Bill would offer every Wisconsin child a chance to start saving from birth

State investment board would manage new ‘401Kids’ accounts under bipartisan proposal

By: - March 1, 2022 7:00 am
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A bipartisan proposal that would create a special savings account for every Wisconsin child at birth or adoption will get a public hearing Tuesday in the state Assembly.

The legislation — AB-974/SB-947 — was introduced by Reps. John Macco (R-Ledgeview) and Evan Goyke (D-Milwaukee) and Sen. Janis Ringhand (D-Bayfield). If it is enacted, every child in Wisconsin at birth or adoption would be enrolled in a special savings account, seeded with $25. Families can make deposits so that the account grows. 

The legislation calls it a “401Kids” account — evoking self-funded 401-k retirement accounts offered by many employers. Goyke and state Treasurer Sarah Godlewski have been promoting the legislation, including with a video posted in YouTube’s kids channel (where it cannot be saved by viewers) to help popularize the idea.

“401(K)ids gives Wisconsin kids an early start in learning good financial practices and the importance of saving,” wrote Macco, Goyke and Ringhand in a memo seeking cosponsors they circulated in January. “Over time, these accounts will accumulate and improve the financial security of individuals and families, while reducing the need to take on debt and rely on the state for long-term retirement support services.”

A cartoon depicting Rep. Evan Goyke (D-Milwaukee) and State Treasurer Sarah Godlewski is part of a YouTube v video that promotes a bipartisan bill that would create 401(k)-style investment accounts at birth for every Wisconsin child. (Courtesy office of Rep, Evan Goyke)

The accounts would be established and administered by the state Department of Employee Trust Funds, and their investment would be managed by the State of Wisconsin Investment Board (SWIB), the agency that manages investing for Wisconsin public employees’ retirement accounts.

“Rather than just a savings account that accrues 1 or 2%interest, it actually is invested like a retirement account that can provide 7-8-9% interest,” Godlewski says. 

The account would follow a child for life. The legislation prescribes that its use would be limited to education, medical emergencies, a first-time home purchase or retirement. 

“It is intended to work as a college savings account, but also with other options,” Goyke says. “While [college is] an important goal for a number of families, it isn’t universally the goal. We want more people saving — a broader, more diverse set of people that can benefit from this.”

The bill has bipartisan support from more than a half-dozen Assembly Republicans who have signed on. Goyke considers its hearing Tuesday before the Assembly Ways and Means Committee, which Macco chairs, an important advance. Most bills introduced in a session never get a hearing. “Big ideas sometimes take a few years to cross the goal line,” Goyke says.

Godlewski says the proposal has already won support from groups ranging from public education advocates and the Boys & Girls Club to the real estate industry and medical professionals. 

The proposal grew out of the Retirement Security Task Force that Gov. Tony Evers established in 2019. Creating a state-initiated investment account for every child born in Wisconsin was one of five recommendations in the task force’s final report published in February 2021.

“One of the things that we kept hearing about over and over again is that people wished they would have saved earlier,” says Godlewski, who chaired the task force. She recalled a listening session at which a mother with three children, now in their 30s, lamented that none of them had started to save for retirement. 

“We know that about a million Wisconsinites don’t have access to any sort of retirement plan at work,” Godlewski says. “They can’t live off of $1,400 a month once they’re able to qualify for Social Security.” 

Without help, as many as 400,000 or more people in their 60s or older could be living in poverty by 2030, according to projections in the task force report based on a 2017 analysis published by the La Follette School of Public Affairs at the University of Wisconsin.

Parents could opt out of the program, but it is set up to be automatic to ensure more people take part. Research on related programs, Godlewski says, shows that automatically enrolling someone with the chance to opt out will drive much higher participation.

“If all we did was send a letter saying, ‘Hey, you should start saving,’ we know that not enough families will take advantage of that,” says Goyke. “So we establish it at birth, and then over time, work to educate the account holders and the families on how they can make further contributions.”

Account holders, their families and outside organizations could all pay into the account on a holder’s behalf so the account could grow.

There have been other, smaller scale projects for universal savings accounts from birth. Rhode Island has a program of 529 college savings accounts that parents can open from the day a child is born, for example. Godlewski and Goyke say one reason the 401Kids proposal is distinctive is its plan to use the state investment board to manage the money.

The board would have a fiduciary duty to maximize the accounts and manage them appropriately. 

“Relying on a professional, trusted, well-known entity like SWIB, we can bring this type of savings product to the masses and meet people where they are,” Goyke says. “You ask me how to invest for my retirement, I get kind of nervous. These kinds of financial conversations are hard and scary, and so we bring a lot of stability and certainty through SWIB.”

The investment board’s staff “have been doing this for public employees for a very long time,” Godlewski says. “Public employees will tell you that they are a big fan of SWIB.”

School districts must teach financial literacy under a law enacted in 2017. “It’s hard to learn about these financial terms, when you talk about compound interest or mutual funds or index funds or things like that,” Godlewski says. “These accounts can be the tool that [students] can learn from.”

Another provision of the bill would allow families to request the Wisconsin Department of Revenue to directly deposit some or all of a state income tax refund directly into a child’s 401Kids account. That’s intended to make feeding the account easier, even for people without bank accounts.

“If we can make it really easy to move $100 or $200 at the moment in which a parent has that money, we think it’s a great way to facilitate it,” Goyke says. 

“The easier you make it to save, the more people say they will take advantage of this,” he adds. “But you have to break those barriers down. So you don’t need a bank account. You don’t need a credit union account. You can be a cash-in-the-coffee-can person and still have direct access to put money into your kid’s 401Kids account.”

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Erik Gunn
Erik Gunn

Deputy Editor Erik Gunn reports and writes on work and the economy, health policy and related subjects, for the Wisconsin Examiner. He spent 24 years as a freelance writer for Milwaukee Magazine, Isthmus, The Progressive, BNA Inc., and other publications, winning awards for investigative reporting, feature writing, beat coverage, business writing, and commentary. An East Coast native, he previously covered labor for The Milwaukee Journal after reporting for newspapers in upstate New York and northern Illinois. He's a graduate of Beloit College (English Comp.) and the Columbia School of Journalism. Off hours he is the Examiner's resident Springsteen and Jackson Browne fanboy and model railroad nerd.

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