Addressing Retirement Security in Pennsylvania

A staggering 44 percent of working Pennsylvanians – over two-million workers – lack access to any retirement plan. Pennsylvania House Democrats are proposing the Keystone Retirement Security Program to address this emergency.

The program would give millions of working Pennsylvanians the option to protect their retirement futures by offering them access to a state-run, privately managed plan that is safe and portable. The Keystone Retirement Security Program would be an option for employers that don’t offer workers a different tax-qualified retirement plan.

A closer look reveals that retirement security touches on many issues affecting seniors, taxpayers and economic development.


Preventing the next 'Silver Tsunami'

To produce the income needed to maintain their standard of living in retirement, experts suggests that Americans need to save about 15 percent of earnings, but more than half of today’s households will not have enough retirement income to maintain their pre-retirement standard of living.

Right now, people who work for small businesses or who make less than $25,000 a year are least likely to save for life as senior citizens: only 26 percent of small-business employees and 29 percent of low-income workers say that they are saving. Those who have more exposure to retirement savings programs – young adults and workers of medium-sized companies – invest more in savings programs: 39 percent of young adults and 43 percent of workers in medium-sized businesses say that they do.

But the number of active savers in Pennsylvania will not abate a “Silver Tsunami” of soon-to-be retirees who have not saved enough and are turning to state and federal governments for assistance and taxpayer-financed services. This run on public programs costs taxpayers billions of dollars each year and without a solution that promotes individual savings, the problem only will worsen.

“The states know at the end of the day, if you have a large number of retirees who don’t have the financial resources, they’ll need support with health care, housing and food that generally comes from local and state government. Ultimately, the states will be the ones footing the bill.”

Gerri Madrid-Davis

State Advocacy Director


There is hope, however. Workers with access to a workplace retirement plan are 15 times more likely to save for retirement.


The Keystone Retirement Security Plan

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.

The Commonwealth of Pennsylvania would never have access to Keystone Retirement Security investments or assets.

Who does the plan benefit?

  • Workers
    • Provides a convenient, safe, portable retirement savings plan for workers who have no access to an employer-sponsored retirement plan

    • Enjoys economies of scale that drastically reduces investment and administrative fees on workers’ accounts
  • Businesses
    • Allows small businesses to compete with larger employers by providing a low-cost retirement savings plan
  • Taxpayers
    • Encouraging and facilitating individual retirement savings will reduce the demands placed on state and federal services by retirees who lack sufficient resources to fund their own retirements.
  • Women
    • Women gain greater access to a plan that is automatic, low-cost and portable. Studies show that women live longer but statistically earn less than men, spend more time out of the workforce caring for family, spend more on medical care and are less likely to access retirement savings plans.


Time for Pa. to join other states

States with programs similar to The Keystone Retirement Security Program include California, Connecticut, Illinois, Maryland, Oregon and Washington.

A December 2015 AARP study of Illinois’ “Secure Choice Savings Program” found:

  • IL Secure Choice makes the deduction simple for the employer to set up. The plan has only one possible provider, and employees can choose from only four investment options

  • Secure Choice requires employers to open enrollment for all employees annually to provide the opportunity for employees who have opted out to enroll

  • The IL Secure Choice model is one tool to address the looming retirement income insecurity facing many private-sector workers.

Pennsylvania should join other states in offering private-sector employees a simple, safe and portable plan to save for retirement security.