Sen. Jeff Merkley, D-Ore., unveiled Thursday the American Savings Act, legislation that would give workers without access to a retirement plan at work the ability to save through an American Savings Account, modeled on accounts offered to federal employees and Congress.
“It shouldn’t matter whether you work part time or full time, as an employee or as a contractor, or for a huge corporation or a tiny business: every American worker deserves access to a financially secure retirement,” Merkley said in introducing the bill. “With private-sector pensions becoming rarer and rarer, Social Security and retirement savings are more important to retirement security than ever, which is exactly why we must strengthen Social Security and expand high-quality retirement savings options to all workers.”
The bill will likely be referred to the Senate Committee on Health, Education, Labor and Pensions (HELP).
He said the new type of savings plans would be “universal, portable, simple and personal” and that if a workers’ employer doesn’t offer a plan, they’d “automatically” be given their own ASA.
Employers, he explained, will put 3% of a worker’s earnings into their account with each paycheck, but workers can choose to adjust contributions to as low as 2% of income, or as high as $18,000 per year, or opt out entirely.
ASAs will have the same investment options as federal employees get through the Thrift Savings Plan, with similar “rock-bottom costs,” Merkley said. ASAs, he added, “are simple for employers, who simply need to send employees’ ASA savings to the federal government alongside employee tax withholdings.” Workers will control their own accounts directly through a website.
Contributions to an ASA would be tax-deductible, and participants would be able to rollover any previous IRAs into their ASA or roll their ASA funds into an employer-sponsored 401(k) or 403(b) plan.
Employers using ASAs would “simply need to send employees’ ASA savings to the federal government alongside the employee tax withholdings that they already process,” Merkly noted, so AMAs offer a “high-quality option for small businesses without added paperwork or hassle.”