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Plan Proposed to Increase Workplace Retirement Savings in KY

Public News Service

Kentucky's leading senior citizens organization says 50 percent of employees in the state's private sector do not have access to a workplace retirement plan.

That's 787,000 Kentuckians, according to AARP, which is calling on the state legislature to create a Work and Save plan.

Scott Wegenast, associate state director for advocacy and outreach with AARP Kentucky, says creating a framework for workplace retirement would make it simpler for more Kentuckians to save through automatic payroll deposits.

"We want to find a way for small businesses and their employees that's voluntary and it's portable,” he states. “If workers change jobs, their accounts will go with them. Everybody knows Social Security alone is not enough to retire on. "

According to The Pew Charitable Trusts, since early 2012, more than half of the states, including Kentucky, have introduced legislation to set up or study options for state-sponsored retirement savings programs. Five states have enacted programs that put a framework in place.

According to AARP, 63 percent of small business employers in Kentucky want to offer retirement savings plans to their employees, but can't afford to do so. Laura Dake is among them.

She is executive director of ITN Bluegrass, a nonprofit, transportation solutions organization in Lexington with 15 employees. She says small businesses such as hers would welcome a low hassle savings plan.

"If it's something that is simple, simple to administer, low cost or no cost, and something that they could present to employees as a positive,” she states.

Wegenest says the Work and Save plan has to avoid creating red tape for businesses while shielding employers and the state from liability.

"There are some fundamental keys here,” he stresses. “The program needs to be voluntary. It has to have low fee. It has to create no burden for small businesses."

The Pew report noted the challenges states face is generating and protecting workers' savings over the long run, because while low risk investments make losses less likely, they increase the chances that accounts won't grow enough to meet retirees' needs.

According to AARP, the average retirement account in Kentucky is around $32,000, and Wegenest believes Work and Save could help change that.