EIG CONTACT: Amelia Sandhovel | [email protected]
Washington, D.C. – The Economic Innovation Group (EIG) applauds the introduction of the Retirement Savings for Americans Act (RSAA), an effort to boost retirement security for low- and moderate-income workers led by Senators John Hickenlooper (D-CO) and Thom Tillis (R-NC), and Representatives Lloyd Smucker (R-PA-11) and Terri Sewell (D-AL-7).
“The Retirement Savings for Americans Act would address significant and longstanding gaps in the U.S. retirement system that have severely limited participation from low- and moderate-income workers. If enacted, this legislation would result in a healthier retirement system, a more financially secure workforce, and a stronger economy to the benefit of all Americans,” said EIG President and CEO John Lettieri. “EIG is proud to have worked closely with Senators Hickenlooper and Tillis and Representatives Smucker and Sewell on this important legislation, and we applaud them for their bipartisan leadership on behalf of workers nationwide.”
Retirement accounts are the largest source of aggregate wealth for American households. While the vast majority of workers saving for retirement do so through tax-advantaged employer-sponsored accounts, a staggering 70 million workers—or 55.7 percent—have no access to such plans. Low-income workers bear the brunt of that access gap, resulting in a mere 10 percent of older workers’ households in the bottom income quintile holding a retirement account balance as of 2019. This represents a significant decline from 2007 when over twice the share of such households had savings in a retirement account.
The RSAA would provide workers who lack access to an employer-sponsored retirement plan with access to portable plans modeled after the highly successful Thrift Savings Plan (TSP) enjoyed by federal employees. It would also provide targeted matching incentives to participating low- and moderate-income workers to reward work and encourage long-term savings. The legislation builds upon the recommendations of a 2021 EIG white paper by a bipartisan pair of economists, Teresa Ghilarducci and Kevin Hassett.
“Lawmakers today are searching for bold ideas to support and empower American workers—and especially low-income workers. The Retirement Savings for Americans Act is just such an idea,” said Kevin Hassett, Distinguished Visiting Fellow at the Hoover Institution and former Chairman of the White House Council of Economic Advisers. “This legislation would put millions of American families on the path to financial security and help them build intergenerational wealth.”
“Too many working Americans are struggling to save and invest to secure their standard of living when they choose to retire or are forced to retire,” said Professor Teresa Ghilarducci, a labor economist at the New School and leading expert on retirement security. “The Retirement Savings for Americans Act would equip millions of low- and moderate-income workers to build a nest egg for themselves and for future generations, leading to a stronger economy for all Americans in the process.”
Key features of the Retirement Savings for Americans Act include:
- Automatic Eligibility and Enrollment: Full- and part-time workers who lack access to an employer-sponsored retirement plan would be immediately eligible for an account, and they would be automatically enrolled at 3 percent of their income. They could choose to change their withholding or opt out entirely at any time. Independent and gig workers would also be eligible.
- Matching Contributions: Low- and moderate-income workers would be eligible for up to a 5 percent matching contribution via a refundable federal tax credit. This would be deposited directly into the employee’s retirement account and would begin to phase out at median income.
- Portability: Accounts would remain owned by workers throughout their lifetimes, and workers would be able to stop and start contributions as they desire or as their eligibility allows. They are in complete control.
- Employee Ownership: The accounts would be the property of the worker and their assets could be passed down to future generations.
- Investment Options: Much like the current TSP, participants would be given a menu of simple, low-fee investment options to choose from, including lifecycle funds tied to a worker’s estimated retirement date, or index funds made of stocks and bonds. The accounts would be managed by private asset managers chosen through a competitive process.
A 2022 EIG national survey found that a large, bipartisan majority of voters (81 percent) are concerned about retirement security, while less than half are confident that the next generation will be better off financially. The U.S. Conference of Mayors adopted a bipartisan resolution during their 2023 Annual Meeting calling on federal policymakers to consider adopting a TSP-type program for private sector workers who lack a retirement plan at work.
Explore a summary of the legislation, read the full bill text, and view the Congressional Statement.
About the Economic Innovation Group (EIG)
The Economic Innovation Group (EIG) is a bipartisan public policy organization dedicated to forging a more dynamic and inclusive American economy. Headquartered in Washington, DC, EIG produces nationally-recognized research and works with policymakers to develop ideas that empower workers, entrepreneurs, and communities.