PA House passes bill for state-run retirement plan

The Keystone State is moving closer toward a state-run retirement plan. 

House Bill 577, a measure that would establish the Keystone Saves Program and an automatic enrollment payroll deduction IRA retirement savings program, was passed last week by the Pennsylvania House of Representatives. 

HB 577 passed by a 106-95 vote and now moves to the Pennsylvania Senate for consideration. 

Each of the 101 Democrats in the House voted for the bill, along with five Republicans. The legislation was introduced by Rep. Kyle Mullins, D-Lackawanna, on March 20 and approved by the House Commerce Committee on May 3. 

The measure would provide coverage for private sector employees whose employers do not offer a retirement plan. It would create the Keystone Saves Program Fund, the Keystone Saves Administrative Fund, and the Keystone Same Program Advisory Board. It would also address the duties and powers of the Pennsylvania Treasury Department in relation to the program. 

Mullins remarked in the May 1 Commerce Committee hearing that the bill would not replace employees’ ability to locate additional options to invest in their retirement, “but it will start them on a path to learning more about saving for retirement.” 

Rep. Marla Brown, R-Lawrence, was among those casting a “no” vote for the Keystone Saves Program. 

The subcommittee chairperson for local business under the House Commerce Committee, Brown said the bill would further damage small businesses still suffering from the pandemic and inflation by establishing unnecessary mandates. 

“This legislation would make it harder to do business in Pennsylvania,” Brown said in a statement. “Employers would be required to prove if they have an existing retirement savings program and are responsible for registering new employees. 

“Businesses must manage certain portions of the program, including varying contribution percentages, workers’ anniversaries, and tax filings. In addition, they could be subject to penalties should they not be able to keep up with the demands of the new program.” 

Brown said that under the bill, any business that employs more than five people must comply. She added that according to the National Federation of Independent Businesses (NFIB), 84% of Pennsylvania’s small businesses oppose the measure. 

“An alternative would have provided tax credits to companies that provide private retirement plans to their employees,” Brown said. “This would have helped to ease the burden on employers by removing mandates while incentivizing retirement savings without government penalties.” 

Andrew Remo, Director of Federal and State Legislative Affairs for the American Retirement Association (ARA), said his organization favors the bill.  

“Data shows that private sector retirement plan adoption rates increase in states that have fully implemented an auto-IRA program with a retirement plan coverage requirement like the Keystone Saves Program,” said Remo. “The Keystone Saves Program will complement, not compete, with the private sector and ARA urges its prompt enactment into law.” 

Employees participating in the Keystone Saves Program would be enrolled automatically unless they opt out. Regular deductions would be taken from a participant’s gross wages and put into the participant’s program account. 

Covered employees could also choose from the program’s investment options and could change their investment option at any time. If a participant does not select any investment option, deductions from a participant’s gross wages will be invested in a default option established by the Treasury Department. 

The default payroll deduction rate would be 4% of gross wages. The bill provides an automatic increase of the deduction equal to 1% of annual gross wages, up to a maximum of 10%.  

Participants would be able to select the rate of payroll deduction, increase or decrease the deduction, and freeze the automatic increase in the annual deduction rate.  

The Keystone Saves Program Advisory Board, which would be part of the Treasury Department, would be composed of the following members: 

  • the Governor, or a designee. 
  • the State Treasurer, or a designee. 
  • four members, who would serve a term of four years, one each appointed by the President pro tempore of the Senate, the Speaker of the House of Representatives, the Minority Leader of the Senate; and Minority Leader of the House of Representatives.  

The State Treasurer, or a designee, shall serve as chairperson of the board. 

The bill states that no later than 24 months from the effective date the legislation is enacted, the Treasury Department would be required to begin implementing the program and allow a participating employer to register with it. 

Registration would be phased in by employers according to their number of employees: 

  • Employers with 100 or more employees: no later than two years after the effective date. 
  • Employers with 20-99 employees: no later than 30 months after the effective date. 
  • Employers with 10-19 employees: no later than three years after the effective date. 
  • Employers with 5-9 employees: no later than four years after the effective date.  

The department may delay implementation for up to one year if it determines that would be in the program’s best interests.

History made as Shapiro, Davis sworn-in as Pa.’s new leaders

Invoking the history of Pennsylvania, its founder William Penn, and various chapters of its storied past and present, Democrat Josh Shapiro was inaugurated Tuesday as the state’s 48th Governor. 

