401 Day

March 10, 2006
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LANSING — According to the Pew Center for Research, 56 percent of Americans have investments tied up in the stock market. Of that number, 46 percent have invested through 401(k) plans or other retirement-savings options.

Some say those percentages are high, while others don't. Gov. Jennifer Granholm clearly falls into the "don't" category. As part of her State of the State address in January, Granholm announced that her administration would design and open a 401(k) plan, similar to the one the state has for its employees, for workers of small firms that don't offer a retirement plan.

"At minimal expense to state government, we will help thousands of Michigan workers save for their retirement and achieve economic security," the governor said on Jan. 25.

The Department of Treasury is leading the effort to create the personal finance plan and that effort has just gotten under way.

"We are currently working with the private sector and with experts in the retirement-savings field to develop an actual proposal that we can move forward with. At this point, we don't have a finalized plan, if you will, that we are ready to discuss publicly," said Terry Stanton, public information officer for the treasury department.

While the process for developing a plan goes on, the reason for having such a plan needs no further work: Too many workers in the state have too little socked away for retirement, especially those who are employed by smaller companies that don't offer any type of plan.

Stanton told the Business Journal that the number of workers in Michigan without a 401(k) to fall back on parallels the national number, and that means roughly four out of 10 are not invested in the market or in their future.

"We see a need, because many employees of small businesses don't have employer-based programs. And statistics show that if people have access to employer-based programs, they will save," said Stanton.

"We see the state's ability here to team up with the private sector to help devise a program that will make retirement-saving plans more cost effective for smaller businesses and, therefore, make them willing to take part to make programs accessible to employees of small businesses," he added.

With about 5 million workers in Michigan drawing a regular paycheck, that means around 2 million are without an employer-based plan. The Pew Center research showed that the group that is least invested is households with an annual income of $30,000 or less, as 73 percent of that demographic doesn't have any stock holdings. In contrast, only 16 percent of households with an annual income above $75,000 aren't invested on Wall Street.

"We see no reason not to believe that the national number is not accurate in Michigan. Our statistics indicate that four in 10 employees are not currently saving for retirement and that half of the households nearing retirement have $10,000 or less in retirement savings," said Stanton.

"We do believe access is a problem. If businesses offer it, people will take advantage of it."

Stanton said it was difficult to say how long it would take the treasury to finalize a proposal because the effort is still in its infancy and whatever is developed has to pass muster with the Internal Revenue Service. But, he added, the department expects to have more to report by early next year.

"The hope is we could have it up and running by 2007. So, clearly, the timeline is such that the development and the approval process would get done at some point this year," he said. "Clearly, we would like to do this as quickly and prudently as possible, but there are some steps that we need to take just to make sure that everything is done properly."   

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