Finally, a Retirement Plan for Job-Hopping Millennials
|
Version 0 of 1. BALTIMORE — Workers in their 20s and 30s are changing jobs at a record pace, yet they often view retirement stability as a back-burner issue. A law passed in Maryland last summer could give those without conventional pensions or 401(k) plans a way to save for retirement without the nuisance of setting up individual savings accounts. But despite broad bipartisan support in the state, the application of the law has now stalled with a new Republican Congress and White House. Maryland is one of only a handful of states to try such a plan, which eases the costs and strain for smaller companies wrestling with retirement options. This city’s boutique tech firms, brick-lined coffee shops and retooled public schools attract a younger, urban population for which the new law could be indispensable. Small employers would need only allow for automatic payroll deductions, and their employees could access a portable retirement plan with money that moves with them from job to job, without the hassle of the forms and transfers that go with leaving a company 401(k) program. Here, in the state’s largest city, the conditions that led to the law are in plain view. Corey Polyoka, 30, and Hannah Ragan, 31, help run Foodshed, a critically acclaimed group of restaurants and cafes that has refined Baltimore’s seafood-heavy cuisine. Mr. Polyoka partners with the chef Spike Gjerde, managing the family of small locally-sourced businesses that include the Obama-endorsed Woodberry Kitchen. Mr. Polyoka and Ms. Ragan have over 265 employees, including dishwashers, bartenders, baristas, managers and chefs. Around 85 percent of their workers are millennials or younger. The company offers health care options to all employees, but has strained to square those costs with the scrambled politics of the Affordable Care Act and the right retirement packages. Over the last two years, independent financial advisers and banks have pitched cumbersome and overpriced retirement plans that do not suit Mr. Polyoka’s designs for Foodshed. The new law would allow Foodshed to work around that kind of dead end by using state-appointed private money managers. “It can be very tricky to come up with the plans, and it can be very costly to administer it for the business because of the management of them, the turnover of them, the matching of them,” Mr. Polyoka said. Any kind of uniform retirement planning approach at Foodshed “needs to have the personality to match the company culture,” he said. Ms. Ragan, who trains and handles personnel matters at the restaurants and cafes, says she talks to her staff about negotiating benefits every day. She wants Foodshed to be a place where those in their 20s and 30s think about “making their lives here.” “As we’re getting bigger, it’s about having the right systems in place so that we can keep growing,” she said. At the other end of the spectrum is Key Tech, a 43-person engineering firm here that designs high-grade medical instruments. As the company has grown, the staff has continued to compete for highly credentialed engineers who might otherwise flee to Silicon Valley. “All of my friends that are outside of Key Tech that are engineers hop every few years from company to company, but we have surprisingly high retention rates,” said Abbie Shoemaker, an electrical engineer who started at Key Tech in 2006. “People stay for a long time. Part of that is benefits.” Key Tech, with an average age closer to 30, offers 401(k) plans after one year of employment with a $1 for $1 company match of up to 3 percent of the employee’s salary, and a 50-cent for $1 match from 3 percent to 5 percent, for a total of 4 percent of the person’s salary. Ms. Shoemaker, 34, has had a 401(k) and health savings account for around a decade, both of which allow for tax-free investments. This let Ms. Shoemaker think about and plan for retirement almost from the start: She maxxed out her plan early in her career. If the proposed legislation goes into practice, this kind of preparedness is what the Maryland Small Business Retirement Savings Board has in mind even for workers without the 401(k), employer-matching luxuries of Key Tech: young Maryland residents who can move with their money without worrying about a new employer resistant to taking on another company’s retirement package. A task force set up in 2014 to lay the groundwork for the bill made sure to appeal to even small-government-minded lawmakers in the State Legislature’s Republican minority. The framework has for a long time had an appeal to conservatives: During the 2008 presidential campaign, auto-I.R.A.s were endorsed by Senator John McCain and by Senator Barack Obama. The Republican State Senator Andrew A. Serafini of Maryland, a financial consultant who represents Washington County, was crucial to the negotiations leading up to the 2016 law. “We made it a carrot, and not a stick,” he said. The state would waive a $300 corporate filing fee for small businesses that already have or agree to sign up their employees for a retirement plan, giving an incentive to companies on the edge. The law helps employers and employees resist the temptation to be “more in the day” while thinking that “tomorrow will take care of itself,” Mr. Serafini said. David C. John, a policy adviser at AARP, has studied the issue for decades. If an employee does not have access to this kind of payroll deduction retirement savings plan, “the odds are minimal that you’ll be doing something else, that you’ll go out and start something on your own,” Mr. John said. The state, he said, must make sure noncorporate careers offer retirement security even to the most indecisive young Maryland workers. “At least half the states are in some stage of examining this,” he said. “Whether they’ll go forward with it is another question. We’re seeing as much interest and activity in red states as we are in blue states.” Even those who do have conventional state-sponsored pension plans face the anxiety of a fluid job market. Kellye Gill, 31, teaches math at Thomas Johnson Elementary Middle School in Baltimore, just a mile from the gleaming global headquarters of Under Armour, which tempts young recruits with a slew of amenities and benefits. The state pension plan Ms. Gill is locked into as a public school teacher requires 30 years of employment to be fully optimized at retirement. This leaves her more vulnerable if she ever decides to change careers, even as the stability of the pension has lulled her into the comfort of automatic payments. Working in education, where millions of dollars in budgets and layoffs may occur, “What would be my fallback plan if anything were to happen?” she said. “I think the more difficult thing is, especially in an urban environment, is thinking I’m going to do this for 23 more years,” she said. She worries about the complexity of moving and figuring out other retirement plans that might be incompatible with her pension. “They were historically great plans, but pension plans are for recruitment and retention,” Mr. Serafini said. “They don’t work as well as they used to because millennials don’t stay at the same place.” |