ASAs Based on TSP
Any worker that does not currently have access to an employer-sponsored retirement plan could potentially be given the opportunity for coverage under a new retirement savings account, thanks to the legislation introduced in the U.S. Senate.
Initially proposed in January 2016 by Sen. Jeff Merkley, The American Savings Act would give these workers access to a retirement plan with something called the “American Savings Account” (ASA). According to Merkley this plan would be “universal, portable, simple and personal.”
Merkley goes on to note that the American Savings Act would offer a “high-quality option for small businesses without added paperwork or hassle,” since employers won’t need to engage in new administrative processes. They would just need to send their employees’ ASA savings, alongside the already processed tax withholdings, to the federal government.
If a retirement plan is not already offered by an employer then the workers would receive their own ASAs automatically, according to a press release. By default, there is a 3% contribution. However, there are options for adjustment, which can be as low as 2% or as high as $18,000 per year. If workers do not wish to participate in their ASA then they have the option to opt out completely.
The ASA is modeled after the Thrift Savings Plan (TSP) and would offer the same investment options. Merkley states that ASA participants would experience “similar rock-bottom costs” as the TSP, and they would also have the ability to fully control their accounts online through a website.
Participants would be permitted to roll over previous IRAs into their ASA, or they could even roll their ASAs into a 401(k) or 403(b) employee-sponsored plan. Contributions to their ASA would also be tax-deductible, and the investment of the funds would be managed by an independent board of directors.
Last but not least, full-time workers, part-time workers, and contracted workers would all have access to the ASA plan.