Two separate pieces of legislation have been proposed to increase the number of people saving for retirement.

In the House, a bill aims to expand the availability of retirement plans for people who don’t have access to one, while in the Senate, another is focused on removing the barriers that keep graduate students from setting aside any money for retirement.

The House bill, the American Savings Account Act was introduced by Rep. Jared Huffman, D- Calif., and Rep. Suzanne Bonamici, D-Ore. The legislation would create a new American Savings Account, a personal tax-advantaged retirement savings plan modeled after the plan offered to federal workers since 1986. It would make the American Savings Account available to every private-sector American worker currently without access to an employer-sponsored savings plan, such as a 401(k) or 403(b).

While some states are already taking action to make retirement savings accounts available to workers currently not covered by one in their places of work, the House bill would provide a means of saving for retirement for some 68 million people currently not covered by a plan, and also avoid a patchwork of solutions that could leave some employees uncovered or unprotected by measures that safeguard the interests of those who are already able to participate in a plan.

The details of the proposal

The legislation would automatically enroll workers whose employers don’t already offer them a plan. It would also ensure all private sector workers, including full-time, part-time and contract, have immediate access to a retirement savings account no matter the size of their employer.

Workers could discontinue participation, or change their contribution level (an auto-deduction of between 2–10 percent, to be deposited in the American Savings Account from each paycheck). Even the self-employed and those who receive 1099s would be able to enroll. In addition, employers would be allowed to provide tax-advantaged matching or nonmatching contributions.

The Senate measure, introduced by Sens. Elizabeth Warren, D-Mass., and Mike Lee, R-Utah, political polar opposites, would “[amend] section 219(f) of the Internal Revenue Code to allow 'any amount paid to an individual to aid the individual in the pursuit of graduate or postdoctoral study or research' to be considered compensation for purposes of determining qualified retirement contributions to individual retirement plans.”

Currently advanced degree students are legally prevented from saving in a tax-advantaged retirement account any stipend, fellowship or grant income — something that imposes a severe handicap, since “the median doctoral student takes about seven years to finish a degree.” Since approximately a million people receive graduate degrees each year, and about 100,000 postdoctoral fellows—who, because they are paid by fellowships, are also are barred from using that fellowship income to save for retirement — that’s a sizeable segment of the population shut out from saving for retirement.

Instant Insights /

2 items of legislation proposed to expand retirement savings

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