Legislative Update
Rep. Anne Donahue
March 29, 2025
A total of 32 bills were passed by the
House over the past two weeks and are enroute to the Senate. There they could
be passed, could be abandoned, or could be rewritten and sent back for our reconsideration.
So, they are a ways away from reaching the final stage of going to the governor,
apart from the controversial budget adjustment act (BAA), which was vetoed and
is still in flux.
Many were updates to existing law and not
controversial, or were initiatives with broad support. The most prominent
included a new BAA (political gamesmanship); next year’s annual budget (104-38
vote after a unanimous bipartisan committee vote); election law changes (a very
controversial provision limiting write-in votes was removed); the homestead
property tax rate (reduced by injecting added general funds, risking a big
spike next year); the capital construction and transportation bills (I raised
concern about the new Dog River bridge in Berlin being constructed without a
sidewalk); expansion of access to unpaid leave (I pointed our concern for small
businesses); protection of personal information of public service employees
from data brokers (badly written, but a start; vote was 106-38); and state advertising
restriction to use a minimum of 70% in local media organizations (overly
prescriptive but also with a huge loophole that will negate its good intent.) Ask
me for details on any or all.
Meanwhile, we still await hearing how our
Ways and Means Committee will respond to the amendment that proposes a military
pension exemption from the state income tax. It’s ironic to me that we were
willing to pay out $5,000 in cash to entice folks to move to Vermont a few
years ago but haven’t been willing to pay a much lower per person cost to
attract this skilled workforce to further their careers (or maintain them) here.
Our House version of initial steps for
education and funding transformation is emerging shortly and will be certain to
result in a lengthy House-Senate process of attempting to reconcile the
significant differences in approach. Predictions are that we will be in session
for at least several weeks longer than usual in order to get this done.
***
Rather than speculate on the outcomes of these
multiple moving targets, I want to use this update to focus on a picture of the
kinds of “work behind the scenes” legislators can get pulled into, and that don’t
usually make it into news media.
Two years ago, the legislature passed a
bill to create “Vermont Saves,” a very positive way to support Vermonters in
building retirement savings if they do not have access to an employer-sponsored
plan. The way it was set up, employers are required to send the employee
information to the state Treasurer, who runs the program. It is promoted as a
voluntary program, but in order to help foster participation, it is an
“opt-out” rather than “opt-in” program.
That means that anyone can give notice
that they do not want to participate, and they will be removed, but silence is
consent. If you don’t object, five percent of your net income is deducted from
your paycheck and becomes a contribution to a Roth IRA established through the
Treasurer’s office.
Obviously, for many wage earners, five
percent is a whole lot of money to carve out. Fortunately, they can ask for a
lower contribution rate if they prefer. Starting to save for retirement early
and regularly is a good move, but some people who are just scraping by simply
can’t do it, and we certainly want to preserve their choice in such decisions,
right? The problem with any “opt out” system, however, is that someone can only
choose to opt out if they receive clear information that they have been
automatically enrolled and that they need to take action if they do not want to
take part. Otherwise, it’s no longer actually voluntary.
So I was shocked several weeks ago when a
constituent sent me the copy of a “Vermont Saves” program notice he had
received. It was an email that came from an unknown company and the headline
was, “You’re in! Your Vermont Saves account is ready to be set up.” Note in
particular the terminology: “ready to be set up,” future tense. It goes
on to laud the program, which “puts you in control of your financial future by
offering you a safe, secure, and simple way to save for your retirement with
every paycheck.”
Some lines further down the page, a
boldface bullet point states, “Participation is voluntary” and continues, in
regular font, with, “Stay enrolled or opt out…” That’s the very first reference
to the auto-enrollment that has already occurred. The account isn’t “ready to
be set up.” It is already set up. This isn’t “offering” something. It’s
already done, unless you act to stop it.
In today’s world of email scams, I think
it’s likely that some folks will see that the email isn’t from the state or
their employer, and say, “Wow, I know better than to hit that ‘set up account’ link
on this email. I’ll be hacked.” Others will skim the beginning and say, “well,
this is an offer I’m not interested in; I’m not going to set up an account to
participate.” By appearance, they have not taken up the offer. In reality, they
needed to set up access to their account in order to then withdraw from
participating. Even when the first paycheck with a deduction arrives, some will
see it and just sigh (or curse) over a new payroll tax being imposed, unaware
that it is “voluntary.”
