Philadelphia to Become First City to Implement Auto-IRA Program

Philadelphia voters approved the establishment of a city-run program that would automatically enroll thousands of workers in individual retirement accounts, making it the first city to implement a program that has become increasingly popular at the state level.

City residents established the Philadelphia Retirement Savings Board to oversee the PhillySaves program, which targets workers who don’t have access to an employer-sponsored retirement plan. With 99% of the vote in, 78% of voters backed the measure on Tuesday.

Eligible employees must work for Philadelphia businesses that have operated for at least two years and don’t offer a retirement plan. Self-employed workers aren’t eligible to enroll. Mayor Cherelle Parker signed legislation in January to establish PhillySaves, but it required voters to approve the creation of the board.

The initiative is the latest push from local, state, and federal officials to address the lack of retirement savings among the more than 50 million Americans without an employer-sponsored plan. Pew Research found in 2023 that approximately 208,000 private sector workers in Philadelphia didn’t have access to a retirement plan through their employer.

Those eligible would be automatically enrolled into a Roth IRA with a default contribution of between 3% and 6%. They can opt out or change their contribution amount if they choose.

The city’s retirement savings board will be made up of nine members: Four appointed by the mayor, four by the City Council president, and one chosen by the city controller. The board will oversee a private investment firm to establish the retirement accounts for workers in the program.

Pew Charitable Trusts estimated it would cost the city up to $1 million in expenses to get the program up and running, and roughly $500,000 each year after.

Philadelphia is the third city to approve an auto-IRA program, but is poised to become the first to fully implement it. New York City and Seattle previously approved auto-IRA initiatives, but they were later folded into state-run plans.

There are 22 states that have enacted either voluntary or mandatory state-facilitated retirement savings programs. Pennsylvania hasn’t approved a state-wide program.