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Pennsylvania State Capitol

Regulation and Compliance > State Regulation

Auto-IRA Bill Advances in Pennsylvania Legislature

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What You Need to Know

  • The Keystone Saves program would help 2 million Pennsylvania workers who currently have no employer-based retirement plan option.
  • A significant and growing number of states have established government-administered retirement savings accounts for private-sector workers.
  • As drafted, the program would utilize automatic enrollment, but employee participation would not be mandatory.

A proposal to establish a state-based retirement savings program with automatic enrollment has cleared the lower chamber of the Pennsylvania State Legislature and is now under consideration by the finance committee of the state Senate.

The vote on House Bill 577, which is co-sponsored by several dozen Democratic members, was 106-95, and its supporters are urging speedy consideration and passage of the bill by the Republican-led Senate.

The legislation would establish a new program called “Keystone Saves,” following in the footsteps of the significant and growing number of states that have moved to establish government-administered retirement savings accounts for private-sector workers.

As described by the bill’s co-sponsors, the Keystone Saves program would allow the more than 2 million Pennsylvania workers who currently have no opportunity to save for retirement at their place of employment to establish payroll-deduction-funded individual retirement accounts. As drafted, the bill would utilize automatic enrollment, but participation would not be mandatory among employees.

As the bill’s sponsoring members highlight, a report in 2019 from a state Treasury Department task force on private-sector retirement security found that a vast number of Pennsylvanians are unprepared for the financial challenges of retirement.

It’s a problem not just for retirees but also for the commonwealth, the members say, as financially unprepared retirees are projected to cost the state an additional $14 billion in social services between 2015 and 2030 — an average of nearly $1 billion per year.

Additionally, the co-sponsors argue, lower consumer spending by retirees over this same time is estimated to cost the state roughly $1.4 billion in reduced tax collections, putting additional pressures on the state’s finances.

In a House debate about the bill, opposing members warned that the legislation could impose an undue burden on resource-strapped small businesses. Others argued cash-strapped employees might not be able to afford to save for retirement in the workplace.

Supporters counter that Keystone Saves is designed to maximize employee choice and control while minimizing any burden on employers. Under the text of the bill, employees can set their own contribution levels, increase or decrease their deductions, make investment choices, leave the program at any time, or even opt out altogether.

The co-sponsors say the bulk of administration and management activities will be borne by the state’s Treasury Department “working with a private sector, third-party administrator and investment managers, just as is done in our highly acclaimed 529 College and Career Savings Program.”

Keystone Saves also includes a four-year phase-in period, supporters say, providing “a common-sense approach which allows businesses to plan ahead.”

Pictured: The Pennsylvania State Capitol. (Image: Adobe Stock)


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