Rep. Joseph Crowley, D-New York, today introduced legislation intended to aggressively improve access to workplace retirement savings plans.

The Secure, Accessible, Valuable, Efficient Universal Pension Accounts, or SAVE UPs Act, requires small businesses with 10 or more employees that don’t already have a workplace savings program in place to enroll all employees in “individualized retirement accounts,” according to a release from Crowley’s office.

Employee elective contributions

Under the proposed legislation, employees will be automatically enrolled in SAVE UPs account funds, with 3 percent of annual income being deferred into accounts.

That deferral rate will automatically increase by 0.5 percent annually until a deferral rate of 5 percent is reached. Employees will be allowed to opt-out of deferring any salary, or set a pre-determined deferral rate.

Employer non-elective contributions

The bill requires all eligible employers to make contributions to the accounts at a rate of $0.50 cents of every hour worked by employees. That would translate to $20 for a 40-hour workweek, and $1,000 annually for an employee that works 50 40-hour workweeks in a year.

Employers will be required to make that minimum contribution requirement even if an employee elects to opt-out of the plan, according to language and the bill, which was provided by a representative of Rep. Crowley’s office.

The required employer contributions may not be counted as part of an hourly employees wage, according to language in the proposed legislation.

And if employers elect to contribute more than $0.50 cents per hour worked, they will be required to do so equally for all employees. The employer contribution rate will be indexed for inflation, and pegged to the national average wage index, which is used by the Social Security Administration.

The bill provides a tax credit up to the cost of employer contributions for 10 employees.

Accounts run through Treasury

If enacted, Crowley’s bill establishes a trust fund operated through the U.S. Treasury Department.

A board of trustees will oversee the trust, the funds of which will be available for distributions to retiring participants irrespective to Congress’ budgetary appropriation procedures.

The trust will create three separate accounts: the accumulation, annuity and reserve accounts.

The accumulations account will consist of contributions and investment earnings, which will fund the separate annuity account, from which a lifetime income stream of annuitized retirement benefits would be paid to each participant. The third and separate reserve account would be established to fund potential investment shortfalls in the annuity account.

Investment management

Assets in the three separate accounts would be invested by a board of trustees assigned to each, which will be overseen by a SAVE UPs Board of Governors.

Individuals accounts will be credited an annual return equal to the lessor of 6 percent or a return rate determined by the Board of Governors.

Ultimately, participants will be paid benefits in the form of an annuity, the amount of which will be based on credits in individual accounts. Upon retirement, benefits cannot be reduced by more than 5 percent during any year, “unless the fund is faced with a significant financial hardship” and a greater benefit cut is authorized by the Board of Governors.

Benefits will be in the form of a qualified joint and survivor annuity, as defined under the Employee Retirement Income Security Act: should a participant die before retirement, the benefits would be paid to the surviving spouse.

Participants will have some latitude in choosing when to begin receiving benefits—they can choose to begin drawing benefits after age 62 but not after age 70.

Board of governors

The SAVE UPs board of governors will be established by the president, and will be comprised of five members that had previously served as trustees to the three separate accounts, and six other members appointed by the president. The appointment of a chairman or chairwoman to will be subject to the U.S. Senate’s approval.

The chairman or chairwoman's term will be limited to seven years, and no board member may serve more than two terms, which will be between one and six years.

Furthermore, five regional boards of trustees will be established, each with seven members, with appointments from the Federal Reserve Board, the Securities and Exchange Commission, and the majority and minority leadership in both chambers of Congress. The president will appoint the chairman or chairwoman of each regional board of trustees.

Employers’ fiduciary duties

Employers’ fiduciary duties will be limited to the “timely payment in full” of elective employee contributions and nonelective employer contributions.

Employers will not be liable for investment performance or benefit distributions, the law stipulates.

Those responsibilities will fall on the boards of governors and trustees, who will all be considered as fiduciaries, as defined by the Employee Retirement Income Security Act.

So far, Crowley’s proposed legislation has received support from the Pension Rights Center, a non-profit, Washington, D.C.-based advocacy for pension and retirement security and protections.

In as statement, Crowley said, “Every American should be able to retire with peace of mind and enjoy their golden years after a lifetime of working.”

His proposed legislation would mean “workers will see a much more stable retirement picture — and that’s good news for American families,” added Crowley.

Instant Insights /

SAVE UPs Act mandating employer contributions introduced

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