Philadelphia Approves First-of-Its-Kind Auto-IRA Program, PhillySaves, Setting National Precedent for Municipal Retirement Security

Philadelphia Creates Nation's First City-Run Retirement Savings Program

Philadelphia voters have approved a groundbreaking ballot measure establishing the country's first municipal retirement savings program, clearing the way for PhillySaves to serve an estimated 208,000 private sector workers lacking access to employer-sponsored retirement plans.

The initiative, which passed with overwhelming support from 78% of voters, enables private sector employees without 401(k) coverage to automatically enroll in individual retirement accounts administered by the city. Unlike traditional employer-sponsored plans, participation remains entirely voluntary—workers can opt out at any time or adjust their contribution amounts as their financial circumstances change.

Addressing a Critical Gap in Retirement Coverage

Many eligible workers are concentrated in the service industry or employed by small businesses that lack the resources to establish and maintain retirement plans. These workers often face significant barriers to saving for retirement, with high turnover rates further complicating long-term financial planning.

PhillySaves addresses these challenges by removing compliance burdens from employers. Businesses registered with the program face no charges for enrolling their employees, making it a cost-effective solution for both workers and companies.

"Philadelphia now has a real opportunity to show that smart policy design, strong execution and sustained support can expand Philadelphians' retirement security in a practical and affordable way," said Patrick Morgan, project director for The Pew Charitable Trusts' Philadelphia research and policy initiative.

How PhillySaves Works

The accounts offer several practical benefits: contributions travel with workers to future jobs, and early withdrawals of principal contributions are permitted on a tax-free basis. However, any investment gains or interest withdrawn remain subject to taxation.

A third-party firm will manage the program under oversight from the Philadelphia Retirement Savings Board, which was created through the ballot measure. Pew estimates initial implementation costs could reach $1 million, with annual operating expenses around $500,000 thereafter.

Path to Implementation

The Tuesday vote represents the culmination of a multi-year effort. Philadelphia City Council passed enabling legislation last year, which Mayor signed into law in January. That legislation required the public ballot measure to formally establish the governing board under the city's charter.

Morgan emphasized the importance of rapid execution once the program launches. "We know from looking at similar efforts that appointing a strong board, hiring the right leader, and education employers and employees about how the plan works is critical to the success of these programs," he noted.

The initiative positions Philadelphia as a laboratory for municipal retirement policy, with advocates watching closely to evaluate whether the program can serve as a model for other cities seeking to expand retirement security among underserved worker populations.