New legislation, the Saving for the Future Act, would require employers to contribute 50 cents per hour to an employee's retirement plan, with a boost to 60 cents after two years and then continued increases with wage growth.
"Companies with ten or more employees would be required to contribute at least 50 cents per hour worked to an employer contribution savings plan, which could include existing plans, such as a 401(k)," the bill's sponsors in the House, California Democrats Scott Peters and Norma Torres, said in a statement.
Part-time workers would be included.
The bill, H.R. 5887, also allows employees at smaller companies to save through federally provided “UP Accounts,” modeled after the Thrift Savings Plan for federal workers.
"UP Accounts would have low fees, could easily be transferred from job to job, and would be tailored to the employee’s age and savings needs," the lawmakers said.
“Today’s cost of living crisis means most Americans aren't able to put enough money away for retirement or protect their families from unexpected emergency costs,” Peters said. "Now more than ever, retirement benefits should follow a worker as they move to new companies throughout their career. This legislation expands proven models of employer-provided savings and invests in portable benefits, so Americans can save for a more secure and prosperous future.”
Independent contractors may also participate in UP Accounts, according to the bill's fact sheet.
The maximum annual employee contribution to an UP Account "is set at half the level of allowable contributions to 401(k) plans," the fact sheet states. "That means employers who offer a 401(k) plan can offer a more generous tax deferral to their workers."
Up Accounts
Under the bill, businesses with fewer than 100 workers can make contributions through payroll into UP Accounts run by the federal government.
"UP Accounts are portable, low-fee, and worker-owned," the fact sheet states.
Employers receive a tax credit worth 50% of their minimum contributions to their first 15 workers, and 25% of their minimum contributions to their next 15 workers. Employers with 10 or fewer workers may opt out of employer contributions.
UP-Savings "is designed to encourage individuals to build modest emergency savings before putting away money for retirement. When first enrolling in an UP Account, a participant’s first $2,500 in contributions will deposit in his or her UP-Savings account," the fact sheet states.
Participants may withdraw funds from their UP-Savings accounts "when they face a non-routine financial need, such as a large out-of-pocket medical expense, a lapse in earning, a car accident, or family leave," the fact sheet explains.
Once an UP-Savings balance reaches the $2,500 maximum, "all additional contributions must go toward the UP-Retirement account. When a participant makes a withdrawal from the UP-Savings account, contributions will automatically revert back to the UP-Savings account."
Participants may bypass the UP-Savings account and save for retirement first.
"Additional contributions then go to a worker’s UP-Retirement account. Workers are automatically enrolled to contribute 4% of their own earnings, but may opt out or select a different contribution level. Worker contributions automatically rise to as high as 10%."
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