3 More States Advance Auto-IRA Programs
Three more states—Pennsylvania, Vermont and Nevada—are entering the final stages of passing legislation to enact state-run automatic IRA programs, joining a growing list of states that are turning to such programs to increase access to retirement savings for workers lacking a workplace retirement plan.
During the 2023 state legislative sessions, there have been at least 22 states that have introduced legislation to establish new programs, amend existing programs, or form study groups to explore their options, reports the Georgetown University Center for Retirement Initiatives.
Since 2012, at least 47 states have now acted to implement a new program, study program options, or consider legislation to establish state-facilitated retirement savings programs.
Here’s a closer look at recent developments in Pennsylvania, Vermont and Nevada.
Keystone Saves
Pennsylvania’s House of Representatives passed a bill on May 24 that would create Keystone Saves, a state-run automatic IRA program, now under consideration by the finance committee of the state Senate.
If it becomes law, Keystone Saves is projected to help over 2 million Pennsylvania workers who lack access to workplace plans earn retirement savings through their jobs.
At no cost to employers, Keystone Saves creates an individual retirement account (IRA) program that automatically enrolls workers, who have the option to opt-out.
Nearly half of workers in Pennsylvania do not have access to a retirement plan at work, according to a new study released by AARP. Nearly 2 million people—41% of Pennsylvania’s private sector employees ages 18 to 64—work for an employer that does not offer a traditional pension or a retirement savings plan.
“Having access to a retirement plan at work is critical for building financial security later in life. And we know people are much more likely to save for retirement if they can do so automatically through their paycheck,” said Bill Johnston-Walsh, State Director, AARP Pennsylvania. “The 41% of workers in Pennsylvania that do not have access to a plan come from all walks of life and work in a range of occupations. We must make it easier for all workers to save for retirement so they can take control of their futures.”
Research shows that the share of Pennsylvania households with people ages 65+ with less than $75,000 in annual income—which indicates financial vulnerability—is expected to increase by 17% from 2020 to 2035. As these workers age, inadequate retirement savings will likely force reductions in retirement income and thus in the quality of life for many. At the same time, this shortfall in retirement income will increase state spending for Medicaid and other assistance programs.
“My Keystone Saves legislation allows retirees to retire with greater dignity and security,” said State Sen. Art Haywood (D-Philadelphia), the prime sponsor of the Senate version of the bill. “Keystone Saves will establish automated retirement savings payroll deductions that are then professionally invested. I have seen first-hand the struggle that people without retirement savings face when reaching their golden years. The work of those without employer-based retirement plans is no less valuable to our economy than any other profession, and their work is no less dignified.”
In a recent AARP poll, four in five small businesses in Pennsylvania agree that state lawmakers should support a state-facilitated retirement savings program, citing that offering a voluntary, portable retirement savings program helps local small businesses attract and retain quality employees and stay competitive. To date, 18 states, not including Pennsylvania, have enacted state-facilitated payroll deduction retirement savings or “Work & Save” programs.
NEXT PAGE: VT Saves