Employers didn’t receive transparent
information, either. They were told that they were required to send in the
information on their employees, but that then their employees would be able to
choose whether they wanted to participate. I spoke to one local employer who
was absolutely stunned to learn that it required an active opt-out by the
employee to prevent automatic payroll deductions.
But it gets worse. The notice announces,
“Your paycheck contributions have the potential to grow into big savings over
time” – with “have the potential to grow” boldfaced. True. But a Roth IRA is an
investment account. It includes the risk of loss as well as the potential of
gain. (I think we’ve all seen ads for investment opportunities that
specifically state that, in a manner that suggests they are required to do so.
Apparently, our Treasurer is not under that requirement… yet.) It makes no
reference at all to the difference between a savings account and an investment
account.
Last week, I met with our State Treasurer,
Mike Pieciak, to share my concerns. He defended the information as being tested
and evidence-based by the company contracted to produce it; it runs the same
program in other states and uses the same communication with good results.
After all, people should be saving for retirement, and this helps people stay
on board. That’s the program goal. He agreed the notices might lack some
clarity and said he’d talk to the company to see if they could rework some of
the placement of information. I was unimpressed by his response.
By coincidence of timing, that same day
our 2026 state budget bill was on our House calendar. In reading it, I
discovered there was a section about Vermont Saves, which included a change to
allow the Treasurer to adjust the automatic annual contribution rate increase
by up to 10 percent, instead of the original eight percent. You are not merely
automatically enrolled, you also have an automatic increase in your
contribution rate each year… unless you give notice that you don’t want it
increased. What will the phrasing be like to tell employees about that right?
So I introduced an amendment to the budget
bill to put a pause button on that change.The first auto-increase isn’t until
next year, so there’s no rush. The Treasurer’s Office objected to the amendment
and began giving broad testimony on the purpose of the program and the
importance of encouraging savings, including that optimal rates to save for
retirement are actually more like 15 percent… so they want to be able to get
the deduction up to at least 10 percent of net wages.
As it turned out, the Appropriations
Committee had never heard any testimony about the rationale for the proposed change
and for including the Treasurer’s language in the budget bill. He had bypassed
the process of bringing the issue to the policy committee for review before
asking to have it added to the budget. It had then slipped in as a “technical”
change almost without being noticed.
The Committee voted 10-1 to support my
amendment. The Chair suggested that the Treasurer should go to the Senate
Government Operations to make his case in full and enable that policy committee
to discuss it, before seeking to add it back into the budget bill during the
Senate’s work on it. It was really only a symbolic victory, but what was
important was that presenting the amendment on the House floor was an
opportunity for me to ring the alarm on the much bigger underlying issue – the misleading communications – to the full body.
I’m not planning to let it end here. I talked
with the Chair of House Government Ops and he is going to have me meet with the
committee about the need for more transparent communications to the people who
are about to have their paychecks raided (for their own benefit, of course…),
and how we might address it. I’ve also already given a heads’ up to the Senate
Gov Ops chair that I’d like to meet with him to share this same background information.
That committee would have the best opportunity to get protective language
through the legislative process this late in the session.
How could we have put something like this
in motion two years ago? Well-intended, of course, but also passed in the very
last week of that legislative year, a time during which bills are passed at
dizzying speed, despite the attempts of some of us to be allowed more time to
be thorough in our work. We are a citizen legislature with no individual staff and
who must rely heavily on the expertise of others.
But if we were going to pass a bill that
would automatically deduct money from Vermonter’s paychecks to invest in an
IRA, we owed it to Vermonters to have made sure they would get full, clear
information about how they could turn the program down. Not everyone is in the
place to give up the “as little as $105 a month” that the notice cheerfully
uses as an illustration. To some of us, that’s a lot of money.
So now, we need to fix it.
***
It is a pleasure to be representing you.
Please contact me at adonahue@leg.state.vt.us with questions or
concerns, or my district-mate Ken Goslant at kgoslant@leg.state.vt.us. All of my past
updates are accessible at representativeannedonahue.blogspot.com
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