By Jack Tomczuk
Voters, through a question on the May 19 primary ballot, will decide whether Philadelphia should have a program that automatically sets up a retirement account for individuals without access to plans through their employer.
The initiative, known as PhillySaves, is designed to help residents become better prepared for their retirement and old age, particularly if they work for a small business.
City Council unanimously approved legislation last month providing for the ballot question and program specifics, and Mayor Cherelle Parker signed the bills two weeks ago.
Who would be eligible?
Anyone who works in the private or nonprofit sectors for a Philadelphia-based business or organization that has at least one employee and has been in operation for a minimum of two years would be covered under PhillySaves, provided that their employer does not offer a 401(k) plan, pension or other retirement benefit.
Legislative officials have estimated that more than 200,000 Philadelphians would qualify for an individual retirement account, or IRA, through the program.
Independent contractors and sole proprietors are not eligible; however, the text of the bill indicates that lawmakers may expand the program to include those groups in the future.
How would it work?
Employees who work for a covered business or nonprofit would automatically be signed up to contribute to their PhillySaves retirement plan through a payroll deduction.
When the program launches, the default contribution will be set at between 3% and 6% of the individual’s income, according to the legislation. Participants will have the opportunity to opt out or change the deduction percentage.
The account will be a Roth IRA, unless the individual decides to open a traditional IRA or contribute to both types of accounts.
Employers will not cover any costs. The plans will likely be managed by a third-party firm, overseen by the Philadelphia Retirement Savings Board, which will be created if voters approve the ballot measure.
When would it launch?
Legislation authorizing the program stipulates that PhillySaves should begin accepting contributions no later than July 2027.
The board will be permitted to roll it out “in a phased approach as needed to facilitate the ease and effectiveness” of the initiative, according to the bill.
Has this been done elsewhere?
PhillySaves is based on a government-backed auto-IRA model that debuted nearly a decade ago in Oregon.
Two cities and 17 states have authorized similar programs, according to the Pew Charitable Trusts. Pennsylvania is not among them.
Who would serve on the board?
Nine people would serve on the Philadelphia Retirement Savings Board, the legislation states.
The mayor and Council president would each get four appointees. Each would need to name an employer representative (from a chamber of commerce-type organization), an employee representative (such as a labor union leader), a retiree advocate (from AARP or a similar group) and an investment expert.
One member of the board would be appointed by the City Controller.