A bipartisan bill was introduced in Congress last week that would establish a program allowing eligible workers access to portable, tax-advantaged retirement savings accounts.
The Retirement Savings for Americans Act (S. 102) would allow full- and part-time workers who lack access to a 401(k) or employer-sponsored retirement plan to participate in this program. Similar to a 401(k), those who are enrolled would be able to automatically contribute 3 percent of their income, with the option to increase or decrease their withholding or opt-out at any time. Independent workers, including gig workers, would also be eligible.
Further, low- and moderate-income workers would be eligible for a 1 percent automatic contribution, as long as they remain employed, and up to a 4 percent matching contribution via a refundable federal tax credit. This provision would begin to phase out at median income.
These accounts would remain attached to workers throughout their lifetimes, even if they change jobs, and workers would be able to stop and start contributions at will. Further, the accounts would be the worker’s property, and the assets could be passed down to future generations to help them build wealth and financial security.
And much like the current Thrift Savings Plan, participants would be given a menu of simple, low-fee investment options, including lifecycle funds tied to a worker’s estimated retirement date or index funds made of stocks and bonds.
“Roughly 40 million Americans lack access to an employer-sponsored retirement plan, which represents a significant roadblock to achieving financial security for their retirement,” Sen. Tom Tillis (R-NC), one of the billʻs sponsors, said. “The Retirement Savings for Americans Act tackles this problem by establishing a pathway for savings for Americans lacking retirement options.”
It was also sponsored by Sen. John Hickenlooper (D-CO), along with Reps. Lloyd Smucker (R-PA) and Terri Sewell (D-AL).
The bill has the support of several groups and entities, including Charles Schwab, the founder of the company of the same name.
“For the millions of workers at small businesses or working independent as occasional or gig workers who donʻt have access to a 401(k), the Retirement Savings for Americans Act would create an incentive to put money aside and gradually build a retirement nest egg, just as so many other Americans have been able to do through their workplace programs and as government employees do through the Thrift Savings Plan,” Schwab wrote to the billʻs sponsors.