A benefit President Donald Trump proposed in his nearly two-hour State of the Union address this week could have a major impact on millions of American workers if it comes to pass.
Trump suggested a major new retirement benefit for tens of millions of American workers, embracing an economic policy that proponents say could bolster the federal retirement safety net, according to the Washington Post.
Speaking to congressional lawmakers, Trump pledged to extend to private-sector workers the kind of retirement plan federal employees already get. He also said the government would kick in up to $1,000 per year to their accounts, presumably in matching benefits.
The WaPo reported that some 54 million workers in the private sector have no workplace retirement benefits and do not benefit from stock market gains, according to research cited by the Economic Innovation Group, a Washington-based think tank, as part of what some experts have termed a “retirement crisis” in America.
“Half of all of working Americans still do not have access to a retirement plan with matching contributions from an employer,” Trump said. “To remedy this gross disparity, I’m announcing that next year, my administration will give these often forgotten American workers – great people, the people that built our country – access to the same type of retirement plan offered to every federal worker. We will match your contribution with up to $1,000 each year.”
Whether it actually happens is something of a mystery. The biggest challenge is how much of his proposal Trump can accomplish on his own. Under existing authorities, WaPo reported, the administration can create portable retirement accounts and make them available to workers who currently lack a workplace plan. But the government cannot compel employers or workers to automatically enroll, nor can it unilaterally appropriate funds to provide a universal $1,000 match to all eligible workers.
Instead, the administration can facilitate take-up of a benefit that already exists. The bipartisan Secure 2.0 bill, signed by President Joe Biden in 2022, created a “Saver’s Match” – a federal contribution of up to $1,000 annually for qualifying workers who put $2,000 in an eligible retirement account. One problem has been that many eligible workers have had nowhere to put their contributions. Trump’s executive action could create additional account infrastructure, but eligibility would still be constrained. Only workers who make less than $25,000 per year, or roughly $41,000 for couples, are eligible.
White House economist Kevin Hassett has backed a similar kind of approach, The Post reported. Of the more than $200 billion in annual income tax expenditures related to retirement savings, less than 1 percent flows to workers in the bottom income quintile, according to the Economic Innovation Group. This would move some of those benefits down the income distribution.
“Since we’ve had the 401(k) system this has always been the problem: A huge share of the workforce has not been participating and doesn’t have access to these benefits. Closing that gap is a big first step,” John Lettieri, co-founder of the Economic Innovation Group, told The Post. “It’s a long-run exercise to get people into the market, engaged in long-term savings and investment behavior with matching benefits. That’s a proven way of building wealth over time, including for low-income savers.”
