Voluntary Accounts | Introduction
The Washington State Department of Retirement Systems is currently designing a program called Washington Voluntary Accounts (WVA), based upon a policy proposal developed by EOI to expand retirement security for Washington workers who aren't covered by a retirement plan at work.
Using payroll deductions and optional employer contributions, WVAs will provide an easy way for individuals to save for retirement, and help small businesses - who often lack the resources to provide their own retirement plan - make a retirement plan available to their workers. WVAs will:
- Make voluntary, portable retirement savings available to all workers in the state.
- Allow workers to make tax-deferred contributions to a 401 (k)-style retirement account, through a new plan administered by the Washington State Department of Retirement Systems.
- Provide an easy and inexpensive mechanics for small business to offer the benefit of a retirement plan to workers.
About 50% of all working Americans are not covered by a retirement plan at their place of work. This includes both traditional defined benefit pensions and the more recently popular defined contribution 401(k) and Individual Retirement Accounts. Employees of small and medium sized businesses are at the greatest risk of not having access to a retirement program.
Universal Voluntary Retirement Accounts (UVRAs) meet the current gap in workplace based retirement savings, supporting both workers and businesses. UVRAs are voluntary programs that make it easier for individuals to save for retirement through work and for businesses to offer such options for their employees.
UVRAs utilize portions of a state’s retirement system or investment system infrastructure as a foundation for the program, and take advantage of economies of scale created by pooling the investments of thousands of workers and businesses, resulting in very low administrative and investment fees for participants.
The program is intended to supplement Social Security, which provides a defined benefit pension for older Americans, but alone is barely enough to keep many retirees out of poverty. UVRAs are not intended to replace current pension plans, whether defined benefit or defined contribution plans. Instead, they are designed for individuals and businesses not currently utilizing workplace-based retirement investing.