Treasurer Diossa Testifies Before Senate Finance Committee in Support of the Secure Choice Act Published on Friday, May 12, 2023 Providence, RI – Last evening Rhode Island General Treasurer James A. Diossa testified before the Senate Finance Committee in support of Senate Bill 545, the Secure Choice Act, sponsored by Senator Meghan Kallman. If enacted, the bill would create a portable and voluntary state-run Individual Retirement Account (IRA) for workers at Rhode Island Businesses that have five or more employees and do not already provide retirement savings benefits. Below are Treasurer Diossa’s remarks, which can also be viewed here: Thank you, Chairman DiPalma and Members of the Committee, and thank you Senator Kallman for sponsoring the Secure Choice Retirement Savings Program Act, which will help thousands of Rhode Islanders save for retirement. As you heard from Senator Kallman, this bill creates a state-administered, automatic-enrollment Roth IRA program for private sector employees at businesses that do not currently offer a retirement savings plan. The Program offers employees considerable flexibility: participation is voluntary, and employees can choose their contribution amount and select their risk preference from options overseen by the State Investment Commission. Because plans are unique to the employee, and not to the employer, they will follow the employee if they change jobs. When this bill was introduced in past sessions, some have questioned whether this program would be a burden on employers that have to participate and intrude on the private retirement market. I can assure you it is not a burden. Though companies employing five or more employees are required to participate, this bill does not create an unfunded mandate. Twelve other states have now passed enabling legislation, with seven states open for enrollment including our next-door neighbors in Connecticut. The experience in those states informs our understanding of how this program would work in Rhode Island. The fact is there is little to no cost to employers, who would only be required to provide employees with paperwork and information packets created by the state administrator and register an employee’s payroll deduction. A Pew Research study of more than 2,500 private sector businesses participating in Oregon’s Secure Choice program found that four out of five businesses reported NO out of pocket costs associated with the program. Businesses that did report some out-of-pocket expenses were mostly those providing leisure, hospitality, administrative and support services. This result reflects the nature of such workforces, which are traditionally characterized by high turnover. That is why I have asked the Senate and House to amend the bill so that an employee would not be eligible to participate until they have been with an employer for at least 120 days. Likewise, The Wall Street Journal recently reported that state administered IRA savings programs in Oregon, Illinois, and California were followed by an increase in private retirement plan adoption, while termination rates for existing private plans remained steady or were lower than the national average. In California – for example – there was a 16% increase in new 401(k)-type plans between 2019 and 2021 as compared with 2013 through 2018. The state officially launched its state retirement savings plan in 2019. These states are only the first to experience private plan growth because they were the first to begin implementing their respective retirement savings programs and I fully expect the four other states that have since followed them to experience similar private business growth. Senators: this bill is a solution to a growing problem. Far too many Rhode Islanders work to make ends meet without a plan to save for retirement. We are on the precipice of a retirement crisis in desperate need of a solution. A generation ago, many private businesses offered retirement plans and middle-class families were able to save during their working years. But private sector employees are now overlooked in a shifting retirement landscape. In 2020, forty percent of private sector workers were employed by businesses that did not offer a retirement savings option. Inflation and stagnant wages have prohibited families from accruing meaningful savings. This has left thousands of Rhode Islanders approaching retirement with an uncertain financial future. We need to provide a savings vehicle so businesses of any size can offer their employees the option to save. That is why I have proposed an amendment that would make enrollment optional for businesses under five employees. If we do not pass this bill, Rhode Islanders without retirement savings increasingly rely on state welfare programs that will cost taxpayers far more than the start-up costs associated with establishing this program today. By passing this bill, you will create a voluntary savings program to equip working class families with the tools to secure a solid financial future. Thank you for your consideration, and my team and I would be glad to answer any questions you may have.