Pennsylvania’s Treasurer Stacy Garrity: Fresh perspectives on savings and impact

As the 78th Treasurer of the Commonwealth of Pennsylvania, businesswoman and retired, decorated, U.S. Army Reserve Colonel Stacy Garrity is focused on transparency, cutting waste and fees, returning more than $4 billion in unclaimed property to its rightful owners, and making education affordable for Pennsylvanians. Is there a link between her Army service and her priorities as Treasurer? We see several. We appreciate Treasurer Garrity’s blend of pragmatism, enthusiasm, and dare we say BLUF-ability. You know, Bottom Line Up Front. With the bottom line in mind, here’s the Treasurer’s perspectives on financial and retirement security in the Commonwealth.

Treasurer Stacy Garrity, welcome. It's a pleasure to talk with you. We’d love to hear about your current priorities!

Absolutely. Naturally in this role, my top priority is to be a fiscal watchdog. As Treasurer, I oversee an office of more than 300 employees, and we have to protect $153 billion in state assets. Important.

In Pennsylvania we also have more than $4 billion in unclaimed property. That means one out of 10 Pennsylvanians has unclaimed property. The average claim just for last year was around $1,500 -- that can make a big difference to some folks that have been really hurt through the pandemic.

Fun fact, and this is related, we have the largest working vault in the nation. It was built in 1939 at a cost of $600,000. Adjusted that for inflation, that’s over $17 million today. The front door alone is 60 tons of steel. If you've seen the movie Ocean’s 11, our vault is way cooler, except that we don't have George Clooney.

You have our attention.

When you get behind that vault door, you’ll find we have many military decorations – one of my favorite things in the vault. I'm a veteran. Returning military decorations is very near and dear to my heart. Since I took office, we've returned 229 decorations, including two Purple Hearts and a Bronze Star. We have campaign medals from every branch of service, from every major conflict. We also have memorabilia like dog tags and citations. These are all things that obviously the veteran held in very high esteem.

We're just getting ready to return a Purple Heart to a family around Allegheny and Westmoreland counties. They had a father that served in World War II. He's passed, and they're assembling all the family members so that we can return the Purple Heart to them in person. I'm very excited about it. When we return these items we always send a proclamation from the Treasurer's office. We try to make it special. Each one of those campaign medals is a story about someone's service to our great nation, and we want them to know how much we appreciate them.

Tell us more.

Rural outreach is a priority of mine. 48 out of 67 of our counties are rural and sometimes rural Pennsylvania can be forgotten by Harrisburg. I'm from Bradford County, one of the more rural counties in Pennsylvania. It’s important for us to understand perspectives and experiences across the entire state, in the rural areas and in our cities.

Another priority is our savings programs. We have the PA529 College and Career Savings Program with about $7 billion in assets saved. It’s important to remember – this program is not just for four year degrees, it's for community colleges, it's for technical schools, it's for qualified apprenticeship programs. Savings can also be used for some K-12 expenses.

When you travel across the state, everybody is clamoring for skilled labor. So, I'm really trying to push the flexibility of the PA 529. You know this: the PA 529 has tremendous tax benefits. Savings grow tax free, the withdrawals for qualified expenses are free from taxes, and for Pennsylvania residents it's even greater because PA 529 savings don't impact your Pennsylvania state financial aid eligibility. That's huge. As a bonus, the accounts are exempt from Pennsylvania inheritance tax.

Another savings program we provide is PA ABLE. PA ABLE helps people with disabilities save for the future without impacting important support tools like SSI and other federal benefits. Pennsylvania is part of a 19-state National ABLE Alliance within which we are the largest program. This is a newer program, just started in in 2017, and 6,000 families have already saved nearly $70 million. The National ABLE Alliance just surpassed the $250 million asset milestone, which triggered a fee reduction. We're pretty proud of being able to reduce fees this early into our program.

I also want to mention that I'm very supportive of the federal ABLE Age Adjustment Act. To refresh, this Act expands the age eligibility to those with disabilities that occur prior to age 46, instead of stopping at 26. Why I like that so much is it means that 6 million more Americans would have access to ABLE plans, including 1 million veterans. So that's really important to me.

And then of course we have prioritized increasing transparency. We’ve just added a page on our Transparency Portal called Ledger Five. It's very new. Ledger Five is the accounting tool that records what the Governor spends that wasn't specifically appropriated. It's largely Department of Human Services spending to maintain public health. My opinion is taxpayers should see where every single dollar is being spent. We added this section to the transparency portal to basically take the mystery out.

That's a long list. We know you are also passionate about retirement security for Pennsylvanians. What are you seeing that makes this important to you?

Well we know that there are more than 2 million Pennsylvanians, that's 40% of our private-sector workforce, that don't have enough money to retire. They don't even have emergency savings. In fact, this group is largely made up of people that don't have access to retirement savings through their employers. Being from rural Pennsylvania, I recognized these are people that we all know and care about. These are your hairstylists, your wait staff, your family members and some of my family members. They work hard. They deserve better for their families and for their future.

We also know that people are 15 times more likely to save if their employer offers some sort of retirement savings option.

By helping people save what we're doing is we're helping to add to their independence, so that when they do retire, that they are less likely to be reliant on government social services programs.

I view this as an absolute win, win, win. It's great for taxpayers, it's great for employers and it's great for employees.

You've been working with the legislature to introduce a retirement savings program called Keystone Saves. Tell us about that proposal.

