House legislation offers retirement security to workers without pensions
HARRISBURG, Sept. 8 – Pennsylvanians looking for a more secure retirement -- and an easier way of getting there – would get that with legislation soon to be introduced by state Reps. Mike Hanna and Mike Driscoll.
Their proposed retirement security initiative for private-sector workers would provide a simple and convenient way for Pennsylvanians who do not have access to an employer-sponsored retirement plan to save money through automatic payroll deduction for their retirement.
"The lack of retirement savings for people of all ages is a developing crisis across the country," Hanna said. "The so-called ‘Silver Tsunami’ that is bearing down on Pennsylvania -- as a large number of residents begin to retire without the savings needed to meet their expenses -- is something we must address, both for retirees and for the fiscal well-being of our state.
"Numerous studies, plus the experience of several states that already started low-cost individual retirement security programs, clearly show that this type of initiative prompts more people to save more money for their eventual retirement," said Hanna, the House Democratic whip.
The proposed Keystone Retirement Security Program would consist of individual, low-cost, fully portable, Roth IRA accounts. The accounts would be managed by the state Treasurer's Office, similar to the Tuition Account Program 529 accounts many Pennsylvania families already use to save for college expenses.
Driscoll, a Philadelphia Democrat, has sought a legislative study on the concept since early 2015, and he supports the introduction of the bill now.
“There’s no longer a need to study this,” Driscoll said. “We know that it works well because a growing number of states have developed the same idea and put it into use. Based on their success, Pennsylvania should take steps to set up our own program as soon as we can.”
"These individual retirement savings accounts are easy to contribute to and the money moves with the employee from job to job,” said Democratic Leader Frank Dermody. “That’s a key part in helping more Pennsylvanians build up the retirement security they will need once they are done working."
Dermody said House Democrats are committed to finding ways to help working individuals and families in Pennsylvania build retirement security while reducing future costs and the financial burden of public assistance programs to the state.
Under the Hanna-Driscoll plan, employers with five or more employees that don't already offer a retirement plan would be required to offer their employees enrollment in the Keystone Retirement Security Program. Workers could decline if they choose; otherwise, a small portion of their pay would be automatically deducted and deposited into an account with the state Treasurer's Office. Treasury would manage the accounts similar to the way it manages the TAP 529 accounts.
House Democratic Appropriations Chairman Joe Markosek said the plans would not place any additional administrative or financial burden on private employers in Pennsylvania. The federal government recently issued guidance designed to facilitate and encourage these types of individual savings programs at the state level. No employer contributions would be required or permitted to an employee's account.
"Offering the Keystone Retirement Security Program to employees would be the default option for employers that don't offer workers a different tax-qualified retirement plan," Markosek said. "It's really a simple and next-to-no-cost way for employers to help their employees save money and build retirement security.
"This is a benefit that many workers currently don't have access to and that many employers can't afford to offer," Markosek said.
"Obviously, this legislation will help younger workers the most, those who have more working years to save through the program," Hanna said, "but it would help all workers to some degree, even those with just a few years to retirement. The sooner we get it started, the more Pennsylvania workers will have a chance for better retirement security."