The 2020 legislative session begins on January 21, and bills have already been introduced on all three of Think New Mexico’s recommendations to improve retirement security for New Mexicans!
Repealing or reducing the state’s income tax on Social Security benefits. New Mexico is one of only 13 states that tax Social Security income, and it is a form of double taxation since New Mexicans pay income taxes on the money they put into Social Security and then they are taxed again on the benefits they receive. No other government benefits (e.g., Medicare, Medicaid, TANF, food stamps) are taxed.
House Bill 29 (Rep. Cathrynn Brown) and Senate Bill 81 (Sen. Jim White) would repeal the state’s tax on Social Security entirely, while House Bill 77 (Rep. Daymon Ely, Rep. Gail Armstrong, & Sen. Bill Tallman) would exempt the first $24,000 in Social Security income from tax, and Senate Bill 68 (Sen. Michael Padilla) would exempt the first $25,000.
The New Mexico Work and Save Act (House Bill 44, Rep. Tomas Salazar, Rep. Gail Armstrong, Rep. Christine Chandler, Sen. Bill Tallman) would create a system of Individual Retirement Accounts, similar to the state’s 529 college savings accounts, that would be available to workers who do not have access to retirement savings plans through their jobs. The research shows that people are 15 times more likely to save for retirement if they can do so using automatic deductions from their paychecks. Unfortunately, New Mexico currently leads the nation in the percentage of workers who lack access to work-based retirement savings plans that they can contribute to using automatic payroll deductions.
Increasing qualifications to for PERA pension board members (Senate Bill 60, Sen. George Munoz). Currently, no member of the PERA board, which oversees $15.8 billion for 90,000 public workers and retirees, is required to have any background in finance or investment management. The PERA board is completely dysfunctional, as was recently reported in the Santa Fe New Mexican, and research shows that poor governance can cost pensions 1-2% annually. Just a 1% reduction means the dysfunction on the current PERA board could cost the fund nearly $160 million dollars a year. SB 60 would restructure the PERA board in several ways, including adding qualifications for board members.