A controversial bill that would provide eligible private sector workers with access to a federally run retirement savings account was once again introduced on Monday.
Rep. Lloyd Smucker (R-PA) reintroduced the Retirement Savings for Americans Act (RSAA), a bipartisan, bicameral bill that would offer matching contributions for low-to-middle income Americans who do not have access to an employer-sponsored retirement plan.
The bill was originally introduced in December 2022 by Sen. John Hickenlooper (D-CO), and then reintroduced by Sen. Hickenlooper and Thom Tillis (R-NC) in October 2023. 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 a 5% contribution for low- and middle-income workers (at 1% non-elective and 4% safe harbor), with the match beginning to phase out at median income.
Advocates support the bill for its aim to diminish wealth disparities among low- to middle-income workers who have previously faced a shortage of retirement savings.
They also say it can aid rural workers who are left without access to retirement benefits. An analysis by the Economic Innovation Group (EIG) in March found that rural workers hold approximately half of the retirement savings of their urban counterparts, resulting in a savings gap of nearly $55,000 between the two groups. Today, there are 5.1 million rural workers who are without access to an employer-based retirement plan, and 5.9 million who do not receive an employer match.
EIG says legislation like the RSAA can help curtail this disparity. “While this legislation would benefit workers everywhere, our findings suggest that the access and incentives provided by RSAA would disproportionately benefit rural workers,” EIG’s paper states.
The bill has previously received support from tech giants like Uber and DoorDash, who say the legislation provides retirement planning benefits for gig workers and part-time employees. AARP, Goldman Sachs, and the Society for Human Resource Management (SHRM) have also backed the bill for widening accessibility.
But opponents of the legislation believe it could worsen retirement outcomes for some while wedging a gap between the private 401(k) market and the federal government. A 2024 Morningstar report asserts that while the RSAA was found to improve accessibility to retirement plans, it could reduce the median wealth at retirement age by 20% for Gen Z workers and 12% for Millennial workers. This is due to anticipated reductions in employer-sponsored defined contribution (DC) plans and lower default contribution rates, Morningstar reports.
Other organizations, like the American Retirement Association (ARA), argue that the RSAA could incentivize employers to terminate existing 401(k) accounts for a retirement plan with government-subsidized matching contributions. They also say the bill poses risks to Social Security’s stability, as the government could use the funds to solve the agency’s insolvency rather than implement a U.S.-run retirement plan.
Opponents say that provisions in SECURE 2.0 legislation, state-sponsored automatic individual retirement accounts (IRAs) and plan features like automatic enrollment and automatic escalation are already closing the coverage gap and instead urge the federal government to utilize these resources before launching a retirement program at the federal level.
SEE ALSO:
Controversial ‘Retirement Savings for Americans Act’ Reintroduced in Congress
Rural Americans Face Steeper Retirement Savings Barriers than Urban Peers
RSAA: Improved Plan Access, But Worse Overall Outcomes, Morningstar Retirement Finds
Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with nearly a decade of experience and a passion for telling stories and reporting news. She is originally from Queens, New York, but now resides in Denver, Colorado.