by Rob Roper
Until I read an op-ed by Vermont State Treasurer, Mike Piecack, yesterday celebrating its passage, I had no idea this bill (S.135) establishing the “Vermont Saves” program was even a thing. How did I miss such major legislation? This new law requires employers who do not already provide a retirement savings plan to enroll their employees in a government-run individual Roth IRA retirement savings account. The state will then automatically deduct 5 percent of said employees’ paychecks (increasing to 8 percent over time), putting the money into that account – without the employees’ consent!
Now, the law does allow for the employee to later opt out of the program or modify their participation percentages after being enrolled — but the employee has no choice about first being enrolled in this program. Nor does the law make it clear exactly how one can opt out if one wants to. Details to come, we hope.
This scheme is lifted pretty much wholesale from the classic book on behavioral economics, Nudge, by Richard Thaler and Cass Sunstein. The theory behind it is that most people are lazy and will go along with whatever default setting the government decides for them rather than do anything to change their situation. If people have to actively opt in, they mostly won’t. If people have to opt-out, they mostly won’t. So, if you want a lot of people to be in and stay in the program, make them have to do the work to opt out. The theory has proven correct (How many “free” trial subscriptions to streaming services are you now paying for despite the option to opt out at any time?), but it’s a really dirty way to manipulate people.
The Vermont Saves program does attempt to address a real problem: not enough people save enough money, or any money in many cases, to prepare for retirement. When they fail to do so, it falls on the rest of society to shoulder the costs of providing for them in their old age. And this, of course, is not fair — making the conscientious ants pay for the indolent grasshoppers per the old fable. So, I do get the motivation though I seriously question whether it is the proper role of government in a free society to make these decisions for adult citizens without their affirmative consent.
But back to my opening question, how did I miss this major policy initiative as it passed through the legislature? This is a program that will affect as many as 88,000 workers, primarily lower income earners making $50,000 a year or less who are, according to the presenters of the bill, disproportionately minorities and women. Five percent of $50,000 is $2500 which will suddenly disappear from all these people’s disposable (or non-disposable as the case may be) annual income. This is a huge amount of money.
$2500 is nearly two month’s rent (if you’re lucky in Vermont). It’s about 75 percent of the average Vermonter’s annual grocery bill. It’s a burden 50 percent larger than their state income tax rate of 3.35% The lawmakers who passed S.135 are assuming that people in these financial situations can afford to have 5 to 8 percent of their paychecks automatically redirected for any reason, even a good one. Surely a lot of time and effort went into figuring out if this policy is compassionate or cruel.
Nope.
Six committees considered S.135, two policy committees (House Government Operations & Military Affairs and Senate Economic Development, Housing & General Affairs) and four money committees (both House and Senate Appropriations and Ways & Means). They spent a grand total of eight hours and twenty minutes taking testimony on and discussing this bill. The two policy committees responsible for crafting how the law would actually work spent less than five hours on the bill — combined.
They took testimony from just six people: three from the Treasurer’s Office (Mike Piecack, Gavin Boyles, and Ashlynn Doyon, who never opened her mouth), which will be responsible for running the program. Legislative Council, responsible for writing the bill but offering no opinion or insights into its merits, Senator Randy Brock (R-Franklin), who presented the bill on the senate floor, and Greg Marchildon, Vermont Director for AARP, who was the only person from “outside the building” to weigh in. His single page of testimony in a nutshell: Saving for retirement is good.
S.135 passed both the house and senate without so much as a roll call vote in either.
And that, folks, is how I missed it! It’s probably why the rest of the Vermont media mostly missed it too. (A news search shows a just four Vermont based stories on the topic before passage, only two of which have any real meat on them.) There was virtually zero discussion about a program that aims to redirect hundreds of millions of dollars’ worth of mostly lower income workers’ money away from what they are currently spending it on to survive in a state experiencing a prolonged, well-acknowledged “affordability” crisis.
Lawmakers took no testimony from the employers who will be forced to enroll their employees into this program. They took no testimony from any of the workers who will be impacted by this. After making a big deal out of the notion that this program will supposedly benefit women and people of color, they took no testimony from the Office of Racial Equity, the Vermont Women’s Coalition, or any such similar group. There was no public outreach, public hearing, or organized requests for public input.
Advocates cited a dozen other states that have implemented similar programs, but lawmakers didn’t bother to take testimony from any representatives of those state programs. Worthy of note, those states are California, Illinois, New York, Oregon, Hawaii, New Jersey, Connecticut, Maryland, Delaware, Maine, Colorado, and Virginia. With the exceptions of Colorado and Virginia, this is veritable clown car of state fiscal mismanagement that should be a policy red flag, not a beacon.
One thing they did do that should tell you something is they exempted government employees from the automatic enrollment into the government-run plan mandate. So, there’s that.
Whether or not Vermont Saves a good idea, a bad idea, or an idea that could be improved (It’s certainly a better model than the Ponzi scheme that is Social Security), any way you slice it, this is not a good or responsible way to make law.
