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06/20/2024 11:20 AM
Pennsylvania House of Representatives
https://www.legis.state.pa.us/cfdocs/Legis/CSM/showMemoPublic.cfm?chamber=H&SPick=20230&cosponId=39343
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House of Representatives
Session of 2023 - 2024 Regular Session

MEMORANDUM

Posted: January 13, 2023 02:31 PM
From: Representative Kyle J. Mullins and Rep. Pat Gallagher
To: All House members
Subject: Keystone Saves Retirement Accounts
 
A financially secure retirement should follow decades of hard work at the end of a career. Unfortunately, a growing number of our retirees find themselves straining to match insufficient savings with the costs of living and unforeseen expenses. We will soon be introducing a bi-partisan solution that comes at no cost to employers or taxpayers.

Our legislation will establish “Keystone Saves” – a voluntary employee retirement savings program that would expand access to private sector individual retirement accounts (IRA) to the over two million Pennsylvania workers who currently have no opportunity to save for retirement at their place of employment.
 
The State Treasurer’s Retirement Security Task Force Report highlighted the vast number of Pennsylvanians who are seriously unprepared for the financial challenges of retirement. It’s a problem not just for retirees but also for the Commonwealth 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, 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.

An important step to address these alarming trends is to give workers who lack access to employer sponsored retirement plans the ability to save by enabling them to have a percentage of their pay automatically deposited into an IRA. National data shows that workers who have access to an employer sponsored retirement plan are 15 times more likely to save than employees who lack access to a plan through their employer. In Pennsylvania, 78 percent of employees with access to a retirement plan at their workplace take advantage of the opportunity to save. Keystone Saves allows employees to contribute to an IRA through an automatic payroll deduction, giving those without an employer retirement plan the opportunity to save for their retirement like the nearly 3.1 million employees with access to an employer plan can do.

Keystone Saves is designed to maximize employee choice and control while minimizing any burden on employers. 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. Retirement accounts can provide employees with emergency savings. Accounts are also portable so employees can continue to save if they change jobs, wish to rollover their Keystone Saves account into another retirement plan, or even move their account to a private account manager. It’s the employee’s choice.

For employers competing to attract and retain employees, Keystone Saves will provide a frictionless system that enables participation at no financial cost and little additional time, and extends protection from any legal liabilities. The vast bulk of employee, account, and investment administration and management activities, however, will be borne by the state 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, a common-sense approach which allows businesses to plan ahead.

We respectfully ask for your consideration in co-sponsoring this important legislation.



Introduced as HB577