Pennsylvania and Hawaii consider Auto-IRA savings opportunities for private sector workers
Pennsylvania and Hawaii will consider legislation this year to help private-sector workers without workplace pension plans save through government-sponsored Individual Retirement Account programs. In both cases, workers from employers of a minimum size would be automatically enrolled in the program with the possibility of opting out.
If the measures are passed, these states will join 10 others (California, Colorado, Connecticut, Illinois, Maine, Maryland, New Jersey, New York, Oregon and Virginia) that have implemented similar programs, called auto-IRAs, to encourage more of their residents to save for retirement.
Auto-IRAs are payroll savings programs in which workers deposit money directly from their paychecks into an account they then manage. Although workers are automatically enrolled, they can withdraw or change their contributions or investments at any time.
In Pennsylvania, Reps. Tracy Pennycuick (R-Montgomery County) and Mike Driscoll (D-Philadelphia) unveiled the Keystone Saves Retirement Program Act (HB 2156) on Dec. 13. Keystone Saves would create a self-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 helping hard-working Pennsylvanians prepare for the future.”
The bill has bipartisan support, including 47 co-sponsors from both parties.
Pennsylvania Treasurer Stacy Garrity (right) defended the proposed program, which would be overseen by the Treasurer’s Office if passed. “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 with no easy way to save for their family’s future. Keystone Saves is a simple, effective and user-friendly way to help them save more.
Meanwhile, the Hawaii Retirement Savings Task Force delivered its final report to the state legislature Dec. 10 and recommended that Hawaii also adopt a self-IRA program. The report noted the rapid growth rate of the elderly population in Hawaii, one of the highest in the nation, and how that growth could increase fiscal pressure on the state.
To help more Hawaiians prepare for retirement and reduce the potential impact on state finances, the report recommends implementing a self-IRA program for workers of employers with five or more employees. more. Independents could also participate.
Notably, the report urged lawmakers to consider joining another state self-IRA program as a way to achieve economies of scale through more savers and therefore total assets. The Hawaii State Legislature is expected to pass the self-IRA legislation early this year.
The Pew Charitable Trusts Retirement Savings Project helped develop both initiatives. Pew provided technical assistance to the Pennsylvania State Treasurer and the Hawaii Task Force in the form of data analysis, testimony, and contributions to reports and legislation. The Retirement Savings Project will continue to provide assistance as initiatives progress in both states.
John Scott is the Director of The Pew Charitable Trusts Retirement Savings Project.