OLYMPIA — When state Sen. Mark Mullet opened a pizza place in Issaquah in 2009, he realized none of his employees had saved for retirement.
“Not a penny,” Mullet said. “And I realized part of it was they’d never had the option to save money directly out of their paycheck.”
Mullet, who’d previously worked in finance, wanted to set up a retirement plan for his employees, but found the options were expensive.
Elected to the Senate a few years later, Mullet, D-Issaquah, has long pushed for the state to consider a way to let small businesses help their workers save for retirement. About 1.2 million Washingtonians aren’t covered by a retirement plan through their workplace, according to data from AARP.
In the decade since, a growing number of states have passed laws to automatically enroll workers into retirement savings plans if they don’t have one at work.
The idea works like this: Money comes out of an employee’s paycheck and goes into a privately managed IRA unless they opt out — they can opt out at any point — and employers don’t have to pay anything. To an employer, it essentially functions as a payroll deduction.
Mullet last tried to pass a retirement savings program in 2020. Three years later, he and other supporters say the state should take another look. They point to the economic fallout from the pandemic and a new federal law to encourage more saving.
Rep. Kristine Reeves, D-Federal Way, is sponsoring House Bill 1632, which would require the state Department of Commerce to study how prepared Washingtonians are for retirement and whether setting up a state-sponsored retirement program is feasible.
With a legislative deadline looming Friday, that bill is unlikely to make the cut, but Reeves has asked to earmark state funds to cover the study costs, and will find out later in the legislative session whether it’s part of the proposed state budget. Mullet, a vice chair on the Senate Budget Committee, also wants to get the study into the state’s budget.
“We need to keep having this conversation and we need to keep pushing the idea that the retirement system isn’t working for everybody,” Reeves said. “And we’ve got to think differently about how to make sure it does.”
Reeves, 41, is a first-generation college graduate who says she wishes she had started saving earlier.
“It all sounds good in theory to say, ‘I’m going to give folks an opt-in,’ you can sit and fill out a 60-page retirement packet when you get hired and pray to God that you actually know what you’re signing up for,” Reeves said. “The reality is, again, you’re leaving out entire markets of people who may never ever sit down and have that retirement conversation with their employer because that’s not part of their benefit package.”
It wouldn’t be the first time Washington has taken a magnifying glass to whether its residents are financially prepared for their future. But since the last time the state studied retirement readiness in 2017, the pandemic has shaken up jobs and careers, Reeves said.
In 2019 and 2020, Mullet’s bill to create an automatic retirement savings plan passed the Senate, but didn’t make it to the House floor for a vote. He feels his opposition to some of the tax bills coming out of the House in the 2019 session may have affected a variety of his bills getting a vote in that chamber.
Mullet said that in the three years since, the COVID-19 pandemic meant there were too many other priorities to revisit the issue. But he’s renewed his efforts because the federal government acted in late 2022 to provide more retirement options for workers. In December, Congress passed the Secure 2.0 Act, intended to shore up retirement options.
That bill included a measure to match contributions that low-wage workers make to qualifying retirement accounts, with a maximum match of $1,000.
“Completely different scenario than what I had just three years ago and in a very positive way,” Mullet said. “Because for the first time, you’re getting matching money and it’s from the federal government, not from the state.”
“All we have to do is make it as easy as humanly possible for people to put money into their retirement account directly out of their paycheck,” he said.
Washington does offer a small business retirement “marketplace,” which is a bit like a health insurance exchange, but where consumers can compare and choose retirement plans.
The marketplace was created in 2015 by legislation Mullet sponsored. It’s available to workers who are self-employed, sole proprietors or work for an organization with fewer than 100 employees.
But it’s not clear how many Washingtonians the marketplace is actually reaching. Companies that provide the plans aren’t required to report enrollment data to the state.
A December 2020 report to the Legislature by the Commerce Department found that between March 2018 and June 2020, web traffic yielded 16 businesses enrolling a total of 96 employees and 23 individual accounts, and nearly $1.3 million in retirement savings.
Brian Moreno, who owns a restaurant franchise in Othello, Adams County, and chairs the board of the Washington Hospitality Association, said he participates in a retirement plan he found off the marketplace for his workers.
He testified in favor of Reeves’ bill earlier this month, and says he would like to see the state study a plan that would be easier for employers to use and for workers to take from job to job.
Six states, including Oregon and California, have launched plans, according to The Pew Charitable Trusts. Six other states have passed legislation to start programs but aren’t up and running yet.
About 630,000 people have saved about $642 million, according to data from four of the programs that have gotten started, said Kim Olson, senior officer of the retirement savings project at Pew, which supports the bill. The average account balance is about $1,000.
The financial advising industry previously voiced fears that a plan sponsored by the state could compete with private plans.
Mullet argues that it takes time for low-wage workers to save enough for a financial services provider to break even, and the state has a role to play in getting workers started on saving.
The idea of automatically enrolling workers in a retirement plan faces opposition from financial advisers and life insurers.
“We don’t dispute that there’s a huge challenge for workers, especially workers and small employers, to find effective, meaningful, cost-efficient retirement plans,” John Mangan, vice president and deputy for state relations for the American Council of Life Insurers, told lawmakers earlier this month.
But he said that the Secure 2.0 Act and prior federal legislation have made it easier for workers to save money for retirement through their jobs, and that there are now savings plans available from some popular payroll companies.
Maeghan Gale, public policy director for the National Association of Insurance and Financial Advisors, said in testimony that CalSavers, the state-sponsored plan in California, has not drawn as many people or built up as much savings as initially projected.
“We do not believe that the state-run retirement programs effectively address the barriers keeping more from saving,” Gale said. “Nor do we feel there is a significant lack of access to retirement planning that would justify these programs.”
Mullet said even if the number of people participating and amount of money saved is less than anticipated, “it’s better than zero.”