AARP endorsed the bipartisan—and controversial—Retirement Savings for Americans Act (RSAA), which provides a boost to advocates of a federally sponsored retirement plan for uncovered private-sector workers.
The country’s largest lobbying and advocacy organization sent a letter last week to Reps. Lloyd Smucker (R-Penn.) and Terri Sewell (D-Ala.), two of the bill’s sponsors, announcing its support.
“AARP, which advocates for the more than 100 million Americans [aged] 50 and older, writes to express our support for your efforts to extend access to retirement savings to more Americans through the Retirement Savings for Americans Act,” the letter from AARP’s Government Affairs office read.
Under RSAA, low- and moderate-income workers would be eligible for a 5% federal match (1% non-elective and 4% safe harbor), something to which opponents of the bill strongly object—including the American Retirement Association (ARA).
Why the objection? The ARA and others argue that the match would strongly encourage employers to terminate their 401(k) and similar-style defined contribution plans in favor of the federal plan, eventually leading to a “crowding out” of the country’s private, employer-based retirement saving system.
For its part, AARP said, “improving the health and financial security of older Americans is central to ensuring they can have a fulfilling and dignified life as they age. That is why AARP has fought for many years to implement state-facilitated retirement savings programs, and we are excited to see the potential to cover even more of America’s workers through federal legislation.”
The ARA agreed that state-facilitated plans, combined with provisions in SECURE 2.0 legislation, are covering more workers, but argued it’s the reason the introduction of a massive government-run program is unnecessary.
"Although we share AARP’s goal to promote greater retirement plan coverage, we continue to believe that a federal takeover of the 401(k) system, which will ultimately be the result of this proposal, is absolutely not the answer," ARA CEO Brian Graff said.
The bill, reintroduced in October and co-sponsored in the Senate by John Hickenlooper (R-Colo.) and Thom Tillis (R-N.C.), is championed by the Economic Innovation Group (EIG), an organization founded by several high-profile individuals.
They include Napster and Facebook billionaire Sean Parker, Steve Glickman, former Senior Economic Advisor at the National Security Council under President Obama, and John Lettieri, EIG’s CEO. Rocket Mortgage’s majority owner, Dan Gilbert, is a member of the organization’s Founders Circle, an advisory board with no governance responsibilities.
Key provisions of the bill include:
- Eligibility and Auto Enrollment: Full- and part-time workers who lack access to an employer-sponsored retirement plan would be eligible for an account and automatically enrolled at 3% of their income. They could choose to increase or decrease their withholding or opt-out entirely at any time. Independent workers (including gig workers) would also be eligible.
- Federal Contribution: Low- and moderate-income workers would be eligible for a 1% automatic contribution (as long as they remain employed) and up to a 4% matching contribution via a refundable federal tax credit. This would begin to phase out at median income.
- Portability: Accounts would remain attached to workers throughout their lifetimes, and workers would be able to stop and start contributions at will.
- Private Assets: The accounts would be the worker’s property, and the assets could be passed down to future generations to help them build wealth and financial security.
- Investment Options: Much like the current Thrift Savings Plan, 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.
READ AARP’S LETTER HERE.
