Sen. Jeff Merkley (D-Oregon) has reintroduced the American Savings Act.
Modeled on the Thrift Savings Plan (TSP) used by federal workers and members of Congress, it would give every worker who does not already have access to a retirement savings plan through their employer their own personal retirement savings account. Most notably, workers would be able to take these savings accounts with them seamlessly as they switch jobs.
“It shouldn’t matter whether you work part-time or full-time, as an employee or a contractor, or for a huge corporation or a tiny business,” Merkley says. “Every American worker deserves access to a financially secure retirement. With private-sector pensions becoming rarer and rarer, Social Security and retirement savings are more important to retirement security than ever. That makes our mission clear. We need to strengthen Social Security, and we also must expand high-quality retirement savings options to all workers.”
Merkley notes that 55 million Americans do not have access to a retirement savings plan. The legislation would enable employers to send employees’ savings to the federal government in an American Savings Account (ASA) alongside the employee tax withholdings they already process, thereby not saddling employers with new administrative processes. It would initially defer 3% of workers’ salaries, but participants could change that to 2%, or contribute a maximum of $18,000 a year.
ASAs would offer the same investment options as TSPs, at the same low cost. Workers would be able to control their accounts through a website. They would be able to roll any previous individual retirement accounts (IRAs) into the ASA, and well as roll their ASA into an employer-sponsored 401(k) or 403(b) plan.
The main benefits of ASAs is that they would be universal, portable, simple and personal—workers would be able to decide how much to save and how to invest.