Can Keystone Saves bill rescue Pa. from fiscal cliff?

Financial security in retirement is important for all Pennsylvania taxpayers, and especially for Pennsylvanians aged 65 and older. But what happens when residents do not have enough money for retirement? 

Such is the dilemma facing Pennsylvania as the state seeks to deal with a looming fiscal crisis – “a fiscal cliff,” Pennsylvania State Treasurer Stacy Garrity called it – created by insufficient retirement savings. 

An online seminar addressing the impact of insufficient retirement savings on Pennsylvania’s fiscal health was hosted recently by Garrity and John Scott, project director for retirement savings for The Pew Charitable Trusts. Information in the online seminar was based on analysis prepared for the Pew Charitable Trusts by Econsult Solutions, Inc. (ESI), an economic consulting firm. 

ESI provided a 2018 analysis of economic and fiscal impact of insufficient retirement savings in Pennsylvania from 2015 to 2030 for the Pennsylvania Treasury Retirement Savings Task Force. Subsequent analysis of county-level impacts was undertaken by ESI for Pew in 2020. ESI’s report updates findings of statewide impacts of insufficient savings to cover the period from 2020 to 2035. 

According to ESI’s findings, Pennsylvania’s elderly population is expected to grow by more than 550,000 in the next 15 years, increasing from 19% to 23% of PA’s population. The share of Pennsylvania households headed by an elderly resident is expected to increase from 30% in 2020 to 36% by 2035. Pennsylvania’s dependency ratio is also projected to increase from 43 households aged 65 and older for every 100 working-age households in 2020 to 56 households aged 65 and older in 2035. 

As working age households are major drivers of tax base, the change in ratio creates fiscal pressure. The reason being there will be fewer taxpaying households age 20-64 to support an elderly population that is projected to grow from 2.49 million in 2020 to 3.04 million in 2035. 

“There is a growing share of older people, older households in the Commonwealth, but the tax base that’s supporting a lot of the programs that support the elderly has not grown as quickly,” Scott said. “So that’s going to be placing more stress on taxpayers in Pennsylvania.” 

How much stress was revealed by Garrity, who noted that two million Pennsylvanians, approximately 44% of the state’s private-sector workforce, cannot save for retirement at work. The resultant cost to taxpayers, she said, is more than $1 billion annually. 

“I really want to emphasize this point,” Garrity said. “Pennsylvania taxpayers are footing a bill of more than $1 billion per year to account for unprepared retirees. That includes costs for social services and lost revenue.” 

Garrity added that research conducted by the Independent Fiscal Office confirms that Pennsylvania will reach a fiscal cliff by Fiscal Year 2025-26. 

“Common sense says we should prepare for it now,” said Garrity. “And here’s another fiscal challenge for Pennsylvania: The research we’re discussing shows the retirement savings crisis will cost Pennsylvania a total of $17.8 billion through 2035. So that’s the scope of the problem.” 

The problem having been defined, what’s the solution? Garrity and Scott said one way to address the retirement savings crisis is to implement a simple, business-friendly plan to help working Pennsylvanians save for retirement. Not a government handout, Garrity emphasized, but a program that makes it easy for people to save for retirement. 

“The goal,” she said, “is to make it easy for people to save their own money.” 

In December 2021, Garrity and Rep. Tracy Pennycuick (R-Berks/Montgomery) and then-Rep. Michael Driscoll (D-Philadelphia) announced the introduction of “Keystone Saves”, a retirement-savings program for Pennsylvanians who do not have access to retirement savings through their employer. 

As is the case with automated savings programs across the country, Keystone Saves would enroll employees automatically in a voluntary individual savings account (IRA) to which they can use direct deposit to make regular contributions. 

Estimated to help Pennsylvania reduce state spending by close to $1 billion annually, Keystone Saves is supported by The Pew Charitable Trusts, the Pennsylvania Institute of CPAs, the American Association of Retired Persons (AARP), the United Way of Pennsylvania, the Pennsylvania Health Care Association, the Pennsylvania Association of Sustainable Agriculture, and members of the state’s General Assembly. 

As many employers are unable to provide retirement savings due to administrative capacity and high startup costs, state automated savings programs are seen as a practical solution to provide savings opportunities to workers who lack them. 

Scott noted that 12 states in the U.S. have enacted legislation creating such programs, and programs in six states are operational. Participants in state-sponsored automated savings programs have an average annual savings of $1,500 to $2,000. 

