Seattle Retirement Savings Plan

Seattle Retirement Savings Plan infographic

About 4 in 10 Seattle workers don’t have access to workplace retirement plans. Mayor Tim Burgess has developed an ordinance that will provide those Seattle employees with an efficient and cost-effective way to save for retirement.

The Seattle Retirement Savings Plan

  • Applies to Seattle-based workers whose employers do not offer a workplace retirement savings plan
  • Has a defined contribution structure — like a 401(k) or 403(b)
  • Will be facilitated by the City of Seattle and managed by a third-party provider
  • Allows employers who otherwise wouldn’t provide retirement benefits to do so by processing payments through their existing payroll system
  • Eligible employees will be automatically enrolled in the Plan, and can choose to opt out or stop participating at any time
  • Employees contribute to their own account and are responsible for selecting investments
  • Employees will grow their retirement savings through additional contributions and investment performance
  • Accounts will be portable and remain with the worker if they change employers

Who Does the Plan Help?

A large and growing number of workers in Seattle, as elsewhere in the United States, are failing to save adequately for their retirement.

Individuals are far more likely to save for retirement if an option is made available to them in their workplace, especially if they are automatically enrolled into a plan.

200,000 workers in Seattle could benefit from the Seattle Savings Retirement Plan.

  • 40% of workers in Seattle lack access
  • Small business workers: 68% of workers at firms under 50 employees don’t have access to a workplace retirement savings plan
  • 45% of black workers, 54% of Latino workers, and 47% of Asian workers lack access to a workplace plan, compared to 37% of white workers

Frequently Asked Questions

1. Which workers can participate in the Seattle Retirement Savings Plan?

The Seattle Retirement Savings Plan (“Plan”) only applies to workers in the Seattle city limits whose employer does not offer their own workplace retirement savings plan (“eligible employees”). There may be additional requirements established to make the Plan administratively feasible.

2. What does the Seattle Retirement Savings Plan require of employers?

The Plan only applies to employers who have employees in the Seattle city limits and who do not offer their own workplace retirement savings plan (“covered employers”). Covered employers would perform a limited administrative function by processing payments of eligible employees to the private, third-party Plan administrator through their existing payroll system. There is no additional responsibility for employers. Furthermore, federal law prohibits employers from matching employee IRA contributions.

3. What does the Seattle Retirement Savings Plan require of employees?

Eligible employees will be automatically enrolled in the Plan, and can choose to opt out or stop participating at any time. Employees will contribute a percentage of their pay to their retirement savings account and determine how to allocate their savings between the investment products that are available within the Plan. Default options will be initially set for contribution rate (expected to be 3% to 5%) and investment product, but employees can make changes at any time.

4. How are savings in the Seattle Retirement Savings Plan invested?

Workers determine how their account is invested by choosing from a menu of investment products offered by financial firms that have been screened and selected by a Seattle Retirement Savings Plan Board, which would be formed if the Plan is adopted by the City Council. Employees will initially be assigned a default investment product that is appropriate for their age and corresponding risk profile, such as a low-fee target date mutual fund. Employees can change their investment selection at any time.

5. What risk is posed to the City by creating the Seattle Retirement Savings Plan?

The City is not responsible for the performance of investments selected by employees from the menu established by the Seattle Retirement Savings Plan Board. Unlike a defined benefit plan, there is no guaranteed return provided by the City.

6. What is the cost of the Seattle Retirement Savings Plan?

The City will conduct a market feasibility and legal analysis to determine how best to proceed with the Plan, which is anticipated to cost the City $200,000. The Plan will also have one-time start-up costs and ongoing costs that will be borne by the Plan. Plan costs would be covered by a small administrative fee automatically deducted from each employee account, making the Plan self-sustaining after an initial period.

7. Have other governments enacted a similar retirement savings plan?

President Obama announced support for a federal retirement savings plan in 2009, which would have alleviated the need for states and municipalities to create their own plans. However, the federal plan was never enacted due to general opposition from Republicans who prefer fully voluntary programs and the financial services industry who are concerned about the reduced profit margins from a government-sponsored plan. Given the lack of federal action, California, Connecticut, Illinois, Maryland, Oregon and Vermont adopted laws to create retirement savings plans. Oregon’s plan began operation in July 2017. New York City, Philadelphia and many states continue to explore the establishment of retirement savings plans.

8. How does the Seattle Retirement Savings Plan differ from the Washington State Small Business Retirement Marketplace that is expected to be operational in 2017?

The Washington State Small Business Retirement Marketplace (“State Marketplace”) provides a web portal and search tool that connects Washington State-based small businesses who would like to establish their own retirement savings plan with appropriate financial services firms. The State Marketplace is intended to simplify the process that small businesses follow in establishing their own retirement savings plan. Participation in the Marketplace is entirely voluntary on the part of employers, employees, and financial services firms.

The Seattle Retirement Savings Plan complements the State Marketplace by providing eligible employees an efficient and cost-effective plan facilitated by the City that employs qualified financial services firms for plan administration and investments. Employers could still choose to establish their own retirement savings plan instead of participating in the Plan at any time.