A bipartisan, bicameral bill that would make saving for retirement attainable for all American workers is once again on the Congress floor, and now backed by mega corporations and industry leaders.
U.S. Senators John Hickenlooper (D-CO) and Thom Tillis (R-NC), along with Representatives Lloyd Smucher (R-PA) and Terri Sewell (D-AL) reintroduced the “Retirement Savings for Americans Act (RSAA),” legislation that would help low- and middle-income Americans build wealth and save for retirement.
Previously introduced in 2022, the bill would establish a new program that gives eligible workers access to portable, tax-advantaged retirement savings accounts, according to a statement released by Senator Hickenlooper. 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.
Its aim is to diminish wealth disparities among low- to middle-income workers who have previously faced a shortage of retirement savings. Currently, the bottom 50% of U.S. households own only 1.5% of total U.S. wealth, while the Federal Reserve reports that less than 25% of workers have no retirement savings at all.
“Americans who work hard their entire lives deserve to retire with dignity,” said Hickenlooper in a statement. “This bill helps low-income workers enjoy a secure retirement and fulfill their American dream.’’
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), which has helped millions of federal workers and members of the military save for retirement.
“If enacted, this legislation would result in a healthier retirement system, a more financially secure workforce, and a stronger economy to the benefit of all Americans.”
John Lettieri, EIG
The Washington, D.C. – based think tank, who has long supported the bill, previously released an analysis in August explaining the disproportionate restrictions that have limited workers from adequately saving, and the need for a solution that would sustain retirement savings for all employees. Data from the 2023 Census Bureau Current Population Survey shows that 70 million—equating to 55.7%—of workers lack any kind of employer-provided retirement plan.
“The ‘Retirement Savings for Americans Act’ would address significant and longstanding gaps in the U.S. retirement system that have severely limited participation from low- and moderate-income workers,” said EIG President and CEO John Lettieri. “If enacted, this legislation would result in a healthier retirement system, a more financially secure workforce, and a stronger economy to the benefit of all Americans.”
Key features
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.
Some concern, some support
Notably, the American Retirement Association has previously expressed concern about the future of the private retirement plan market should the bill pass.
ARA CEO Brian Graff told attendees at the NAPA 401(k) Summit back in April that a program like the one in the proposed legislation could mark the beginning of a “year’s long battle” over the future of America’s retirement system between the private market and the federal government.
Graff 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 would upend the entire private retirement plan system.
“For many small business owners, the cost of being able to provide retirement plans and other benefits to their employees is prohibitively high and most say they only expect it to climb higher.”
Katelyn Gibert, Goldman Sachs
He said back in April he is not expecting the bill to pass in 2023—and perhaps not in 2024 if reintroduced again—but, “What you should be worried about is that there is actually bipartisan support for the idea of a federally run retirement savings plan.”
Yet, others, including large-scale institutions including Goldman Sachs and the Society for Human Resource Management (SHRM), and even tech giants like Uber and DoorDash, have recently asserted their support over 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.
“For many small business owners, the cost of being able to provide retirement plans and other benefits to their employees is prohibitively high and most say they only expect it to climb higher,” said Katelyn Gibert, policy director for Goldman Sachs 10,000 Small Businesses Voices. “It is time to explore innovative policy solutions—like the bipartisan Retirement Savings for Americans Act—to this persistent challenge that makes it difficult for small businesses to compete with large corporations and keeps many of their employees from being able to save for a well-deserved retirement.”
As a leader in employee benefits education, SHRM noted that despite an interest in retirement plans from both participations and employers alike, many Americans continue to retire without sufficient savings.
“SHRM’s 2023 Employee Benefits Study confirms that building retirement readiness in the workforce is of critical importance to the HR profession. These benefits are consistently ranked high by employees and employers, and organizations greatly value having retirement plans available for workers. Unfortunately, too many American workers reach retirement age with inadequate savings,” added Johnny C. Taylor, president and CEO at the Society for Human Resource Management. “…This is a great first step in what we know will be a longer process and discussion, but SHRM stands ready to assist the Congress as it continues a longstanding conversation on coverage among policymakers and the employer community.”
Tech titans like Uber and DoorDash expressed support towards the bill’s aim to provide retirement savings benefits for gig workers and part-time employees, adding that in the past, limited options have become available for these individuals to take advantage of.
“With more Americans choosing new ways to work than ever before, we’re proud to support this bipartisan effort to enable more workers in the modern economy to access the kinds of benefits that have long been out of reach for all but full-time employees…” stated Max Rettig, vice president of Public Policy at DoorDash. “The Retirement Savings for Americans Act makes meaningful progress toward expanding access for retirement savings across the country–regardless of how someone chooses to work.”
SEE ALSO:
- TSP-Like ‘Retirement Savings for Americans Act’ Introduced with Eye on 2023
- EIG’s John Lettieri Refutes ARA Claims of Proposed Bill’s Challenge to Private Retirement Plan System
- Too Many Low-Income Workers Lack Access to Retirement Plans: EIG
- Brian Graff at NAPA 401(k) Summit: Year’s Long Battle Beginning Over Future of America’s Retirement Plan System