And herein lies the lesson. The people who think they know better than you do how to spend your money and “invest” in your future don’t know diddly squat about your situation. Moreover, if they care at all, they really don’t take the time to find out. Even bills that do get publicity, a public hearing, and some in-depth debate are decided by lawmakers who spend very little time looking at limited information about which they more often than not have little or no expertise to intelligently evaluate. This is not a criticism, just the reality of a popularly elected, citizen government.
That being the case, do you really want your retirement future decided by people who spent less than a single business day researching the program that they are all but going to force you to participate in? Or might you be in a better situation to decided what your needs are and how to most efficiently spend/invest the money that, by the way, you earned?
Thomas Jefferson said, “That government is best which governs least.” This is why he said it.
Share Behind the Lines: Rob Roper on Vermont Politics
- Rob Roper is a freelance writer with over twenty years’ experience in Vermont politics and policy.
Categories: Commentary
The audacity.
I’ve had some significant bills sneak by me but this one surprises me – and I’m disheartened that the conservative remnant in Montpelier is so overwhelmed they couldn’t bring this to light and try to make some hay out of it.
Silver lining: once again, the Progressive left unwittingly shows their affection for capitalism.
Nazis!
The bill doesn’t pass the smell test. I hope state employees will challenge the constitutionality of this.
State employees are unaffected and have no standing to sue. This is only for employees in a work setting that makes no pension provision for employees
This is a Nazi State what more can one expect. Culling the population and stealing from those who are alive. Time and time again The Vermont and orginal 1776 constitution of these Federated States have been violated.. Change the name of Vermont to Nazi haven…
You get what you vote for Vermonters. Keep electing those democRATS.
“The Vermont Saves program does attempt to address a real problem: not enough people save enough money, or any money in many cases, to prepare for retirement”. And if those self righteous dirtbags in Mount Pecular keep bilking our paychecks to fund more socialist programs, we the people will have even less money to retire on !
Eventually these Roth IRA accounts, which are presently after tax savings, will get taxed on earnings when the state or US sees how much money can be taxed on those earnings.
As a small-time employer this is going to make more work for me. I have to figure out how to open this “government-run” IRA Roth for employees. But I do want to point out that the money won’t belong to the state. The IRA savings will belong to the employee. I think. Probably.
This is so outrageous, I thought it had to be an april fools joke. Nope, it’s June. I just hope we the people wake up, and vote these freaks out of office!
And during a time of unprecedented inflation, and while raising heating costs by who knows how much, they take another 5-8%. Unconscionable.
That 5% is in addition to the 13% collected by Uncle Sam for Social Security. Your paycheck says 6.5% is deducted, but as an employer- I assure you- you’re paying 13%. Otherwise I’d put that 6.5 % I pay on your behalf in your paycheck.
Calm down. Anyone who doesn’t want to save for their retirement can just opt out of this program. Any program that encourages those without employer-based retirement plans to save more is a good thing – for everyone.
Actually, employer-based retirement plans are not good for everyone. At one time, retirement pensions were an employee benefit with no deductions. Enter George W. Bush, who made it sound great to throw all retirement pension money and employee money into the stock market, aka the casino. In 2008, many of those pension funds lost 50% value. Today, the stock market numbers are fake. Our economy is fake. Our fiat petro dollar is near worthless. What the State of Vermont is doing is legalized thievery under the guise that perhaps employees will have enough money to survive in their elder years. Balderdash! Ask current retirees how their pension money is holding up in the highest inflation rates in 40+ years? As the banks are insolvent, the federal government is insolvent, the only option left is turn over the couch cushions (aka the labor force) to steal every last dime possible. The real numbers don’t lie – only the leadership lies with impunity.
…and the leadership can get away with lying with impunity because their associated in the major media instead run stories about knitting festivals and a particular flower coming into bloom…
Opting out does appear to be a legitimate option. However, it does beg the question as to why legislate the program in the first place? There’s something about the camel’s nose under the tent.
If, for example, an employee does nothing, or says nothing, program participation is automatic.
But there is no question that “Any program that encourages those without employer-based retirement plans to save more is a good thing…”. But, again, the employee already has this option as it is, with or without a a State mandated employer based program.
Furhermore, that the ROTH IRA structure is emphasized is a definite advatage. Any investment in which future qualified distributions are tax-free.is a good thing.
But there have to be funds to distribute. Always remember, PAST PERFORMANCE IS NO GUARANTY OF FUTURE RESULTS.
Perhaps the Truth lies within the fact that any person with a social security number is a traded commodity – not a human being. Underfunded pensions became a problem in the early 1990’s with many municipalities and states facing bankruptcy. Too many people drawing and not enough people paying in. Enter the 401K, which benefits the financial advisor and the largest employers who can spin numbers and trade off social security numbers like bargaining chips. IRA’s – either Roth or Traditional – means you will be taxed on all of it, sooner or later. How does your crystal ball work against the largest financial equity firms and banks in the world? Opting out of anything means you are not in the shell game, but they will get their money out of you one way or another. It’s all a well plotted, well executed scam – the giant carrot dangling from their controlled stick. If you happen to live long enough to see one dime of it. Many people are in such dire financial straits now, they are withdrawing from retirement accounts to survive. Those stats are being reported now. The system is imploding. The real numbers do not lie.