“These programs are showing this can be done,” said Scott. “This is a very feasible and practical solution.” 

The Keystone Saves bill has received bipartisan support in the Pennsylvanian legislature but has yet to pass. As Gov. Josh Shapiro is a Democrat who stresses bipartisanship, the opportunity exists to work with Garrity, a Republican, to guide the bill through the legislature. 

“The time to solve this problem,” Garrity stated, “is now.”

Proposed legislation would help Pennsylvanians save for retirement

State legislators propose a bill that would establish Keystone Saves, a retirement savings program. PHOTO/SUBMITTED –

The American Association of Retired Persons threw its support behind legislation proposed in Pennsylvania Monday that would help people save for retirement. 

State Treasurer Stacy Garrity, Rep. Tracy Pennycuick, R-Harleysville, and Rep. Michael Driscoll, D-Philadelphia, announced the planned introduction of a bill to create Keystone Saves, a retirement savings program for Pennsylvanians who do not have access to retirement savings through their employer. 

“We commend these lawmakers for sponsoring this crucial legislation,” said Joanne Grossi, AARP Pennsylvania state president. “America’s retirement savings crisis is already causing too many families to fall short. Our state lawmakers have a chance to act now to help more Pennsylvanians build a secure financial future by enacting Keystone Saves.” 

Grossi noted that over 2.1 million Pennsylvanians don’t have access to a retirement savings plan through their employers and more than a quarter of American households have no retirement savings. At this rate, half of middle-class retirees will be unable to afford their basic needs in retirement – things like medicine, utilities and rent. 

Previous AARP research found that Americans are 15 times more likely to save for retirement when they can do so at work and are 20 times more likely if their workplace savings plan is automatic. Keystone Saves will give more workers the chance to save automatically out of their regular paycheck. 

“Retirement security is a big problem,” Rep. Driscoll said. “Right here in Pennsylvania, 44% of our workers do not have a defined benefit program or an IRA in the places where they work. And we have the ability to change that with Keystone Saves. Pennsylvania is facing what some call the ‘Silver Tsunami,’ so ignoring this issue is simply not an option. Failing to address this problem would have devastating effects for future retirees and the financial wellbeing of the state as a whole.” 

Keystone Saves was designed to be business friendly, he said.  

Employers simply provide a census of employees and process a payroll deduction for each employee who participates. All other administrative and backend functions will be handled by Treasury and a private-sector third-party vendor, much like the PA 529 College and Career Savings Program.  

Keystone Saves protects employers from liability concerns and removes high start-up costs and complicated investment decisions that keep many employers from providing retirement benefits.  

Keystone Saves will be phased in over four years. The first two years are set aside for the Treasury to set up the program, including an RFP process, and to implement a voluntary pilot.  

Employers with fewer than five employees, and those who have been in business for less than 15 months, are excluded from Keystone Saves, as are employers with already established retirement savings plans. 

House Bill 2156, prime-sponsored by Rep. Pennycuick, will be introduced in the coming weeks.  

Ten other states have enacted similar legislation. 

Employers should not overlook older workers

The most common reason that older workers lack confidence in finding another job is age discrimination, according to an AARP survey of nearly 4,000 people. (Submitted) –

As the workforce ages, older workers can feel devalued by their employers.

Some say it’s because employers think these workers plan to retire soon and pass over them when it’s time to schedule training programs.

Others say it stems from the pervasive stereotype that older workers are ill-equipped to adapt to new changes in workplace technology.

Age discrimination also plays a role.

And then there’s money.

It’s simply cheaper and easier for an employer to hire someone who has the skills they need, rather than invest in the older, and often higher-paid worker.

However, the idea that older workers face challenges adapting to new technology in the workplace is a view based on prejudice, according to Peter Cappelli, a professor of management at The University of Pennsylvania’s Wharton School, where he is director of Wharton’s center for human resources.

“We think of our grandparents, who have been retired for a long time and can’t figure out their new phone and assume that everyone older is like that,” Cappelli said, in a statement. “We see that because they ask us for help, and we won’t see all the younger people who also can’t figure out their phones getting help from their friends.”

People who have been in jobs for a long time without using technology have challenges, he said, but that is true no matter what the age. In addition, most of the new technology is affecting relatively few jobs, at least so far.

