Michigan’s House Democrats want to create a state-mandated retirement savings program and penalize businesses that don’t help administer it.

The proposed bill would require employers without a retirement savings plan to enroll employees into a state-administered Individual Retirement Account.

Employers who do not comply would face steep penalties, including criminal charges and up to a $5,000 fine. In addition, employees who aren’t interested must opt out to avoid automatic enrollment and the corresponding payroll deductions.

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House Republicans argue the legislation is unnecessary and cumbersome, considering individuals can open their own IRA through online investment companies or any bank or credit union.

Many people even prefer to establish and manage their own IRAs outside of a company-sponsored program, so they have the freedom to choose their investments and keep them independent of an employer.

State Rep. Doug Wozniak, R-Shelby Township, on Tuesday criticized the plan, saying it would expand government bureaucracy and complicate payroll processing for small businesses.

“Anyone can walk into a bank right now and sign up for a 401(k) program – it isn’t hard,” Wozniak said in a news release. “Forcing small business owners to facilitate deposits into IRA accounts that no one asked for, and which workers may not even be fully aware of, is deceitful and a clear government overstep.”

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Sponsored by State Rep. Mike McFall, D-Hazel Park, House Bill 5461 would create a state-operated individual retirement account program under a new act, the Retirement Savings Program Act, and be administered by a seven-member Secure Retirement Savings Board.

The Michigan Secure Retirement Savings Program would be for private sector workers who don’t have access to a retirement plan through their jobs.

Employees would be able to contribute to an IRA via automatic payroll deduction. However, it would not offer an employer match like traditional workplace 401K plans.

Many small businesses do not offer standalone retirement plans the way large corporations do. Under the proposed program, small business owners would be responsible for enrolling employees and provide information on the program or face significant penalties. The fines start at a $250 fine per employee up to a lien against an employer’s property and criminal charges.

Besides additional administrative work for employers, they would serve as an intermediary between the employee and the SRSB.  According to the Legislative Analysis, the Savings Board would oversee the program, and administrative fees would be proportionally allocated to enrollees’ IRAs.

In addition, initial costs to implement the program are estimated to be about $5 million over the initial five-year period, according to the Legislative Analysis.

The Michigan Chamber of Commerce expressed a variety of concerns over a state-mandated retirement plan after it was first introduced. The Michigan Chamber took issue with automatically enrolling employees, oversight by the state board, and minimum wage workers being forced to contribute, according to this MI Chamber memorandum on the legislation.

Wozniak said the bureaucratic expectations for small businesses are already far too high and this bill would worsen the problem. An employer could set up an employer-sponsored retirement plan instead of participating in the program.

Employees who do not wish to participate must opt out to avoid automatic enrollment and the corresponding payroll deductions.

“Something about the state garnishing paychecks if workers don’t check a box doesn’t pass the smell test, regardless of how well-intentioned it might be,” Wozniak said.