Seattle Mayor Tim Burgess recently sent legislation to the City Council that will establish the Seattle Retirement Savings Plan. The bill creates a framework to give Seattle workers whose employers do not offer a workplace retirement savings plan an easier way to save for retirement.
“In Seattle, 200,000 workers have no retirement savings plan,” said Burgess. “That’s a recipe for long-term financial instability for those individual workers, their families, and our local economy. We know that people are far more likely to save for retirement if they have an option easily available. That’s exactly what my plan provides.
“This is a pro-business, pro-economic stability, pro-growth, and pro-worker idea,” Burgess continued. “I look forward to working with the City Council, and Seattle workers and businesses to provide the tools people need to help them retire securely.”
According to Burgess, workers whose employers do not offer a retirement savings plan would be automatically enrolled in a retirement plan. They would be able to opt out of the plan at any time, determine how much of their paycheck will be deposited in their personal Individual Retirement Account (IRA), and choose how their funds will be invested. These IRAs would be portable so that if an employee moves to another job, they would take their IRA with them.
“We applaud Mayor Burgess for stepping forward with a proposal to address the growing retirement crisis facing workers today,” said Adam Glickman, Secretary-Treasurer of SEIU 775. “About 50% of U.S. households age 55 and older have no retirement savings to supplement Social Security income, and this is an important step forward to tackle that problem. We believe that for today’s on-demand, part-time, and temporary workforce, policies that give access to retirement and other benefits that are portable and worker-owned are essential.”
If adopted by the City Council, Seattle would be the first city in the country to implement this type of City-facilitated, privately-administered plan. The plan is modeled after legislation establishing similar retirement systems, called “Auto-IRA,” in the states of Oregon and California. Oregon anticipates opening its retirement system for enrollment in 2018. Illinois and Connecticut have also passed Auto-IRA legislation and are in the process of developing their own programs.
All eligible employees would be provided with an IRA that is funded through a payroll deduction set at a default contribution rate at an expected 3 percent to 5 percent of pay. At any time, workers could choose to contribute less, more, or to opt out entirely. Their retirement savings plans would grow through continued contributions and investment performance. Mayor Burgess included $200,000 in his proposed 2018 City budget to fund a market feasibility and legal analysis to determine the specifics for how best to implement the Plan.
“AARP Washington applauds the efforts by city leaders to create alternative savings solutions,” said Doug Shadel, State Director of AARP Washington. “Social Security alone isn’t enough to depend on in retirement and far too many employees don’t have a way to save at work. Seattle’s Auto-IRA program would make it easier for people to save so they can live the life they want.”
An estimated 200,000 Seattle workers have no access to a workplace retirement savings plan. Of Seattle workers, people of color are disproportionately more likely to lack access to workplace retirement plans, and 68 percent of small business employees lack access.
If approved by Council, the Seattle Retirement Savings Plan is expected to begin enrollment on January 1, 2019.
