The bipartisan and bicameral Retirement Savings for Americans Act (RSAA) picked up a big endorsement recently with AARP sending a letter of support to a pair of the bill’s sponsors.
This is the bill the American Retirement Association has expressed its opposition to as an attack on the private workplace retirement plan business by the federal government.
In the Jan. 24 letter of support sent to Representatives Lloyd Smucker (R-PA) and Terri Sewell (D-AL), AARP Senior Vice President of Government Affairs Bill Sweeney writes: “AARP, which advocates for the more than 100 million Americans age 50 and older, writes to express our support for your efforts to extend access to retirement savings to more Americans through the Retirement Savings for Americans Act.”
The letter continues: “AARP believes improving the health and financial security of older Americans is central to ensuring they can have a fulfilling and dignified life as they age. That is why AARP has fought for many years fought to implement state-facilitated retirement savings programs, and we are excited to see the potential to cover even more of America’s workers through federal legislation.”
• Click here to read AARP’s endorsement letter.
First introduced in 2022, U.S. Senators John Hickenlooper (D-CO) and Thom Tillis (R-NC), along with Representatives Lloyd Smucker (R-PA) and Terri Sewell (D-AL), reintroduced the RSAA in the 118th Congress in October 2023.
If passed, the RSAA would allow the federal government to match contributions for low- and middle-income workers
The bill would establish a new program that gives eligible workers access to portable, tax-advantaged retirement savings accounts. If passed, the RSAA would allow the federal government to match contributions for low- and middle-income workers, with the match beginning to phase out at median income.
That’s a significant point of contention for the ARA, which has likened the proposal to a giant multiple employer plan run by the Treasury Department, and warned that if it were to pass, it would amount to unfair competition that could upend the entire private retirement plan system.
“What you should be worried about is that there is actually bipartisan support for the idea of a federally run retirement savings plan,” ARA CEO Brian Graff said while addressing the bill during the “From the Hill to the Summit” session at the NAPA Summit in San Diego last April.
Contacted on Tuesday, ARA declined to comment on AARP’s endorsement of the Retirement Savings for Americans Act.
When the bill was reintroduced last October, organizations including Goldman Sachs, the Society for Human Resource Management (SHRM), Uber and DoorDash each asserted their support for the RSAA, noting its widened accessibility to all workers and its potential to take pressure off small business owners who cannot afford to provide adequate retirement strategies. But the AARP endorsement is the biggest one yet.
“AARP carries enormous credibility with lawmakers, so we are thrilled to see them throw their weight behind this effort,” John Lettieri, President and CEO of the Economic Innovation Group, told 401(k) Specialist Tuesday. EIG was involved in the drafting of the bill (see below). “Their endorsement marks yet another major milestone for this much-needed legislation, which has growing bipartisan support in Congress and the backing of a diverse array of industry groups, experts, and employers.”
The bill’s sponsors released statements today thanking AARP for its support of the bill, also calling it a “major step” in the effort to pass the bill.
“I would like to express my gratitude to AARP for their endorsement of the Retirement Savings for Americans Act. The RSAA is a commonsense bipartisan bill that will allow millions of Americans to participate in structured retirement plans for the very first time. This is a major step in our effort to ensure that all Americans have access to the resources that will allow them to achieve financial security,” said Rep Sewell.
“Thank you to AARP for endorsing the Retirement Savings for Americans Act. Too many hard-working Americans are not able to prepare financially for retirement. The RSAA will help millions of Americans save and find financial security in their retirements,” said Rep. Smucker.
“Roughly 40 million Americans lack access to an employer-sponsored retirement plan, which represents a significant roadblock to achieving financial security for their retirement. I want to thank the AARP for endorsing the Retirement Savings for Americans Act that tackles this problem by establishing a pathway for savings for Americans lacking retirement options,” said Senator Tillis.
“AARP fights for older Americans, many of whom retire without sufficient savings. We’re grateful for their support to help working Americans build savings and retire without fear and stress,” added Senator Hickenlooper.
Program modeled after TSP
Back in May 2022, the four lawmakers formed a Congressional working group focused on boosting retirement security for millions of low- and middle-income American workers, and the bill is the byproduct of their efforts.
The legislation closely follows recommendations made by the Economic Innovation Group’s (EIG) Inclusive Wealth-Building Initiative, which launched in 2021 with a white paper by economists Teresa Ghilarducci and Kevin Hassett. In it, the authors outline an idea to significantly expand retirement savings for millions of low- and moderate-income Americans through a new program modeled after the highly successful federal Thrift Savings Plan (TSP), used by millions of federal workers and members of the military to save for retirement.
What’s in the bill
The Retirement Savings for Americans Act contains the following provisions:
- Eligibility and Auto Enrollment: Full- and part-time workers who lack access to an employer-sponsored retirement plan would be eligible for an account, and they would be automatically enrolled at 3% of their income. They could choose to increase or decrease their withholding or opt out entirely at any time. Independent workers (including gig workers) would also be eligible.
- Federal Contribution: Low- and moderate-income workers would be eligible for a 1% automatic contribution (as long as they remain employed) and up to a 4% matching contribution via a refundable federal tax credit. This would begin to phase out at median income.
- Portability: Accounts would remain attached to workers throughout their lifetimes, and workers would be able to stop and start contributions at will.
- Private Assets: The accounts would be the property of the worker and the assets could be passed down to future generations to help them build wealth and financial security.
- Investment Options: Much like the current Thrift Savings Plan, participants would be given a menu of simple, low-fee investment options to choose from, including lifecycle funds tied to a worker’s estimated retirement date, or index funds made of stocks and bonds.
EDITOR’S NOTE: This article was edited after posting to clarify that the RSAA was introduced in the Senate (S.3102) and House (H.R.6065) in 2023 during the 118th Congress so it does not need to be reintroduced in 2024.
SEE ALSO:
• RSAA: Improved Plan Access, But Worse Overall Outcomes, Morningstar Retirement Finds
• Controversial ‘Retirement Savings for Americans Act’ Reintroduced in Congress
• TSP-Like ‘Retirement Savings for Americans Act’ Introduced with Eye on 2023