New Bill Would Create U.S.-Run Retirement Accounts for Workers Without 401(k)s

Lawmakers introduced bipartisan legislation late Thursday, the Retirement Savings for Americans Act, which would create Roth IRA-style retirement accounts for workers without access to employer-sponsored retirement plans.

The bill “would establish a new program that gives eligible workers access to portable, tax-advantaged retirement savings accounts,” according to the bill’s sponsors. “It would also offer federal matching contributions for low- and middle-income workers, with the match beginning to phase out at median income.”

The bill was introduced by Sens. John Hickenlooper, D-Colo., and Thom Tillis, R-N.C., as well as Reps. Terri Sewell, D-Ala., and Lloyd Smucker, R-Pa.

The bill, as explained by the lawmakers, includes eight 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 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.
• 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.

Teresa Ghilarducci, a labor economist at the New School who has advocated for the government to boost retirement savings, said in a statement that “too many Americans are struggling to meet their savings goals and secure a comfortable standard of living in retirement.”

The Retirement Savings for Americans Act “takes critical steps to address gaps in federal retirement policy and ensure that low- and moderate-income workers are equipped to build a nest egg for themselves and for future generations,” Ghilarducci said.

Smucker added in the statement that he appreciates “the opportunity to advance meaningful bipartisan legislation to assist hardworking Americans save for their retirement.”

The Retirement Savings for Americans Act “will create a pathway for millions of Americans to find financial security in their retirement,” Smucker said. “I look forward to continuing to advance this legislation in the next Congress and building upon the successes of Secure 2.0 to help Americans become financially secure in their retirements.”