By our count, it’s the fourth piece of retirement-related legislation to find its way to Congress in the past two years. In a sign of ever-increasing government interest in some sort of national, mandatory retirement program, Congressman Jared Huffman (D-CA) and Congresswoman Suzanne Bonamici (D-OR) introduced the “American Savings Account Act” on Friday, which they say is meant to provide American workers “with a new tool to help them save for a strong and secure retirement.
The legislation would create a new American Savings Account (ASA), a personal, tax-advantaged retirement savings plan modeled after Thrift Savings Plan offered to federal workers since 1986, and make it available to every private sector American worker currently without access to an employer-sponsored savings plan such as a 401(k) or 403(b) plan.
Currently, 68 million Americans in the workforce are not offered retirement savings plans through their employer. In the 21st century economy, more workers switch jobs frequently and are less likely than in the past to be covered by a traditional employer-sponsored retirement savings plan, according to a recent study based on Census data.
“We’re in the midst of a serious retirement savings crisis with too many American workers unable to save enough to meet their retirement goals and enjoy financial security,” Huffman said in a statement. “After working for a lifetime, all Americans have the right to retire in dignity. Our legislation, modeled after the great progress in California and Oregon, would ensure that every worker in America has access to high-quality savings options to provide them an income in retirement.”
“For the millions of Americans without retirement savings, the future can be uncertain,” Bonamici added. “Oregon leads the nation in helping all workers save for retirement and carry their savings from job to job. The American Savings Act will help working families around the country be more secure in their retirement by giving them the tools necessary to invest in their future, regardless of where they work.”
According to its sponsors, the legislation would:
- Automatically enroll private sector workers whose employers do not currently provide qualified retirement savings plans in an American Savings Account;
- Ensure that all private sector workers, including full-time, part-time, and contract, have immediate access to a retirement savings account no matter the size of their employer;
- Enable workers to discontinue their participation, or to change their contribution level between 2% and 10% to be deposited in the ASA from each paycheck;
- Permit employers to provide tax-advantaged matching or non-matching contributions to employee ASA accounts; and
- Allow, but not require, self-employed individuals and 1099 independents to enroll in an ASA.
In March 2016, the California Secure Choice Retirement Savings Investment Board recommended that the State Legislature establish the California Secure Retirement Plan, a 401(k)-like retirement plan managed by the state and available to private sector workers who do not have access to retirement savings plans through their employer.
Oregon has taken similar steps to establish an Oregon Retirement Savings Plan. Congressman Huffman and Congresswoman Bonamici’s legislation includes many of the policy recommendations currently moving forward in the two states.
The Senate version of the “American Savings Account Act” was introduced by Senator Jeff Merkley (D-OR) on January 28, 2016.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
