Sen. Vitelli introduces bill to help more working Mainers save for retirement

Posted: May 13, 2021 | Health Coverage, Insurance and Financial Services, Senator Vitelli

AUGUSTA — On Thursday, Sen. Eloise Vitelli, D-Arrowsic, introduced a bill to help more Maine workers save for retirement. LD 1622, “An Act To Promote Individual Retirement Savings through a Public-Private Partnership,” was the subject of the public hearing before the Legislature’s Committee on Health Coverage, Insurance and Financial Services.

Sen. Eloise Vitelli

“I spent my career of 38 years at New Ventures Maine, helping Mainers start their own small businesses and become financially self-sufficient. I’m lucky enough to have a stable retirement resting upon the three pillars of financial security: earnings, savings and Social Security. But I know too well that not everyone is as fortunate as I am, and many Mainers of retirement age are almost totally without at least one of these key pillars,” said Sen. Vitelli. “Mainers are known for our incredible work ethic. It seems only fair that people who have worked hard their whole life should be able to enjoy their golden years on stable financial footing. This bill will help more Maine workers save what they need for a safe and healthy retirement.”

LD 1622, the Work and Save bill, would create the Maine Retirement Savings Program, a way for working Mainers to contribute to a Roth IRA directly from their paycheck. Employers who don’t offer their own retirement savings plans will facilitate a deduction for their employees, straight from their paycheck. These employers do not contribute any matching funds to the plan. The deducted funds go into a Roth IRA, following participants from job to job until that person is ready to retire. At least six other states have similar programs.

“Maine’s workers want to save for retirement and it’s difficult for them to save for it,” said Janet Smith, with CA$H Maine, in testimony supporting the bill. “Each tax season CA$H Maine collects information about financial goals and challenges from the low to moderate income tax filers participating in the program. In 2020, 34 percent of our tax filers indicated that saving for retirement is one of their top three  financial goals and 32 percent identified that saving for retirement is a challenge. Many of these tax filers work for employers that do not offer a retirement savings program. These individuals are also balancing other financial demands, like saving for unexpected expenses and other goals, and would benefit from a retirement savings program that would make it easier for them to save, like the plans offered by many large employers.”

“More than a third of Mainers who are over 65 live on Social Security benefits alone, without any retirement savings. The average annual Social Security income for these Mainers is $18,000. This is just about 140 percent of the Federal Poverty Level and is not enough income for these people to meet their basic need,” said Torey Steward with the Maine Council on Aging, in testimony supporting the bill. “While many of these people will need to make significant repairs to their homes and pay out of pocket for health care and home care, they will not be able to afford these expenses.”

LD 1622 is also supported by the Maine State Treasurer, Maine State Attorney General, AARP Maine, Maine Women’s Lobby, Maine Association of Retirees, and Disability Rights Maine.

According to data from AARP, approximately 46 percent of private-sector workers in Maine — about 235,000 people — do not have access to an employer-sponsored retirement savings program. Nationally, 26 percent of working-age adults say they have no retirement savings at all.

A 2017 report published by the Margaret Chase Smith Policy Center at the University of Maine states that, “Inadequate savings for retirement creates fiscal costs due to increased elderly reliance on public assistance … Simulations show that increasing retirement income through greater preretirement savings can substantially reduce the need for taxpayer contributions for public assistance.”

LD 1622 faces further action in committee.