There’s a crack in the American retirement system that has been open for decades and affects tens of millions of people. It’s not a minor flaw or a technical problem. It’s a structural fracture that for generations divided the workforce into two categories: those with access to a job-based retirement plan and those without. The federal government has just announced that it wants to close it.
The proposal originated in the State of the Union address and has a specific goal: to offer private-sector workers who currently lack a 401(k) or any other employer-sponsored retirement plan access to the same type of account available to federal employees. The chosen model is the Thrift Savings Plan, the fund used by government employees.
The account would be universal and portable, based on diversified index funds with low fees. Portable means it doesn’t disappear when the worker changes jobs; the account follows them.
The Retirement Gap Nobody Fixed — Until Now
Approximately 56 million Americans lack access to a retirement savings plan through their workplace, according to the Pew Charitable Trusts. The average retirement account balance among active workers is a mere $955, according to the National Institute for Retirement Security.
And nearly 79% of full-time workers earning less than $27,400 annually have no access to any retirement savings, according to data from the Economic Innovation Group. These figures paint a picture of a system that has worked well for some segments of the workforce and failed completely for others.
Who Qualifies: the Income Limit
The plan’s core mechanism rests on the Saver’s Match program, created under the SECURE 2.0 law signed in 2022. Starting in 2027, the federal government would match 50% of up to $2,000 of an employee’s annual contributions, capped at $1,000 per tax year.
To qualify, the employee must earn less than $35,500 annually if single, or less than $71,000 if filing jointly as a married couple, and must contribute at least $2,000 annually to a qualifying plan.
How the New Retirement Plan Actually Works
One of the most significant changes in terms of practical design involves simplifying the enrollment process. Teresa Ghilarducci, a labor economist at The New School who has closely followed the plan’s development, noted that instead of opening an IRA on their own, which most people don’t do, “workers could simply tick a box on their tax return to get started.”
That detail is crucial, because the public policy experience shows that friction in the enrollment process is one of the biggest factors that reduces participation in savings programs.
Ghilarducci also called the plan “a significant step toward achieving universal retirement savings coverage,” noting that many people currently outside the system would begin accumulating savings and benefiting from compound interest for the first time in their lives.
Morningstar’s retirement outcomes model projects that these benefits could generate $2.03 trillion in accumulated wealth among all eligible Americans by retirement.
The Origin of This Newly Revealed Retirement Plan
Bipartisan legislation known as the Retirement Savings for Americans Act was reintroduced in 2025 by senators and representatives from both parties, with the goal of creating tax-advantaged portable accounts for workers without access to employer-provided retirement plans.
AARP has supported similar initiatives for years, noting that workers are much more likely to save when they have access to savings tools at their workplace.
Even so, some experts question whether the administration has the fiscal authority to fund the federal contribution without congressional legislation. The Treasury Secretary indicated that the proposal could move forward through the budget reconciliation process, although the final details of the plan have not yet been released.
And some analysts estimate that approximately half of low-income workers will not open an account, primarily due to debt or because their income does not allow them to allocate $2,000 annually to savings.