I'd be delighted to. We announced the bill back in the middle of December -- it's House Bill 2156. The prime sponsors are Representative Tracy Pennycuick and Representative Mike Driscoll. It has strong support from both sides. Right now, it has more than 50 bipartisan co-sponsors. We put it together to be the most business-friendly retirement savings program in the nation.

We're preparing to manage it just like our PA 529 saving plan. What I mean by that is it will truly be managed as a public-private partnership. Program management will be executed by Treasury with the support of a private sector partner.

With this approach, the only thing the employer has to do is provide an employee census and establish a payroll deduction for workers who want to save. That's it. The accounts are portable, so for workers they follow you from job to job, to job.

We're very excited about this proposal. Ten other states have enacted similar legislation, by the way.

Here’s something you might like to see. We did some side by side comparisons. In the first, we list the responsibilities of employers establishing retirement plans vs. facilitating Keystone Saves. You see that if you're an employer and you have to set up a retirement plan, it's pretty challenging and costly, especially if you only have a few employees. On the other hand, with Keystone Saves you only have to upload your list of participating employees to the administrator and process the payroll deduction. Anything else is handled by Treasury and our private sector partner. That makes it very easy for employers.

We also did a side by side between our program and the 2021 federal proposal. Folks may remember the 2021 plan for a federal retirement account auto-enrollment standard; it was originally in the $3.5 trillion spending bill and got pulled out when they pared that back. The federal bill language was pretty onerous and it had some harsh penalties. It included a penalty of $10 per employee per day for noncompliance, capped at a half a million dollars. The other issue with the federal plan is that it would have to be up and running in just one year. Keystone Saves has a four-year phase in after authorization, so businesses can plan ahead. We're trying to work with businesses because they're not the enemy.

You may hear some naysayers comment that ‘Keystone Saves is going to hurt the private market.’ To the contrary, there's absolutely no evidence that suggests that. In fact, the data shows for those states that already have programs, employers with retirement plans continue to offer them and businesses without plans are adopting new ones at the same, or even higher, rates.

Treasurer, research in Pennsylvania shows the state will spend about $14 billion on extra support for seniors if no action is taken to expand retirement savings. Did that impact your thinking?

Yes, it absolutely did. In fact, the first thing I thought about was taxpayers. Taxpayers, and the fact that we believe access at work is just the right thing to do. This isn't a problem just in Pennsylvania. It's a problem across the nation that folks just don't have enough money to retire. And so how long do you wait -- do you wait until you’re hit by the silver tsunami? That would really be a financial drag on Pennsylvania. The problem truly impacts every taxpayer -- even those with good retirement plans -- because who's going to foot the bill? The taxpayers.

So now we have a candid question. Red states are looking at Auto IRAs but have been slower to adopt legislation. Is there something they may be overlooking as they weigh the pros and cons?

I think there are some key points to consider. I’ll tell you, I initially had that first reaction – skepticism -- until I did some research on the positive aspects for business and taxpayers. I do sometimes hear feedback expressing, ‘we're going to put a burden on our small businesses.’ Yet as I showed you, employers simply provide the census of employees and process a payroll deduction. That's it. All the administrative, all the backend functions, they're handled by Treasury and the private sector third-party provider.

I do think that people get caught up in the concept of mandate. In Pennsylvania we put language in the bill that says there will be no penalty for employers that don't comply. I'm doing that to provide a level of comfort and make our bill even stronger.

Is your thought that it will be a requirement but it's not your goal to fine small businesses. You'll be encouraging and providing technical support instead?

Yes. I am really pro-US industrial base. I am for small businesses and that's why I said we should be bold and address this retirement security issue. I really want to support the hard working middle class families in Pennsylvania.

You might find this interesting. My first 10 months in office I traveled to all 67 Pennsylvania counties. And I talked about Keystone Saves in every county.

I talked to so many small businesses -- I mean, very small businesses -- and I don't think I received any pushback. They all said, ‘We would love to offer something for our employees, but we don't have the bandwidth to do it.’ And I said, ‘Well, what if you could provide a retirement savings account and you didn't have to do any of the administrative work. You don't have to maintain any of the records, you don't have to do anything but offer payroll deduction.’ They all said, ‘We'd love to do it.’

When you really talk to the working class, men and women, I don't think they oppose it. At the moment our employers can't even find employees. So, it helps them become more competitive because this is something they can afford to provide.

In Pennsylvania when you look across all 67 counties, above and beyond their Social Security people need about $400 a month more, on average, to make it. You're not talking about a huge, huge number that's really out of reach. So, I think, why do we keep waiting? Why not act now?

Everything you've said makes a lot of sense. And, it’s time for our off the cuff wrap up question: if you could have a superpower today, what would it be?

Can I say the power to get rid of COVID? If I get one superpower today, that would be my superpower.

We like it.

If you can’t tell, folks, there are a lot of great things happening in Pennsylvania right now. Thank you so much Treasurer Stacy Garrity for sharing your perspective with us.

Want more? You can connect directly with Treasurer Garrity at TreasurerGarrity@patreasury.gov. You can follow the Treasurer’s work in Pennsylvania at patreasury.gov and in her newsroom. You can also connect with the Treasurer on Facebook, Twitter, and Instagram.

This piece was featured in the February 10, 2022, edition of Retirement Security Matters. For more fresh thinking on retirement savings innovation, check out the newsletter here.