Pennsylvania and Hawaii will consider legislation this year to help private sector workers without workplace retirement plans to save through government-sponsored individual retirement account programs. In both cases, workers at employers of a minimum size would be enrolled automatically in the program with the ability to opt out.
If the measures are enacted, these states will join 10 others—California, Colorado, Connecticut, Illinois, Maine, Maryland, New Jersey, New York, Oregon, and Virginia—that have implemented similar programs, known as auto-IRAs, to encourage more of their residents to save for retirement.
Auto-IRAs are payroll deduction savings programs in which workers deposit money directly from their paychecks into an account that they then manage. Although the workers are automatically enrolled, they can opt out or change their contributions or investments at any time.
In Pennsylvania, Representatives Tracy Pennycuick (R-Montgomery County) and Mike Driscoll (D-Philadelphia) unveiled the Keystone Saves Retirement Program Act (H.B. 2156) on Dec. 13. Keystone Saves would create an auto-IRA program for those who work at employers with five or more employees.
“Keystone Saves will give people a real opportunity to save for the future,” Pennycuick said at an event in December. “This is a common-sense approach to help hardworking Pennsylvanians prepare for the future.”
The bill has bipartisan support, including 47 co-sponsors from both parties.
Pennsylvania Treasurer Stacy Garrity (R) has championed the proposed program, which would be overseen by the treasurer’s office if enacted. “We’re talking about people we all know—hairstylists and barbers, truckers and mechanics, our favorite waitresses and bartenders,” Garrity said at a press conference in Harrisburg in December. “They work hard every day without an easy way to save for the future of their families. Keystone Saves is a simple, effective, and business-friendly way to help them save more.”
Meanwhile, the Hawaii Retirement Savings Task Force delivered its final report to the State Legislature on Dec. 10 and recommended that Hawaii also adopt an auto-IRA program. The report noted the fast rate of growth of the elderly population in Hawaii, one of the highest in the nation, and how that growth could increase fiscal stress on the state.
To help more residents of Hawaii prepare for retirement and to reduce the potential impact on state finances, the report recommended setting up an auto-IRA program for workers at employers with five or more employees. Self-employed individuals also would be able to take part.
Notably, the report urged lawmakers to explore joining another state auto-IRA program as a way to achieve economies of scale through a larger pool of savers and hence total assets. The Hawaii State Legislature is expected to take up auto-IRA legislation early this year.
The Pew Charitable Trusts’ retirement savings project helped to develop both initiatives. Pew provided technical assistance to the Pennsylvania state treasurer and to the Hawaii task force in the form of data analysis, testimony, and input on reports and legislation. The retirement savings project will continue to provide assistance as the initiatives move forward in both states.
John Scott is the director of The Pew Charitable Trusts’ retirement savings project.