Philadelphia Becomes the First City in the U.S. to Enact a Mandatory Retirement Savings Program

Philadelphia has become the first city in the country to enact a mandatory workplace retirement savings option. The program – also known as PhillySaves – was signed into law by Mayor Cherelle Parker on January 20, 2026, but its implementation required passage as a ballot measure. After Philadelphia voters approved the initiative in the city’s May 19 elections, the program went into effect immediately, though contributions do not begin until July 1, 2027, likely in a phased implementation.

More than 15 states have already enacted some form of mandatory retirement savings program for employees that are not otherwise covered by an employer-sponsored plan, with similar bills having been proposed in at least 10 others this legislative session. However, the Philadelphia measure is the first local-level enactment of such a plan.

PhillySaves applies to employers that have been in business within the city of Philadelphia for at least 24 months. While this is likely to apply primarily to small employers (who more typically may not have established a tax-qualified retirement plan), it will apply to employers of any size. Employers that maintain a “qualified retirement plan,” defined as a compliant plan under sections 401(a), 401(k), 403(a), 403(b), 408(k), 408(p), or 457(b) of the Internal Revenue Code, are not subject to the program.

Under PhillySaves’ requirements, employers that do not offer a qualified retirement plan must facilitate each of their employees’ contributions to the program through a payroll deduction at a default contribution rate to be determined, initially between 3% and 6% of an employee’s wages. This contribution rate may be increased annually thereafter by either 1% or 2%, though the maximum default contribution rate may not exceed 10%. Contributions will be deposited into an IRA, and employees may elect to establish a traditional IRA, a Roth IRA, or both. The city will provide for the automatic enrollment of covered employees, and will allow employees to change their contribution rate or opt out of PhillySaves entirely if they wish to do so.

The program prohibits employers from making contributions to a participating employee’s account, but does permit employers at any time to begin offering a qualified retirement plan and cease their participation in PhillySaves.

There are a number of issues and details that will need to be worked out in order for these arrangements to be implemented. These include:

• Establishment of arrangements by the Philadelphia Retirement Savings Board (Board) (the body that will be responsible for implementing this ordinance) regarding what institutions will be selected as the custodians for the IRAs established under the ordinance; 
• Sorting out whether a non-profit employer that has a 457(b) plan only for its key employees avoids being subject to this ordinance if its other employees have no access to a tax deferred retirement plan or arrangement;
• Provision of guidance regarding who is eligible to have an IRA account at all (not everyone is) and who is or is not eligible for establishing a Roth IRA (which has compensation limits regarding eligibility); and 
• Rules regarding how investments in the IRAs that are established under this ordinance are to be handled (just to note a few items that have been left to the Board to sort out). 

Processes for employers to withhold qualifying employees’ contributions and to demonstrate that they are not covered by the program, and related notice and recordkeeping requirements will also need to be established by the Board through subsequent rules and regulations.

While PhillySaves appears to be a straightforward vehicle to help Philadelphia employees save for retirement, it is likely to be a complex process getting this up and running. Philadelphia employers should consult with knowledgeable counsel to determine their obligations under the PhillySaves program.