The way out of New York’s retirement security crisis

One of Mayor Bill de Blasio’s largely unsung major accomplishments is how he has leveraged his innovative leadership to push Gov. Andrew Cuomo to the left on a host of important progressive issues like universal pre-K and the Fight for $15 campaign.

The most recent area where he succeeded in this regard is one of the most important income inequality concerns of our time: retirement security.

There’s a reason my organization, EffectiveNY, has for the last several years made tackling this crisis a focal point of our work: 57 percent of working New Yorkers don’t have access to a retirement savings plan.

Moreover, most New Yorkers who do have savings have very little in their accounts and are slammed by large fees that make the small returns on their nest eggs even smaller.

It’s hard to imagine that 40 percent of New Yorkers between the ages of 50 and 64 have less than $10,000 saved for retirement. But what’s even harder to stomach is that Gen Xers and millennials, mired in student loan debt and unable to conceive of ever owning a home or an apartment, are likely to wind up in even worse shape than Baby Boomers are in already.

Obviously, the ideal solution would be a dramatic expansion of Social Security, but there’s virtually no hope of that getting through our gridlocked Congress. That’s why states across the country like Oregon, California and Illinois have taken the initiative – with the support of President Obama – to set up their own retirement savings plans.

Until this year, New York had lagged behind these efforts. But, of late, that has changed, and the developments are exciting. This month, Mayor de Blasio announced in his State of the City speech that his administration would soon produce legislation that would make New York the first city in the nation to offer a government-run retirement savings plan to private sector workers.

The outline of this plan is simple: in order to make saving easy, workers who do not have already have a plan through their employer will be auto-enrolled in the city’s program, though of course they can opt out. Employees will then designate a small percentage of their pay to a virtual individualized retirement account – I say “virtual” because the real genius of this plan is that it mimics the wisdom of how labor unions fund their pensions: by pooling workers’ contributions into a multi-billion dollar fund.

Unlike with 401(k)s, where the saver only has a small sum invested and thus gets a rock-bottom return, by being part of a huge pooled fund, New York City’s workers will be able to leverage their collective savings to command lower fees from their money managers and a higher rate of return.

Since workers are saving their own money, the program – other than some start-up expenses – will cost taxpayers nothing, and won’t require a city guarantee. It will also be a boon to our businesses, which will be able to seamlessly sign up their workers through their existing payroll systems at virtually no cost and offer the plan as a new benefit, making them more competitive with neighboring states like Connecticut, which does not have a plan, and New Jersey, which just passed an inferior one.

Mayor de Blasio’s dynamic initiative has spurred Gov. Cuomo to action. As de Blasio’s pension wizards were putting the finishing touches on their work in January, Cuomo raced out of the gate, announcing in his policy book the formation of a new commission to devise a statewide plan.

While this commission is at a fledgling stage, it is enormously promising, in part because the governor had the excellent sense to appoint former state Comptroller Carl McCall as its chairman.

In my talks with McCall, he has demonstrated a profound grasp of the retirement security crisis, a heartfelt desire to tackle it and the vision to help the governor devise a plan that will make New York’s program the best of any state in the nation.

We need this type of vision to triumph over the daunting adversity posed by our retirement savings shortfall. While Mayor de Blasio’s plan is a bold and necessary step in the right direction, it is limited by federal regulations that have not caught up to the historic move by the city to create its own plan.

At the moment, the city’s plan would require businesses with 10 or more employees to participate. EffectiveNY would like to see the state adopt a program that would be open to all our workers, freelancers included. We also want a plan that would allow for employer contributions – which currently is not permissible under federal law – and prohibit workers from withdrawing their money until retirement age.

The state will need to lobby Washington to authorize some of the more ambitious elements of the program we propose, but we are confident that if New York devises a model for the rest of the country to follow that it will get whatever approval it requires.

After years of advocacy around this issue, I am now optimistic that Governor Cuomo will step up, just as Mayor de Blasio has done, so that all New Yorkers – not just those in the five boroughs – will have the means to retire with dignity.

Bill Samuels is a businessman, activist and the founder of the public policy think tank EffectiveNY.