Nearly half of the nation’s metropolitan workers lack a retirement savings plan through their employer, and Seattle is no exception. Pew Charitable Trusts revealed in a 2016 study that about 40 percent of employees in the Seattle metro area lack access to workplace retirement plans. But that could soon change.
In addition to signing the 2018 City budget into law on Wednesday, Mayor Tim Burgess also signed legislation that establishes a Seattle Retirement Savings Plan. The program serves as the nation’s first city-facilitated retirement savings plan administered by an outside private party.
Under the new law, an estimated 200,000 Seattle workers without workplace retirement savings opportunities will be automatically enrolled into a plan managed by a third party provider, with the option to end their enrollment in the plan at anytime. Workers will be able to keep the plan throughout their careers, even when they change jobs. Participants will contribute a percentage of their pay into the plan and will choose how their funds are invested. The yet-to-be-formed Seattle Retirement Savings Plan Board will select the investment products to be offered. The plan is expected to take effect in 2019 or 2020.
“Too many Americans have little more than a few hundred dollars in savings, if any savings at all, never mind any significant amount of money for retirement,” Mayor Tim Burgess said in a Wednesday press release. “In Seattle, Black, Latino, and Asian workers are disproportionately disadvantaged by lack of access to workplace retirement savings. We all know that retirees without savings will never be able to participate in society as they should. But with this legislation, which I’m thrilled to sign into law, Seattle is beginning to help disadvantaged workers plan for a future that will be brighter for them, their families, and society as a whole. This is a pro-business, pro-economic stability, pro-growth, and pro-worker achievement.”
Burgess proposed the plan in late September after advocating for such legislation for more than a year. Along with Philadelphia and New York officials, then-Councilmember Burgess lobbied President Barack Obama’s Department of Labor to allow large cities to create city-operated retirement savings plan last year. But his plan stalled when congressional Republicans repealed the Obama administration’s rule change last March, making it unclear if cities had the legal authority to create such a program.
Following legal guidance and discussions with other cities and states interested in automatic retirement plans, Burgess decided that there was strong legal ground to move forward with the legislation, said Georgetown University’s Center for Retirement Initiatives Executive Director Angela M. Antonelli.
Next, the City will form a board to manage the program. A market feasibility study that will help the City determine how to best implement the plan is projected to cost the City $200,000.
For Antonelli, the plan could encourage other cities and states to move forward with similar legislation. “For Seattle to enact a program of this nature would put it at the forefront of a handful of cities and now several states that are determined to help their citizens be able to have greater access to and save for retirement,” Antonelli added.
She added that many older Americans rely on Social Security as their primary source of income. The plan could help workers save and plan “to have a more comfortable and secure future in their retirement,” Antonelli concluded.