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!
Rob Roper
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.
Rob Roper is a freelance writer who has been involved with Vermont politics and policy for over 20 years. This article reprinted with permission from Behind the Lines: Rob Roper on Vermont Politics, robertroper.substack.com
When the State of Vermont saw how Biden held social security payments hostage if the budget didn’t get passed, it became obvious that Vermont could do the same. Make it mandatory to surrender a portion of employee pay to fill a reserve for off-the-wall spending and to be able to hold the contributors money hostage for similar reasons. Actually we all know that the money in the social security treasury is filled with IOUs because of government using the funds for their projects and giving to non-contributing dead beats. The liberal Vermont legislature will find away to throw our contributions from this new 5% tax to pay for unrelated projects and to make loans to their own campaign funds. Another stickit to the taxpayer scheme.
I “bet”, speaking on fool hardy gambling law, even the temporary transient voter, the well indoctrinated ”The College Voter” would have vetoed this bill. Remembering having a college voting block which regularly out votes Vermonters who actually live here. Then
piggybacking the mind controlled, along with the embedded, nearly largest state / government employees staff in the nation and special interest 501 corps voter block – – with “no” embedded self interests of course. The troth is overflowing with other peoples full credit cards soon to be in default, in an effort to save the pig. And now 5% more…
Such far-reaching measures should be subject to a referendum.
Vermonters did not elect their representatives to act on this matter.
This diktat was never discussed during any campaign, or other statewide public forum
That’s what you get for letting people from other states run for government offices and bring their crazy ideas with them
Oh, but Remember this Mr Barratt; ” We know what is best for you, in fact, we know so much more it behooves us to do the kind of thing we did, even in the darkness of night”.
Let them get away with this and more will be on the way! The only thing that will be a sure bet killer of this sort of work, is to vote them out of office, one and all. After the Clean Heat Act, it should not be hard to do. We’ll see.
As Mark S, from the VDC forum, pointed out:…. there is an ‘opt out’ provision to this program. And it appears to be unlimited. Anyone can opt out.
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.
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.
Furthermore, that the ROTH IRA structure is emphasized is a definite advantage. 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.
So, I continue to wonder why the legislature is getting into the investment business.
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.
But state employees are exempt. Why would that be? Confiscation of your money if the market it is in turns south?
I’ve read the legislation. It is complicated. And it is rife with details that can be ‘interpreted’. But the legislation clearly states that all employees, not just ‘state employees’, are exempt, if they choose to ‘opt out’ of the program.
State employees are exempt,as are employees who are already in an employers plan because they are already in a plan. The same applies to public school employees. If someone chooses to opt out, let’s all hope they will save and invest on their own or they will eventually be costing all of more than a fair share.
The point is that the S.135 legislation is NOT mandated, as the title of this article implies. Anyone can ‘opt out’.
Furthermore, is it reasonable to assume that ‘the State’ can responsibly invest and save, more successfully than an individual can?
Why would anyone expect ‘the State’ to do so? It hasn’t invested wisely in the past. Ever! In fact, ‘the State’ is clearly making poor investments.
Why does ‘the State’ make poor investments? Because it isn’t investing its own money. It has no incentive to be frugal. If it loses money on its investment, no one in ‘the State’ is held accountable. There’s no skin off their backs. In fact, the legislators and their crony capitalists make money by charging investment fees, whether or not their investments make or lose money.
But when individuals invest their own money, they tend to be more careful. Why? Because they have skin in the game. They have a direct, hands on, experience. They don’t make one-size-fits-all investments. Individuals make far more calculating investments that are based on their personal circumstances.
The State just throws money around and calls it progress
You don’t get it. It isn’t about the OPT OUT…it is all about the MANDATE and control that VT initially FORCES the deduction. That is that key, not that you can request to halt it later. IMO, VT has NO legal authority to take anything from your paycheck except the State taxes owed.. but legally MANDATING this without your permission is illegal from the get go…opt out, or no opt out…is reeks of fascist State control over all you do…like mandating your food scrap saving? Mandating EV’s? Mandating DEI? BLM? ESG? Gender, Trannies?.. mandate the ban of fossil fuels in VT eventually? All these “State Run Mandates” are exactly what a Fascist regime does :)…..VT’s new moniker should be: “Vermont: The Mandate State”.
