Pennsylvania Individual Retirement Accounts
Portable Individual Retirement AccountsFor PA Private Sector Workers Without Retirement Plans
Joe Torsella is calling for Pennsylvania state government to address the retirement insecurity crisis by creating portable, individual retirement accounts for the 2 million Pennsylvania private sector workers with no access to workplace retirement plans.
“Individual retirement savings plans are a simple tool that helps both workers and small businesses. This is a no-brainer, and I’ll work with leaders in Harrisburg to have Pennsylvania join the growing list of states taking steps to solve the problem. We need to allow individual Pennsylvanians to build their own economic security. The failure to save enough—or save at all— is a struggle for all working families; however, there are real future risks for all of us if individuals do not have access to retirement savings options in the workplace. If state government sets the stage for accessible and automatic savings, we help mitigate those risks.”
Torsella said he would work with other stakeholders and leaders across the political spectrum to develop the Pennsylvania program, based on best practices and the most recent experience in other states, and would leverage the considerable experience of the Treasury Department to help create and manage the program. The range of possibilities includes a universal, automatic option – such as the Illinois and California models – to the looser “exchange” models, such as Washington, Maryland and New Jersey.
Any successful program, however, should include several key elements:
- Automatic Deductions: Automatic deductions with an employee opt-out, rather than opt-in programs, have been shown to dramatically increase participation.
- Low-fee: Study after study shows that investors benefit from simpler, low-fee investment options.
- Minimal Burden on Business: No fiduciary or contribution burden on employers: under a PA-IRA, employers should bear no fiduciary responsibility for employee accounts, should not be liable for employee investment decisions by employees, and should not required to make or match any contributions to the accounts themselves.
- Portability: PA-IRAs should follow workers from job to job, throughout their lives.
- Restricted to Retirement: PA-IRA balances could only be used retirement, when the contributor would have access to their savings, comprised of the money they contributed and the investment interest and dividend earnings on the account.
- Broad Access: the best program will be the one that provides the widest access to the approximately 2 million Pennsylvanians currently without workplace savings accounts.