The employer-based retirement system is not working well for middle income Americans, Brian Graff, CEO of the American Retirement Association, a Washington-based trade group, said Wednesday at a retirement symposium.

Forty-two percent of Americans have less than $10,000 in total savings and 83% of Americans don’t have a retirement plan, according to recent research by the Employee Benefit Research Institute. Graff adds that 60% of middle income American families aren’t saving for retirement because they don’t have a plan offered through their employer. “You can’t get off the bench if you have no playing field,” he said at the event sponsored by AFS 401(k) Retirement Services in Washington.

The key to retirement savings is to have a meaningful way to save for retirement, he added, as his firm’s research has found those with a 401(k) offered by an employer are 15 times more likely to save.

“You can’t argue with the fact that, people with moderate income, the only way to get them to save is through workplace retirement. But the problem is nearly half of fulltime workers don’t have a [workplace] retirement plan,” he added.

At companies with fewer than 50 workers, not even half of the employees have access to a 401(k) or pension, according to the Bureau of Labor Statistics. At companies with 500 workers or more, 90% of employees have access to a retirement plan, Bloomberg News reports.

While it particularly affects small businesses, it also has an impact on those at larger companies, especially in the service industry, which doesn’t “want to deal with it and [has] high turnover,” Graff said.

The bottom line is the system is not working, he explained. “What is going on today is we sit around and say everything is fine. That is wrong,” he said. “It is not. It works for people who have it … but doesn’t work for most middle income people.”

Countering the problem
To overcome these challenges, Graff mentioned some proposals in states, such as Maryland, where the state runs a retirement program.

The Maryland Small Business Retirement Savings Program and Trust creates incentives to encourage private-sector employers to make the program available to their employees, according to the American Retirement Association.

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“Employers in Maryland still may offer a retirement plan themselves. Employers with 10 or more employees that use an automated payroll system or service, and that do not offer their own plan, must either participate in the state program or pay an annual filing fee,” according to the organization. “The state program also creates a state-run auto-IRA program that businesses can use as an option to meet the requirements.”

Other states, including California and Oregon, are implementing or considering implementing programs that will tax employers who do not offer a plan.

“State governments today are responding to policy concerns that I’ve been talking about that not enough people participate in these programs,” Graff said.

These state ideas are a “different way to think about retirement and benefits policy,” concluded Alex Assaley, managing principal at AFS401(k).

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