Bold New Bill Introduced In Congress Would Bolster the Financial Security of All Workers Through Savings
For Immediate Release
Contact: Kristin Lawton, 202.207.0137
Today, Senators Chris Coons (D-DE) and Amy Klobuchar (D-MN); and Representatives Scott Peters (D-CA-52), Lucy McBath (D-GA-6) and Lisa Blunt Rochester (D-DE-AL) introduced the Saving for the Future Act, which would support workers achieve long-term financial stability through emergency savings while establishing new private-public partnerships. In response to the introduction, Prosperity Now President Andrea Levere issued the following statement:
Americans are woefully unprepared for financial emergencies in the short term, let alone their retirement years. 40 percent of Americans are one emergency away from financial ruin and almost 30 percent of households ages 55 and over do not have retirement savings or a pension. Households of color are especially vulnerable. On average, White families had about six times more in retirement savings than Black and Hispanic families. Government and employers need to work together to give Americans access to savings supports through workplace retirement plans and also help sustain the financial emergencies that inevitably hit every family. The Saving for the Future Act will build upon promising research on retirement and emergency savings, allowing employers to help their workers successfully save for the long and short terms.
40 percent of Americans live in liquid asset poverty, meaning that if these households lose their income due to a death in the family, a job loss, a hospitalization or any other host of reasons, they do not have enough liquid savings to live at the poverty level for three months. Liquid asset poverty is even more prevalent in Black and Latino households, as 63 percent of these families are liquid asset poor.
At the same time, about a third of the U.S. workforce lacks access to a retirement plan at work. With so many households living in financial insecurity, it is critical that resources be put in place to help these families save for financial emergencies while helping them save for their future.
The Saving for the Future Act works to address the short- and long-term savings gaps facing working families by making workplace savings solutions a universal feature of employment in America. With this legislation, workers would have a minimum amount of savings made available to them in an UP Account, regardless of whether they contribute. By building upon proven models of workplace retirement savings—such as 401(k)s, defined benefit pensions, and emerging state-backed savings plans—the bill ensures that all workers, regardless of their income or ability to save, would have a baseline of financial security.
By making enrollment an automatic feature for workers, the Saving for the Future Act has the potential to greatly boost participation in retirement plans. In addition to automatic enrollment, the Saving for the Future Act also increases a worker’s contributions each year. Upon retirement, workers may use their savings as monthly income or collect a lump sum.
While helping workers grow their retirement savings, the Saving for the Future Act also aims to support workers in growing their emergency savings. The first $2,500 in savings goes a safely-invested, accessible account designed for short- and medium-term savings. When the account is at its maximum of $2,500, additional contributions then go to a worker’s retirement fund and help the employee save for their future. This is the strategy touted on emergency savings in the workplace in Prosperity Now’s recent report, Saving for Now & Saving for Later: Rainy Day Savings Accounts to Boost Low-Wage Workers’ Financial Security.
Savings are not only for the benefit of workers. Personal finance issues can distract workers from doing their jobs, thus inhibiting their productivity. PwC reports that a quarter of employees say that personal finance issues have been a distraction while working. Outside of time spent worrying, these personal finance issues can also mean that employees devote more company hours towards solving these problems instead of working.
Another key aspect of the legislation is that it addresses the unique challenges smaller businesses may face in providing greater support to their workers to save for retirement. Businesses with fewer than 100 workers can make contributions through payroll into UP Accounts that are run by the federal government. UP Accounts will be portable, low-fee and worker-owned. Businesses can receive a tax credit for a portion of their minimum contributions to up to 20 workers, starting at 75 percent and phasing down to 25 percent. At the same time, employers with 10 or fewer workers can opt out of employer contributions. However, if the businesses decide to engage, their workers can get UP Account access and a direct, individual credit for their savings.
Prosperity Now believes that everyone deserves a chance to prosper. Since 1979, we have helped make it possible for millions of people, especially people of color and those of limited incomes, to achieve financial security, stability and, ultimately, prosperity. We offer a unique combination of scalable practical solutions, in-depth research and proven policy solutions, all aimed at building wealth for those who need it most.