Amid cold, overcast surroundings, the 49-year-old former attorney general placed his hand on three Jewish Bibles and took the oath of office from Chief Justice Debra Todd. 

The three Bibles are of special significance to Shapiro, who is Pennsylvania’s third Jewish governor. One was a family bible; one was from Pittsburgh’s Tree of Life Synagogue, where 11 worshippers, including several Holocaust survivors, were killed in 2018 by a gunman in the deadliest antisemitic attack on U.S. soil; and one was U.S. Army-issued and brought into battle on D-Day, June 6, 1944, by Philadelphia’s Herman Hershman, a Purple Heart recipient. 

“Along the winding road that led to this moment,” Shapiro began, “I’ve been grounded in my faith and family.” 

Shapiro’s swearing-in ceremony on the steps of the state Capitol was one of two historic ceremonies taking place Tuesday in Harrisburg. Austin Davis was sworn in the state’s Senate chamber as Pennsylvania’s first Black lieutenant governor, and at age 33, is the country’s youngest lieutenant governor. 

Davis said his swearing-in sends a message to young people in Pennsylvania, particularly young people of color, that the Keystone State is a place where everyone is welcomed and can succeed. 

“I say to all the young people watching right now, who are worried and unsure about their future – that the American Dream is alive and well in Pennsylvania,” Davis said. “That no matter how you grew up, no matter where you come from, or what you look like – this Commonwealth will always be a place where you can create your own destiny.” 

Shapiro spoke of destiny as well. Acknowledging that he is “entrusted with this awesome responsibility,” he said he realizes “it is just for a moment in the long history of our Commonwealth” and that he is the “next link in the chain of progress.” 

Noting the presence of former Pennsylvania Governors Tom Wolf, Tom Ridge, Mark Schweiker, and Tom Corbett, Shapiro thanked his predecessors, particularly his immediate predecessor, Wolf. 

“Thanks to his leadership,” Shapiro said, “we now find ourselves in the strongest financial shape in the history of the Commonwealth of Pennsylvania, allowing us to make critical investments for tomorrow.” 

Shapiro emphasized that the presence of the former governor’s “formally celebrates the peaceful transfer of power.” 

His statement was one of several pointed references he made to political extremism and the Jan. 6 insurrection. 

“Here in Pennsylvania, we didn’t allow the extremists who peddle lies drown out the truth,” he said. “We showed that our system works and that our elections are free and fair, safe and secure.” 

Shapiro’s speech lasted approximately 45 minutes and covered a wide range of subjects, including abortion, diversity, education, environment, extremism, faith, family, gun violence, public safety, and religion. Staying away from specificity, Shapiro spoke largely in broad terms. His speech was aimed at unifying a Pennsylvania government divided and attempted to resonate not only with his supporters but also with those whose votes he failed to get. 

Having the reputation as a consensus builder, Shapiro is expected to put together one of the most diverse cabinets in Pennsylvania history. Despite the divided government in Harrisburg, Democrat and Republican leaders have spoken of having common ground when it comes to investing in education, investing in workforce development, and economic development. 

“I set out to build a Cabinet and senior team that looks like Pennsylvania,” Shapiro said, “and reflects the people and the communities that I just took an oath to serve and protect.” 

Shapiro’s inaugural speech often had the tone of the type of rallying cry heard on campaign trails. It also mirrored in some respects the lyrical oratory of former Democratic presidents Bill Clinton and Barack Obama. Shapiro is seen by many as a possible presidential prospect. 

Shapiro concluded his address by stating, And so, with my faith firmly rooted in we the people of Pennsylvania, with my heart open to others and my eyes fixed ahead, I am prepared to do my part to move our Commonwealth forward.” 

Congratulations on Shapiro’s swearing-in came from several fronts. Republican Leader Bryan Cutler (R-Lancaster) said in a statement that as a candidate, Shapiro “offered many policy proposals that provided a path to bipartisan accomplishment and real progress for shared goals. As we look ahead, it is our hope that Gov. Shapiro governs under that same spirit and with a true willingness to find common ground.” 

Bill Johnston-Walsh, state president of AARP Pennsylvania, also congratulated Shapiro and Davis. He added that AARP Pennsylvania applauds the commitment to public service shown by Shapiro and Davis and the message of inclusivity that’s been the essence of the Shapiro-Davis Transition Team, aligning as it does with AARP’s mission to lead positive social change and to find ways to improve the lives of Pennsylvania’s 50 and older population. 

