Philadelphia voters approved the first city-run retirement savings plan in the US
Alliance Global Partners chief strategist Mark Grant discusses his retirement income tax strategy at Varney & Co.
Voters are in Philadelphia passed a ballot measure on Tuesday that would create the nation’s first savings plan for workers whose jobs do not provide retirement benefits.
The move would create a new program called PhillySaves that allows private sector workers whose employers don’t sponsor retirement plans like a 401(k) to automatically enroll. individual retirement accounts (IRAs) stopped by the house.
Participation in PhillySaves is voluntary and allows employees to opt out of auto-IRA enrollment or change how much they contribute to their paychecks at will.
The accounts will also track employees into future jobs, and employees can withdraw contributions early if needed tax-free – although any dividends or interest withdrawn may be subject to tax.
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Philadelphia voter approval of PhillySaves creates the first city-run retirement savings program for private sector workers in the country. (Jumping Rocks Team/Universal Images via Getty Images)
An estimated 208,000 private sector workers in Philadelphia will be able to enroll in PhillySaves. Many such workers are in the high turnover service industry or are employed by small businesses that will face the burden of compliance in establishing and maintaining retirement plan.
The program also does not charge businesses that register in the program to register their employees.
PhillySaves will be managed by a third-party company overseen by the Philadelphia Retirement Savings Board created under the plan. Pew estimates that the program will cost the city up to $1 million initially and approximately $500,000 per year in subsequent years.
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PhillySaves allows registered employees to adjust their contributions or opt out if they would prefer not to participate. (Stock)
“Philadelphia voters took an important step this week by approving PhillySaves,” said Patrick Morgan, Pew Charitable Trusts’ Philadelphia project director for research and policy initiative.
“It’s important that PhillySaves gets off the ground quickly. We know from looking at the concerted efforts to appoint a strong board, hire the right leader, and educate employers and employees about how the program works is critical to the success of these programs,” added Morgan.
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PhillySaves IRAs will follow employees as they move between jobs in addition to their jobs. (Stock)
The measure passed with the support of 78% of voters and follows the Philadelphia City Council’s passage of legislation last year that was signed into law by the mayor in January.
That allowed the plan to move forward with the public vote needed to create a governing board under the city’s charter.
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“Philadelphia now has a real opportunity to demonstrate that smart policy design, strong execution and continued support can grow Philadelphians. retirement security in an efficient and cost-effective way,” said Morgan.
