Proposed Bill Would Allow Employers to Provide Side-Car Emergency Savings Accounts

A package of bills sponsored by Senators Cory Booker (D-New Jersey), Tom Cotton (R-Alaska), Heidi Heitkamp (D-North Dakota), and Todd Young (R-Indiana) would increase access to workplace retirement savings accounts, help workers who already have retirement accounts save more, and prevent leakage from retirement accounts by making it easier for people to save for short-term needs.

Specifically, the four bills would:

• Increase access to workplace retirement plans by allowing for pooled employer plans (PEPs), which will make it easier for small business owners to offer retirement benefits to their employees;
• Boost retirement savings by incentivizing employers to adopt plans with automatic enrollment;
• Reduce emergency withdrawals from retirement accounts and increase short-term savings by allowing employers to automatically enroll their workers in emergency savings accounts (also called sidecar accounts);
• Make it easier for individuals to automatically save their tax refunds.

The Bipartisan Policy Center (BPC) says these bills tackle several ongoing and serious challenges for the country. One-third of private-sector workers lack access to any workplace retirement plan, according to Bureau of Labor Statistics data; more than 40% of Americans say they could not cover a $400 emergency expense, according to a Federal Reserve report; and more than 40% of Baby Boomers and Gen Xers are projected to run short on funds in retirement, according to the Employee Benefit Research Institute’s proprietary Retirement Security Projection Model.

“It is important that retirement security doesn’t get lost in the shuffle of our national debate,” Shai Akabas, BPC economic policy director, said. “With nearly half of working-age Americans concerned about their financial prospects in retirement, this legislation is a significant bipartisan opportunity to help allay those fears.”