“Recognizing that every Pennsylvanian deserves access to quality, affordable health care and home and community based-services when needed,” Johnston-Walsh said, “we look forward to working with the Shapiro Administration and the General Assembly to promote policies that guarantee residents throughout the Commonwealth can live and age healthy and well with the dignity and respect they deserve.” 

National Federation of Independent Business (NFIB) State Director Greg Moreland urged the Shapiro-Davis Administration and legislators to keep small businesses’ interests in mind. 

“Small business is the backbone of Pennsylvania’s economy, anchoring Main Streets across the state and creating a majority of all net new jobs,” Moreland said. “There is much work to be done to ensure small businesses in Pennsylvania can thrive. 

“NFIB stands ready to work with Governor Josh Shapiro, his cabinet members, and the Senate and House to adopt policies that help improve the business environment for small businesses in Pennsylvania.” 

NFIB: Unfilled job openings a major problem for small business

A recent report by the National Federation of Independent Businesses shows a record number of small business owners reporting unfilled job openings.

According to the report 48% of small business owners reported having unfilled job openings in May, the fourth consecutive month of record numbers. The figure is 26 points higher than the 48-year historical rate of 22%.

“It is sad to see so many businesses struggling to find qualified workers to fill vacancies within their companies,” said NFIB Pennsylvania State Director Greg Moreland. “While the Commonwealth is inching out of the COVID-19 pandemic, employers are dealing with a new epidemic: vacancies within their organizations. The lack of available workforce willing to take jobs has directly led to increased costs for goods and services as the business community grapples with shortfalls in revenue projections.”

Sixty-one percent of owners reported hiring or trying to hire in May.

The problem is across the board.

Forty percent of small business owners said have job openings for skilled workers and 27% have openings for unskilled labor.

In the construction industry, 51% of job openings are for skilled workers, and employers aren’t finding them. Sixty-six percent of construction businesses reported few or no qualified applicants.

Overall, small business owners say finding qualified employees remains a problem with 93% of owners hiring or trying to hire reported few or no “qualified” applications for the positions they were trying to fill in May. Thirty-two percent of owners reported few qualified applicants for their positions and 25% reported none.

To deal with the challenges many owners are raising pay. A total 34% of owners reported raising compensation, the highest level in the past 12 months.

A total of 22% of owners said they plan to raise compensation in the next three months, up two points from April.

Small business owners say PPP program needs a tune up

Requirements for small businesses to be forgiven for federal paycheck protection loans are at the center of lobbying efforts to revise the program’s guidelines by industry leaders who say the aid package fails to address sector-specific challenges of the coronavirus recession.

The Paycheck Protection Program (PPP) provides small businesses a loan that can be forgiven if they use it to keep employees on their payrolls for eight weeks until the economy rebounds and they can return to work. But industry leaders say the restrictions on how employers can use PPP money could make it so there’s no work to which employees can return.

Officials from the Small Business Administration (SBA), the federal agency responsible for overseeing the program, say the loan can be 100% forgiven as long as borrowers use the money under specific requirements, many of which weren’t finalized until after the program began accepting applications.

The SBA is requiring borrowers to use at least 75% on payroll costs and no more than 25% for certain overhead expenses. The money needs to be deployed for rehiring full-time equivalent employees over the course of eight weeks following loan disbursal, whether or not they’ve been deemed “life-sustaining” by state officials and can conduct in-person business operations.

A reduction in full-time equivalent employees or payment below pre-pandemic levels at the end of eight weeks would result in the same percent reduction in how much of the loan is forgiven. Unforgiven loan funds would have to be paid back with a low-interest loan term — a 1% rate over the course of 24 months.

Small business and industry trade groups, such as the National Federation of Independent Business (NFIB) and the Pennsylvania Restaurant and Lodging Association (PRLA), are pushing for an easing of restriction on how employers can use fully-forgiven PPP loan funds.

According to letters submitted to Washington D.C. policymakers and Congress this past week, NFIB and PRLA officials are asking policymakers to extend the eight-week window to give companies more time to spend PPP money and still be forgiven. They are also asking lawmakers to alter the 75%-25% ratio of forgivable payroll to overhead expenses, respectively, that can be used with PPP loan money.

“We are going to continue to press for these items,” said NFIB Pennsylvania State Director Gordon Denlinger said in an interview last week.

Ben Fileccia, director of operations and strategy for the PRLA, said it’s going to be a while before the public feels comfortable returning to restaurants after a public health crisis. Fileccia said a recent National Restaurant Association poll shows some 2% of restaurants across the U.S. say they won’t be able to open after the crisis.

