TSP-Themed ‘American Savings Accounts’ Resurface in Senate Bill
Legislation has been introduced in the U.S. Senate that would give any worker not currently covered by an employer-sponsored retirement plan access to a new type of retirement savings account.
The American Savings Act, first introduced in January 2016
and reintroduced July 19 by Sen. Jeff Merkley (D-OR), would do so via something called the “American Savings Account” (ASA), which Merkley says would be “universal, portable, simple and personal.”
Merkley notes that because employers using ASAs would simply send employees’ ASA savings to the federal government alongside the employee tax withholdings that they already process, the American Savings Act offers a “high-quality option for small businesses without added paperwork or hassle.”
According to a press release
, if an employer doesn’t already offer a retirement plan, its workers would be given their own ASAs automatically. There’s a 3% contribution default, but that can be adjusted down to as low as 2% of income, or as high as $18,000 per year. Workers also could opt out entirely.
ASAs would offer the same investment options that federal employees get through the TSP plan, with “similar rock-bottom costs,” says Merkley, adding that workers would control their own accounts directly through a website.
Contributions to an ASA would be tax-deductible, and participants would be able to roll over any previous IRAs into their ASA or roll their ASA funds into an employer-sponsored 401(k) or 403(b) plan. An independent board of directors would manage the investment of the funds.