In fact, according to a national AARP work and career survey of nearly 4,000 people 45 and older, age discrimination plays a pivotal role. It is the most common reason older workers lack confidence they can find another job within three months if they had lost their current one.

In the July 2018 survey, nearly half the workers cited, said it is a major reason they would not find another job quickly. And 31 percent cite it as a minor reason.

“I think the biggest problem they experience is age discrimination, people assuming they don’t know technology,” said Susan Weinstock, vice president of financial resilience programming at AARP, based in Washington, D.C.



Ageism, whether subtle or overt, can make older workers feel worthless. They often feel pressured to leave the workforce, even though they are staying in greater numbers.

Today, many workers are delaying retirement, whether out of necessity or preference.

“We are living longer and we are living healthier,” Weinstock said. “There’s no reason not to work. It’s really hard to save up for a 40-year retirement. They work because they need the money but they also work because it gives them fulfillment.”

Although older workers want training, they are often overlooked. “What we hear is that employers won’t pay to train an older worker because they will leave soon,” Weinstock said.

She encourages employers to look at the issue from a generational viewpoint. Younger workers tend to stay at a company for a shorter time than older ones do.


Not enough training

Cappelli said there is little training going on for most workers and little training for new work. However, that doesn’t mean employers should overlook older workers.

“Employers who complain that there is no one to hire and then ignore older candidates, or at least make no effort to try to find them, are making huge mistakes because older workers have on average, exactly what employers say they want: work experience, better interpersonal skills, and so forth,” Cappelli said.

It has always been a challenge for employers to invest in the workers they already have, regardless of age, rather than seek people who could be a better fit, according to Deirdre Kamber Todd, an employment lawyer in Upper Macungie Township.

“It’s always been harder to get employers to invest in the people they have,” Kamber Todd said. “I do think some people miss out whether it’s because they are older or not.”

The idea of an older worker not being technologically capable is a complete stereotype but Kamber Todd acknowledged there is a grain of truth that can emerge, unfortunately.

“Anything that we don’t grow up with and we weren’t educated on, we are always going to be behind someone who does have that experience,” she said. “There are some truths there, but it’s a stereotype.”

For the employer, it’s easier to hire someone who may be a better fit than train five existing employees.

“If someone needs training and they are not getting it, that’s a problem,” Kamber Todd said.

While many retirement-age people are staying in the workforce, some do so because they have no choice. Those workers could become disinterested their jobs, making it difficult to retrain them.

“We still see a high employee disengagement,” Kamber Todd said. “Now you are going to train employees who may not want to be there. They may want a different job or different opportunities.”


Change is coming

As the recruitment shifts from an employer’s market to an employee’s one, the playing field is tilting.

“I feel we are on the verge of shifting over,” Kamber Todd said. “I think it’s still a mentality shift for employers. They need to look at the transferrable skills.”

Age aside, people respond to different training styles, so options should be available to meet those needs, said Shelly Santa-Anna, president of Santa-Anna Consulting LLC, an executive coach and leadership development consultant in Allentown.

“Sometimes a one-size-fits-all approach is taken because it’s more efficient but not necessarily most effective,” she said.

Employees should voice their desire to learn a new skill, or move to a different role in the organization, she added.

“Age should not be a factor in continuous learning,” Santa-Anna said. “What’s more important, regardless of age or any other factors, is learning agility. Learning agility is the ability and willingness to learn and adapt. Willingness and desire to learn is the key.”

She does not think employers overlook older workers when it comes to training, at least in her experience. If a company is completing a systems upgrade, employers will train everyone at once.


The ‘Keepers’

Santa-Anna hasn’t seen much evidence of discrimination. Just the opposite. She’s seen companies that think of older employees as keepers and want to hold onto them so they can transfer their knowledge to younger workers.

“A lot of companies do that,” she said. “If you can retain that information and transfer it to other people, that’s a win-win for everybody.”

AARP has an employer pledge program that offers a symbolic statement that affirms the value of older workers. While it supports the existing employment law, Weinstock said it’s important that there is a statement that emphasizes that support as well. Integrity Personnel, an employment agency based in South Whitehall Township, signed the pledge.

Kevin Flemming, president and owner of Integrity Personnel, said his company defines older workers as those who are at pre and post-retirement level. Pre-retirement employees are those older employees who are looking for work, either by choice or because they are adapting to industry changes.