“Everything is going to ramp up but it’s going to take some time,” Fileccia said. “Eight weeks is not going to be a solution.”

More time needed

Forgiveness requirements will disadvantage businesses forced to cease operations if they can’t use the money to transition to normal operations after eight weeks, said Drake Nicholas, a partner with the Lancaster-based legal firm Barley Snyder. Shuttered PPP borrowers should have the option to use the loan money for payroll expenses once in-person operations can resume and employees can come back to work.

“If it’s shut down for two to three months, it’s not like a business is ready on day one to ramp up,” Nicholas said. “It puts that particular business at a disadvantage because once they’re able to reopen again, they’re probably going to have to draw on other lines of credit or other resources to start up again, where they could have used these [PPP] resources to support their payroll to get them ramped up again.”

Most member businesses surveyed by the NFIB said it will take longer than eight weeks for them to financially recover from the coronavirus-induced economic recession. The survey, conducted after lenders stopped taking PPP applications on April 16, showed 63% of respondents believed recovery will take them into next year.

Only half of small-business PPP borrowers who responded to the survey said they expect to have their loan be fully-forgiven. About 27% said they expect to have at least 75% forgiven, and 3% said they plan to use more than half as a loan.

But that’s not how the program is meant to be used, said SBA Eastern District Spokesperson Sonia Smith. The program was designed for employees to bring workers back onto payroll regardless of whether or not social distancing orders allow the business to resume operations.

“Some businesses might be able to recall their employees, and they may be able to work,” she said. “There are other businesses where you might just be paying [the worker] to sit at home. That is the intent of the program — to bring employees back onto the payroll.”

Nicholas said it is important employees receive wages while mandatory closures are in effect, but employers should have the option to use a greater share of PPP money to support revamping business operations.

“Some would argue that wasn’t what the law was intended, that it was intended to get employees back on the payroll as soon as possible,” he said. “I don’t see how you could take that position and say this program supports small business.”

With SBA’s PPP and disaster funds exhausted, agency turns to Congress for more

The $349 billion Paycheck Protection Program (PPP) and Economic Injury Disaster Loans (EIDLs) are tapped out after a hurried and uneven rollout that extended private lenders beyond capacity and left many businesses in peril.

Officials from the Small Business Administration, the federal agency responsible for rolling out both programs, said lenders processed more than 14 years’ worth of loans in less than 14 days.

The PPP launched April 3 with many guidelines still pending, but by April 15, the SBA reported it could no longer approve any loans submitted by private lenders facilitating the PPP until lawmakers approve more funds.

“By law, the SBA will not be able to issue new loan approvals once the programs experience a lapse in appropriations,” the SBA said in an official statement this week, urging Congress to appropriate more funding to the programs.

“The high demand we have seen underscores the need for hardworking Americans to have access to relief as soon as possible,” SBA officials said. “We want every eligible small business to participate and get the resources they need.”

Kevin Kuhlman, senior director of federal government relations for the National Federation of Independent Business (NFIB), told Congressional leaders in an April 14 letter that half of member small business owners won’t have the resources to operate their business under current conditions in one to two months, citing a survey conducted in late March.

“As the program operates on a first-come, first-served basis, further delays in appropriations will slow the forgivable loan approval process and lock out those business owners who are only recently eligible to apply such as independent contractors and self-employed individuals,” Kuhlman wrote. “If the funds are exhausted or financial institutions are forced to limit applications, the smallest businesses will be harmed the most.”

Meanwhile, many small business owners are reporting that their EIDL loan status hangs in limbo status. A survey published April 9 from the NFIB showed that half of small businesses have applied for EIDLs, which offers qualifying businesses a $10,000 advance regardless of whether or not they are approved for their full requested loan amount.

Of those survey respondents who applied, only 4% had been approved while the vast majority of applicants still had not received any communication regarding their application. And by April 9, no business owner surveyed had received a loan or a grant, according to the April 9 survey.

“If the SBA is concerned that they cannot fulfill requests due to lack of appropriations, the SBA should communicate that funding issue with the public and request more funding from Congress, rather than limiting loans and grants to small businesses on the brink,” said NFIB President Brad Close in a letter to the SBA. “Small business owners are depleting their reserves and savings trying to keep their workforce intact and pay their bills as they wait for the Emergency Grant and subsequent EIDL.”