Senators propose bill establishing employer contributions to worker savings accounts

A bill has been introduced in the Senate that would establish a minimum employer contribution to a worker's savings plan, with the goal of helping Americans better save for retirement and emergencies.

The Saving for the Future Act was introduced April 4 by Sens. Amy Klobuchar, D-Minn., and Christopher Coons, D-Del. The bill would apply to companies with 10 or more employees and require employers to contribute 50 cents per employee hour worked. The minimum would rise to 60 cents after two years and then rise with wage growth.

The employer contributions would be directed to a given retirement account, such as a 401(k), but if a retirement plan isn't offered, the contributions would go into a universal personal, or UP, account. Modeled after the Thrift Savings Plan for federal workers, the bill would create UP accounts, which would be portable, low-fee, and worker-owned.

Workers would be automatically enrolled to contribute 4% of their own earnings, but may opt out or select a different contribution level. Worker contributions would automatically rise to as high as 10%. The first $2,500 in savings would go to a worker's UP-savings account, an accessible account for non-routine expenses. Additional contributions then go to a worker's UP-retirement account.

Existing retirement plans will be allowed to continue, and the bill would ensure "that employers continue to use them," according to a summary of the bill. Most companies that offer a pension plan or 401(k) match would already be in compliance.

Businesses would receive tax credits for their contributions, which would be offset by increasing the corporate tax rate to 23% from 21% and raising the tax rate on the nation's wealthiest households to 39.6% from 37%.

"Hardworking families in America often don't have enough money in their savings account for an emergency — let alone retirement down the road," Ms. Klobuchar said in a news release. "The Saving for the Future Act will help close the wealth gap, prepare families in case of an emergency, and set workers up for a successful retirement."

The fiduciaries of UP accounts would be a federal board, appointed by the president and confirmed by the Senate, just like the Thrift Savings Plan, the summary said. The board would be required to contract out the administration of UP accounts to a financial services company, and the board would have to ensure that participants provide a menu of investment products that allows for diversification across stocks and bonds, including low-fee index funds. The default UP-retirement investment must be a fully diversified fund or funds that reduce risk for the investor as he or she approaches retirement age.

"The Saving for the Future Act takes important steps to help address the country's looming retirement crisis," said David Madland, senior fellow at the Center for American Progress Action Fund, in the same news release. "It enables workers that lack access to save in a high-quality retirement plan and pushes all employers to contribute towards their employee's retirement so that workers don't have to do it on their own."