A recently passed House bill that would allow employees to voluntarily contribute to state-managed retirement savings accounts faces an uncertain future in the Senate.
State Rep. Kyle Mullins, D-Lackawanna, the bill’s chief sponsor, said the Keystone Saves retirement account program would offer more employees a chance to save for retirement that they don’t have now.
“Just because certain employers of various sizes just don't or haven't established retirement savings accounts,” Mullins said in an interview. “And this would help to fill that need, and at no cost to the employer and at no cost to the taxpayer.”
The House voted 102-101, strictly along party lines, on May 13 to pass the bill. In the last legislative session, the House passed an earlier version of the bill with bipartisan support, 106-95, on May 24, 2023. The Senate never acted on it in the last session and may not in the latest session, which ends Nov. 30, 2026.
“While savings programs can be very beneficial, last year organizations expressed concerns with expanding government’s role in this process and adding an additional mandate on small businesses,” Senate Republican Caucus spokeswoman Kate Flessner said in an email.
Flessner noted the vote passed with no House Republican support this time, but said a Senate committee will be assigned to review it.
Mullins said Keystone Saves accounts would resemble the state’s 529 guaranteed savings plan accounts. The 529 accounts allow families to set aside money for education after high school.
People contribute to the plans after paying taxes on the income. No taxes apply on interest or dividends paid on the money or when money is withdrawn to pay for educations. The state does not contribute to 529 plans and would not to Keystone Saves accounts.
More than 2.1 million state residents work for employers who do not offer pension plans, according to a 2019 state Treasury Department Retirement Security Task Force Report.
Keystone Saves would provide a state-managed option that would allow employees to have a percentage of their pay automatically deposited into an individual retirement account. The Treasury Department would manage the account just like it does 529 plans.
The task force report projected “financially unprepared retirees” would cost Pennsylvania an extra $14 billion between 2015 and 2030 in social services to make up for their lack of retirement money.
Without money saved for retirement, a retiree also has less buying power. That would cost the state $1.4 billion in taxes, according to the report.
“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,” a memo seeking co-sponsors that Mullins circulated says. “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.”
Mullins said employers have numerous reasons to avoid offering retirement plans.
“Most employers are busy in the day to day, trying to ... make payroll, or trying to keep the lights on, keep the doors open,” he said. “This would remove that burden from them. It would also help them attract workers, as well as retain workers.”
Former state Treasurer Joe Torsella, a Democrat, supported the concept, but so does current Treasurer Stacy Garrity, a Republican. In a statement issued by her office, Garrity points out about a million Americans in other states save in “state-facilitated retirement savings programs.”
“This is a tremendous milestone and proof that these programs work to empower our friends and neighbors to save,” Garrity said.
In all, 17 states have enacted retirement programs “with eleven of them up, running, and open to all eligible employers and workers.”
“As of last month, those states have reported nearly 2 billion dollars in assets, with over 250,000 employers registered,” she said. “Pennsylvania should be next to enact a program to combat the retirement security crisis. It’s better for employees, better for businesses, and better for taxpayers. It’s a win, win, win.”
