Progress Illinois looks at a new report showing that Hispanic workers have the lowest rate of participation in employer-based retirement plans among major racial groups.
When it comes to saving for retirement, new research shows that Hispanic workers are far less likely than other workers to be enrolled in employer-based retirement plans.
The Economic Policy Institute‘s report finds that only 34 percent of Hispanic workers aged 32 to 61 and employed at least 35 hours a week participated in an employer-based retirement plan in 2012.
By comparison, the retirement plan enrollment rates were 58.8 percent among white workers, 52.6 percent among black workers and 51.2 among Asian and other workers.
The left-leaning think tank used 2012 data “because apparent declines in 2013-15 are likely due to problems stemming from changes in the survey.”
EPI economist Monique Morrissey noted that some workers may choose not to participate in voluntary retirement plans, “especially if they receive little or no employer match or tax subsidy.”
But the bigger issue, she said, is that Hispanic workers are more likely to lack access to a workplace retirement plan.
“A much more prevalent problem is working for an employer that does not offer a plan in the first place, as 59 percent of Hispanic workers do,” Morrissey wrote in the report. “Even if the take-up rate for Hispanic workers were the same as for non-Hispanic white workers, 89 percent of the gap between the two groups would remain.”
Morrissey broke down what this means for the financial security of workers in their later years.
“The lack of access to traditional pensions and 401(k)s makes it hard for Hispanics to prepare for retirement and increases their reliance on Social Security and working in old age,” she explained. “Only a quarter of prime-working-age Hispanic families have retirement account savings and the median balance is just $22,000.”
A report released earlier this year by the Pew Charitable Trusts provided a snapshot of employer-based retirement plan access and participation in Illinois.
Over 1 million full-time, year-round Illinois workers in the private sector lack access to an employer-provided retirement plan, the report showed. Nationwide, that figure is more than 30 million.
Illinois is at least one state working to expand access to retirement plans for private-sector workers who currently lack the benefit.
The initiative is called the Illinois Secure Choice Savings Program, which was signed into law in January 2015. Through the program, businesses in operation for at least two years with 25 or more employees must provide their workers with a retirement savings plan or automatically enroll them in the state’s Secure Choice program.
Secure Choice enrollment is expected to open in 2017.
Eligible workers can participate in the state’s Secure Choice program and build retirement savings through a 3 percent payroll deduction. Workers covered by the measure are allowed to opt out of the program or reduce their payroll deductions if they choose.
An estimated 1.2 million private-sector workers will gain access to a workplace retirement plan through the Secure Choice program once it is implemented, according to Illinois State Treasurer Michael Frerichs, who chairs the seven-member board administering the program.
Read Progress Illinois’ past coverage of the Secure Choice program here.