Philadelphia voters approve first city-run retirement savings program for workers without 401(k) plans

Alliance Global Partners chief global strategist Mark Grant discusses his income tax strategy for retirees on Varney & Co.

Voters inPhiladelphiapassed a ballot measure on Tuesday. will create the country's first city-run savings program for workers whose jobs don't offer retirement benefits.

The measure will create a new program called PhillySaves. allows private sector workers whose employers don't sponsor retirement plans like a 401(k) to automatically enroll inindividual retirement accounts (IRAs)set up by the city.

Participation in PhillySaves is voluntary. allows workers to opt out of enrolling in the auto-IRA or change how much they're contributing out of their paychecks at will.

The accounts will also follow workers to future jobs,. workers can withdraw contributions early if needed on a tax-free basis – though any gains or interest withdrawn would be subject to tax.

NEARLY HALF OF GEN X WORKERS ARE DELAYING RETIREMENT AS RISING COSTS, STAGNANT WAGES DRAIN SAVINGS

Philadelphia voters' approval of PhillySaves creates the first city-run retirement savings plan for private sector workers in the country.(Jumping Rocks/Universal Images Group via Getty Images)

An estimated 208,000 private sector workers in Philadelphia will be able to enroll in PhillySaves. Many such workers are in the service industry with higher employee turnover or are employed by small businesses that would face compliance burdens in establishing. maintaining aretirement plan.

The program also doesn't charge businesses who are registered in the program to enroll their employees.

PhillySaves will be managed by a third-party firm overseen by the Philadelphia Retirement Savings Board created under the initiative. Pew estimates that the program willcost the cityup to $1 million initially and around $500,000 annually in subsequent years.

WHY GEN Z IS SAYING 'NO' MORE OFTEN – AND SAVING MONEY

PhillySaves allows enrolled workers to adjust their contributions or opt out if they would rather not participate.(iStock)

"Philadelphia voters took an important step this week by approving PhillySaves," said Patrick Morgan, project director for The Pew Charitable Trusts' Philadelphia research. policy initiative.

"It's imperative that PhillySaves gets off to a fast start. We know from looking at similar efforts that appointing a strong board, hiring the right leader,. education employers and employees about how the plan works is critical to the success of these programs," Morgan added.

RETIREMENT 'MAGIC NUMBER' JUMPS AS AMERICANS GROW ANXIOUS ABOUT THEIR FINANCIAL FUTURES

The PhillySaves IRAs will follow workers as they move between jobs over their careers.(iStock)

The measure passed with the support of 78% of voters. follows the Philadelphia City Council passing legislation last year that was signed into law by the mayor in January.

That allowed the program to move forward with the public vote needed to create the governing board under the city's charter.

GET FOX BUSINESS ON THE GO BY CLICKING HERE

"Philadelphia now has a real opportunity to show that smart policy design, strong execution. sustained support can expand Philadelphians'retirement securityin a practical and affordable way," Morgan said.

Get a brief on the top business stories of the week, plus CEO interviews, market updates, tech. money news that matters to you.

We've added you to our mailing list.

By clicking subscribe, you agree to the Fox NewsPrivacy PolicyandTerms of Use,. agree to receive content and promotional communications from Fox News. You understand that you can opt-out at any time.