About 30 percent of the Workforce for Integrity Personnel’s employees are in those pre- and post-retirement categories, he said. His company supports about 300 employers, mainly business operations jobs in office environments in the Lehigh Valley, he added.

“My experience has been that this cohort of older workers is very skilled,” Flemming said. “All of our jobs are very computer-centric.”

Most of the older workers in office jobs have been using software for many years. They have a technology base of computer skills to draw from, he said.

“I’ve found that older workers are very capable,” Flemming said. “The caveat is if they never worked in a professional office environment, they won’t have those skills.”

Flemming also doesn’t see evidence of a bias against hiring older workers. But he does see evidence of unintentional bias.

It’s manifesting itself in two ways: an employer will say a candidate is overqualified. The notion behind this is that the employee would not want to stay in the job long and this bias tends to affect older workers, he said.

The second way it manifests itself is when employers look at older workers and are concerned about longevity.

Flemming said he believes this doesn’t have as much of an impact on businesses as some may think it might.

“Why wouldn’t you want someone who is overqualified if they want to work for you?”

In addition, he said, older workers tend to have a deeper knowledge of how everything works, which comes with experience.














Picking a CCRC starts with good planning

As people age, one of their most pressing concerns is where they will spend their retirement years.

For individuals who have planned well for their retirement and who have enjoyed a certain level of financial success, continuing care retirement communities, or CCRCs, are an extremely attractive retirement living option. They offer a full spectrum of care, ranging from luxurious independent living to memory support to healthcare. CCRCs are defined by AARP as “part independent living, part assisted living and part skilled nursing home, offering a tiered approach to the aging process, accommodating residents’ changing needs.”

Because CCRC s may support seniors for 10 years, 20 years or even longer, and because these institutions offer a broad array of care options, they can be an expensive proposition. These communities require substantial monthly service fees (ranging on average from $2,000 to $4,200) as well as a significant entrance fee (ranging on average from $105,000 to $425,000). So, in order to ensure an individual or couple has the financial wherewithal to gain access to CCRC living, careful financial planning and forethought are required.

In order to afford the comforts of a CCRC, executives and business professionals of all ages and financial means would be wise to invest in a diversified portfolio and take advantage of the power of compound interest on investable assets such as IRAs and 401(k)s. Purchasing a home that is likely to build equity over time is another recommended investment. Small-business owners and entrepreneurs, in particular, should be sure to invest beyond their own business entity or startup, and save in a more balanced manner.

CCRCs differ in their requirements for the income and asset levels of applicants. Generally speaking, residents must have what is referred to as a “multiple” of both the monthly service fees and the entrance fee – and the formulas differ among institutions.
At one community an applicant might be required by the CCRC to have monthly income that adds up to at least two times what their monthly service fees would be. CCRCs typically view income as anything that is counted as income on a tax return (Social Security benefits, pension benefits, annuity income, required minimum distributions from IRAs, income from real estate investments, income from a business that one owns, etc.).

Additionally, applicants must also have assets that add up to a multiple of their entrance fee (such as three times the fee). These additional assets can include, but are not limited to, funds in bank accounts, brokerage accounts, IRAs, 401(k)s and trusts accounts. CCRCs are usually reluctant to count real estate investments or business ownership toward their asset requirements, preferring instead to have these assets converted into a brokerage or bank account.

In order to cover the significant CCRC entrance fee, one strategy is to sell a primary residence and put any additional proceeds from the sale into a brokerage account. Knowing that it may take some time to sell residences, many CCRCs offer bridge loans based on the valuation of an applicant’s home. Selling a business is another strategy available to business owners, especially since much of their net worth can be tied to the business. The exact timing of a sale will depend on a variety of factors, but planning for a potential sale far before the proceeds are needed is advisable to ensure funds are available for an entrance fee.

Additionally, it is always prudent to conduct careful due diligence about the financial wellbeing of a CCRC. A financial adviser can help review the balance sheet of an institution to set your mind at ease. And finally, we recommend that applicants consult an elder care attorney to review their buy-in contract with a CCRC so that there are no misunderstandings or unpleasant surprises down the road.

Marilee Falco, is a principal and financial strategist at Agili, which has offices in Bethlehem and Richmond, Virginia. She can be reached at [email protected] Sarah Caine is a financial strategist at Agili. She can be reached at [email protected]