This from the same legislators that just advocated for their own significant pay hike. Where there’s a double standard, there’s a hidden agenda. And Im sure our state government will take much better care of our money then the federal government has with our social security dollars…..right?
This is one of the most convoluted pieces of legislation yet. And for the same old reasons. The ‘devil’ is, of course, in the ‘details’…. by design. To paraphrase C. S. Lewis, it would be better to live under robber barons than under these omnipotent moral busybodies as they continue to torment us for our own good.
Here’s the rub.
§ 536. PROTECTION FROM LIABILITY
(b) Protection for the State and others. The Treasurer and Program:
(2) have no duty, responsibility, or liability to any party for the payment of any benefits under the Program, regardless of whether sufficient funds are available under the Program to pay such benefits;
(3) shall not guarantee any interest rate or other rate of return on or investment performance of any contribution or account balance; and
(4) shall not be liable or responsible for any loss, deficiency, failure to realize any gain, or any other adverse consequences, including any adverse tax consequences or loss of favorable tax treatment, public assistance, or other benefits, incurred by any person as a result of participating in the Program.
In other words, the legislature says, we’re taking your money because you aren’t capable of managing it yourselves. And oh, by the way, the legislature accepts no responsibility for the success or failure of any of the investments they make on your behalf either.
As usual, our idiotic legislators have fallen prey to the lobbyists (i.e., ‘financial consultants’) who will skim their inordinate share of these funds in the form of investment and management fees. But I also suspect that there are those really crafty (i.e., dishonest, fraudulent, corrupt, etc.) legislators who have vested interests in the so-called financial ‘vendors’ specified by the legislation.
Again, to C. S. Lewis: “This very kindness stings with intolerable insult. To be ‘cured’ against one’s will and cured of states which we may not regard as disease is to be put on a level of those who have not yet reached the age of reason or those who never will; to be classed with infants, imbeciles, and domestic animals.”
Well folks, as long as we go along to get along, as the saying goes, C. S. Lewis’s characterization of us as “infants, imbeciles, and domestic animals” appears to be accurate.
As Mark S stated above…. there is an ‘opt out’ provision to this program. And it appears to be unlimited. Anyone can opt out.
But I continue to wonder why then the legislature is getting into the investment business. Employees already have the option to start their own ROTH IRAs, whether or not their employer has a program.
Perhaps this is the first step to persuade government employees with ‘defined benefit’ retirement programs to choose ROTH IRAs instead. If that’s the case, I will be the first to say that the legislature is to be complimented.
“then the legislature is getting into the investment business.”…They have been in the investment business for many years and have allowed the state employee pension fund to currently run $5 Billion in the red. We vote for this every 2 years.
The reason the current retirement plans run a deficit is because they are ‘defined benefit’ programs, not ‘defined contribution’ programs. Defined benefit programs guaranty a benefit despite the performance of the supporting investments. This new legislation is not a ‘defined benefit’ program.
If this new legislation is the precursor to eliminating ‘defined benefit’ programs, I’m all for it.
But that, as they say, is a BIG if.
John Wayne said it best…”You can’t fix Stupid” …rings true for Vermont. Unfortunately also true is the adage that “As Vermont goes, so goes the nation…” Pretty damned sad.
I guess you missed the words “FOR THE PURPOSE OF PROVIDING ACCESS TO AN IRA FOR VERMONT EMPLOYEES OF COMPANIES WHO DO NOT CURRENTLY OFFER A RETIREMENT SAVINGS PROGRAM.”
and “PERMITS EMPLOYEES TO OPT OUT”
…oops!!!
Act No. 43 (S. 135). An act relating to the establishment of VT Saves
Subjects: Retirement; State Treasurer; VT Saves Program
This act establishes the VT Saves Program, administered by the Office of the StateTreasurer,
for the purpose of increasing financial security for Vermonters by providing access to an IRA for Vermont employees of companies that do not currently offer a retirement savings program.
The Program requires that certain employers enroll employees in the Program to contribute to an IRA but permits employees to opt out.
The type of IRA for the Program is set as a Roth IRA but the Treasurer is authorized to add an option for a traditional IRA. The act sets the initial contribution from an employee at five percent but provides that the employee may change this to a higher or lower amount. An
employer is prohibited from making contributions under the Program. The Treasurer is authorized to charge a fee of not more than $30.00 per participant per calendar year to defray program administration costs.
Imposserous: Please keep in mind that the headline to this article, and its repeat on True North, opened with:
Legislature just decided to start automatically deducting 5% of Vermonters’ paychecks.
Mr. Roper then seemed to imply that ‘opt out’ didn’t really mean ‘opt out’. And I, at first drank the Kool-Aid too, until I read the legislation.
So, I can’t fault readers for coming to the conclusions they did. And I did make every effort to clarify in later posts, not only that the ‘opt out’ provision was, indeed, included and available to all – but that the legislation could be (hopefully is) a precursor to eliminating the ‘defined benefit’ retirement plans currently bankrupting the State.
what right do the legislature take more of our money They already take social security and look what they did with that. They need to have money taken from their money and given to the poor