If I can ‘opt out’ of the program, neither the program nor ‘the State’ have any ‘control’ over what I do. If I ‘opt out’, I don’t have to have a retirement program.
I don’t see a ‘mandate’ in the S.135 language. If you see a mandate, please show me the language.
Then keep voting these Democrat numbskulls in people! You get what you voted for. I didn’t vote Democrat.
Neither did I… and here we are wondering just what happened.
and the state keeps getting more and more blue, no matter how I vote. Hmmm. Will be time to leave as soon as we can.
Well, as was famously stated a few years ago, “you didn’t earn that”, it’s not your money any way, it’s the states! This is the mindset of the Marxist, the biggest one being Obama whom I quote.
They just gave themselves fat raises, so how come you are complaining? That shows how self centered aka narcissistic they are.
The biggest wealth builder is real estate, but you can’t find affordable homes and they want you own nothing and be happy, so there is that bright ray if sunshine.
Meanwhile I tried to max out my Roth as I’m 74 and still working with Social Security and IRS fined me for putting too much in it which I had to remove to a regular 401. Both the fed and state need to stay the hell out of our retirement funds. They steal enough out of our wages and need to keep their clamy paws off Retirement.
I strongly agree with you.. I’m about to step into the wondrous world of the YEAR 72. I can assume this will be a painful one.
Think this will apply to teachers and state employees?
Ya think legislator’s house will continue to be vanquished?
Already did apply long ago.
Yes, their pension plan’s demise?
The State has the right to TAX your wages & income….but they don’t have the right to forcibly take 5% of your wages for a savings account…no matter how good an idea it may be. So, the VT Atty Gen’ls Office made NO effort to warn the legislature that if this went to a Court lawsuit, the Legislature will lose…Libs go too far. But the Atty Gen’l did NOT give any kind of legal opinion, they just let it pass? There’s your proof that the VT AG is not there to advise on ANY actual law/legal issues….the VT AG is there to do the “Lawfare” bidding for the Climate nuts, Socialist, Progressive lawmakers. I can’t imagine a Republican Atty Gen’l would have let this get passed – legally it is absurd. I’m surprised no one has started a Class Action lawsuit against VT. FYI? This is how true fascists operate…. Repubs aren’t the fascists the Dems always spout we are….LIBERALISM is VT’s shining path to true Fascism …it’s the “State Control” over almost all you do…..and I thought mandatory food scrap saving was a fascist diktat?? You WILL NOT recognize VT in about -5 years. VTGON.
Think this will apply to teachers and state employees?
Hopefully, this is the first step in shifting them away for the unsustainable ‘defined benefits’ plans they now have.
It’s all well and good for folks lucky enough to make $50k annually. A great number of Vermonters make nowhere near that amount, and work multiple jobs to pay for rent, electric, food, etc., barely making it, and sometimes not, month to month. To assume that these folk are lazy “Grasshoppers” is insulting! Who wouldn’t like to have a job making enough to live and contribute to a 401K for retirement! The fact is most employees can’t spare a penny these days, especially those only making minimum wage.
This is completely outside the authority of the legislature and amounts to theft under color of law. Any public servants involved in this racketeering scheme should be prosecuted and jailed.
Bear in mind that “employers” in this context would be businesses that are incorporated under the STATE Municipal Corporation. Private businesses, those not incorporated or working under a STATE license of any kind, would not be “required” to do anything.
Larry Walker leave my money alone I don’t want you to help me
And of course we will not have any say into what type of investing these plans will assume. Probably DEI, green companies, remember what happened to all the state pensions when they invested in Chinese green companies and lost it all!
Exactly. It’s essentially a forced public bail out for their Wall Street & Bankster cronies.