Retirement Savings for Americans Act Proposes Federal Auto-IRA with Government Match: Targets Workers Without Existing Plans

The Retirement Savings for Americans Act of 2025 proposes creating a new federal retirement savings program, the American Worker Retirement Fund. Its main goal is to provide a retirement savings path for employees and independent contractors who don't currently have access to a workplace retirement plan like a 401(k). The plan features automatic enrollment for eligible workers, contributions matched by a government tax credit, and investment options similar to the federal Thrift Savings Plan (TSP).

Signing Up and Saving: How the Plan Works

If this bill becomes law, businesses without existing retirement plans would generally be required to automatically enroll their eligible employees within one year of the fund's establishment. The default contribution rate is set at 3% of the worker's pay, deducted automatically from their paycheck. However, workers can choose to opt out of participating altogether, or adjust their contribution percentage. The plan defines a "qualifying worker" as an employee or self-employed independent contractor who doesn't have access to an existing retirement plan (like a 401(k) or certain IRAs with auto-enrollment). Businesses can also choose to enroll qualifying independent contractors they work with.

For employers, this means setting up payroll deductions for enrolled workers and transmitting the funds. The bill includes penalties for employers who fail to enroll workers or deposit contributions on time, starting at 2% of the undeposited amount and increasing based on the delay (Sec 104(f)). Contributions made by participants are Roth contributions, meaning they go in after-tax and aren't tax-deductible upfront (Sec 105(f)). The total amount a participant can contribute annually is capped by existing IRA limits (currently specified in Internal Revenue Code section 219(b)(5)), though the government match doesn't count towards this limit. Participants can also direct their federal tax refunds into their accounts (Sec 105(a)(2)).

The Government Match and Where Your Money Goes

A key feature is the Government Match Tax Credit (Sec 301). This isn't a typical tax credit you claim on your return; instead, the government directly deposits the credit amount into the participant's retirement account. The credit amount is calculated as 1% of the individual's gross income plus a match on their contributions: 100% match on contributions up to 3% of their income, and a 50% match on contributions between 3% and 5% of their income. There's no match on contributions above 5% of income. This entire credit is capped at 5% of a "phaseout amount" tied to median income, and the credit amount decreases for individuals earning above that threshold.

Once contributions are in the account, they need to be invested. The plan offers investment options modeled after the federal employees' TSP (Sec 102). These include funds investing in government securities, fixed-income assets, and various stock index funds (like common stock, small-cap, and international). It also offers Life-Cycle Investment Funds, which automatically adjust the investment mix based on the participant's target retirement date – this is the default option if a participant doesn't actively choose their investments. Participants can change their investment choices at least twice a year. Administrative costs for running the plan are paid from the fund's net earnings (Sec 101(e)).

Accessing Your Savings: Withdrawals, Loans, and Rules

Like most retirement plans, the money is intended for retirement. Participants generally access their funds once they become a "former participant" (i.e., no longer a qualifying worker contributing to the plan). Withdrawal options include receiving the balance as an annuity, a single lump sum, or a series of payments (Sec 106). Funds can also be transferred directly to another eligible retirement plan.

The plan allows participants to borrow against their own contributions (not the match or earnings), similar to 401(k) loans, provided they meet certain requirements and receive information about the loan costs (Sec 106(h)). Limited withdrawals for financial hardship are also permitted before retirement age (59 1/2), again restricted to the participant's contributions (Sec 106(i)). Importantly, the plan includes spousal protections similar to those in the federal TSP system (Sec 109). One unusual feature is an involuntary distribution rule (Sec 106(j)): if a participant's income exceeds a high threshold (defined in Internal Revenue Code section 414(q)(1)(B)), they will be required to take their money out of the plan, potentially rolling it into another retirement account.

Behind the Scenes: Who Manages the Money?

Oversight for this new program would fall to a newly created American Worker Retirement Investment Board (Sec 201). This five-member board, appointed by the President with Senate confirmation, would set investment policies and oversee the plan's administration. An Executive Director, appointed by the Board, would handle daily operations and investment management according to Board policies (Sec 203). The bill outlines specific fiduciary responsibilities (Sec 206), requiring board members and anyone managing the fund's assets to act solely in the interest of participants, diversify investments, and avoid conflicts of interest. Bonding requirements are also included to protect against fraud or dishonesty (Sec 207).