Bill Overview
Title: Starter-K Act of 2022
Description: This bill allows employers who do not provide a retirement plan to establish a starter 401(k) deferral-only arrangement for plan years beginning after 2022. The bill defines starter 401(k) deferral-only arrangement as any cash or deferred arrangement that meets specified automatic deferral requirements, contribution limitations, and notice requirements. Such arrangements also allow catch-up contributions for individuals age 50 and over and exempt such employers from complying with certain participation and discrimination standards.
Sponsors: Rep. Sánchez, Linda T. [D-CA-38]
Target Audience
Population: Employees without access to employer-provided retirement plans
Estimated Size: 54000000
- The primary target population for this legislation consists of employees who currently do not have access to employer-provided retirement plans.
- As of 2021, around 54 million Americans did not have access to a retirement plan through their employer, based on data from organizations such as the Bureau of Labor Statistics.
- Globally, a significant portion of workers in formal employment do not have employer-sponsored retirement plans, but exact global figures vary considerably.
- The bill impacts both younger employees starting their first jobs as well as older employees who may benefit from catch-up contributions, especially those aged 50 and over.
Reasoning
- The Starter-K Act of 2022 primarily targets employees without access to employer-provided retirement plans, a group estimated at about 54 million Americans.
- The policy aims to provide a straightforward way for these employees to save for retirement by allowing employers to offer a basic retirement plan.
- Younger employees, who are just entering the workforce and may not have the chance to join a retirement plan, stand to benefit from starting contributions early.
- Older employees could benefit from the catch-up contribution feature, allowing them to accelerate savings as they approach retirement age.
- The policy's impact varies based on employment type, company size, and demographic factors such as age and financial literacy.
Simulated Interviews
Software Developer (Austin, TX)
Age: 25 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 20.0 years
Commonness: 12/20
Statement of Opinion:
- I think this new option is great, especially for younger employees like me who haven't started saving for retirement yet. We need more encouragement to save.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 7 | 7 |
| Year 3 | 8 | 7 |
| Year 5 | 8 | 8 |
| Year 10 | 9 | 8 |
| Year 20 | 9 | 8 |
Construction Worker (Lincoln, NE)
Age: 45 | Gender: male
Wellbeing Before Policy: 5
Duration of Impact: 20.0 years
Commonness: 10/20
Statement of Opinion:
- Finally, a chance to save for retirement without too much hassle. It's about time small companies got options like this.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 6 | 5 |
| Year 3 | 7 | 5 |
| Year 5 | 7 | 6 |
| Year 10 | 7 | 6 |
| Year 20 | 8 | 6 |
Graphic Designer (Atlanta, GA)
Age: 30 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 0.0 years
Commonness: 8/20
Statement of Opinion:
- It would be nice if something like this could be adapted for freelancers, I see the benefits for those in traditional employment though.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 6 | 6 |
| Year 3 | 6 | 6 |
| Year 5 | 6 | 6 |
| Year 10 | 6 | 6 |
| Year 20 | 6 | 6 |
Nurse (Buffalo, NY)
Age: 52 | Gender: female
Wellbeing Before Policy: 4
Duration of Impact: 15.0 years
Commonness: 9/20
Statement of Opinion:
- I'm really glad to finally have a way to save more as I'm nearing retirement age. It's a relief.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 4 |
| Year 2 | 6 | 4 |
| Year 3 | 6 | 4 |
| Year 5 | 6 | 5 |
| Year 10 | 7 | 5 |
| Year 20 | 8 | 5 |
Retired (Detroit, MI)
Age: 60 | Gender: male
Wellbeing Before Policy: 5
Duration of Impact: 0.0 years
Commonness: 5/20
Statement of Opinion:
- This isn't going to do much for me now since I'm already retired, but it's a good step forward for people still working.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 5 |
| Year 2 | 5 | 5 |
| Year 3 | 5 | 5 |
| Year 5 | 5 | 5 |
| Year 10 | 5 | 5 |
| Year 20 | 5 | 5 |
Retail Worker (San Francisco, CA)
Age: 28 | Gender: other
Wellbeing Before Policy: 6
Duration of Impact: 10.0 years
Commonness: 15/20
Statement of Opinion:
- I like the idea, but I'm not sure how it works with multiple employers. Could be useful if one of my jobs offered it.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 6 | 6 |
| Year 3 | 7 | 6 |
| Year 5 | 7 | 6 |
| Year 10 | 7 | 6 |
| Year 20 | 7 | 6 |
Factory Worker (Columbus, OH)
Age: 40 | Gender: male
Wellbeing Before Policy: 5
Duration of Impact: 15.0 years
Commonness: 13/20
Statement of Opinion:
- This could be very helpful for me and my coworkers. It's been hard to put aside money without any employer support.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 5 |
| Year 2 | 6 | 5 |
| Year 3 | 6 | 5 |
| Year 5 | 7 | 6 |
| Year 10 | 7 | 6 |
| Year 20 | 8 | 6 |
Barista (Seattle, WA)
Age: 34 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 20.0 years
Commonness: 11/20
Statement of Opinion:
- I'm excited to have an option for retirement savings. My employer is small, so this seems perfect for us.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 7 | 6 |
| Year 3 | 7 | 6 |
| Year 5 | 8 | 7 |
| Year 10 | 8 | 7 |
| Year 20 | 8 | 7 |
Truck Driver (Miami, FL)
Age: 48 | Gender: male
Wellbeing Before Policy: 5
Duration of Impact: 12.0 years
Commonness: 9/20
Statement of Opinion:
- I always wanted to save more but never had a company plan to do so. This sounds like it could make things easier.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 6 | 5 |
| Year 3 | 7 | 5 |
| Year 5 | 7 | 5 |
| Year 10 | 7 | 6 |
| Year 20 | 8 | 6 |
Marketing Assistant (Chicago, IL)
Age: 27 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 20.0 years
Commonness: 14/20
Statement of Opinion:
- I need to save for retirement but I'm still paying off loans. A simple plan through work would save me from setting up my own.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 7 | 6 |
| Year 3 | 7 | 7 |
| Year 5 | 8 | 7 |
| Year 10 | 8 | 7 |
| Year 20 | 9 | 7 |
Cost Estimates
Year 1: $200000000 (Low: $150000000, High: $250000000)
Year 2: $220000000 (Low: $160000000, High: $280000000)
Year 3: $240000000 (Low: $180000000, High: $290000000)
Year 5: $260000000 (Low: $200000000, High: $320000000)
Year 10: $300000000 (Low: $250000000, High: $350000000)
Year 100: $500000000 (Low: $400000000, High: $600000000)
Key Considerations
- The participation of small and medium-sized enterprises is crucial for the success of this policy.
- Administrative simplification could be key in encouraging employer participation.
- Initial reductions in tax revenues due to pre-tax nature of contributions need to be managed.
- Understanding the balance between short-term costs and long-term savings in social programs is vital.