Philadelphia is poised to become one of three cities tackling a pressing U.S. problem: an aging workforce that hasn't saved enough to retire comfortably.
Along with New York and Seattle, Philadelphia is contemplating a government-administered retirement savings plan or marketplace for employees who don't have pension or 401(k) plans, such as those who work for small businesses.
So far, seven states, including New Jersey, have set up or are in the process of establishing these exchanges. A change in federal law has allowed cities with populations larger than the smallest state to petition to set up such a program.
In Philadelphia, the planning is well underway. On Oct. 19, AARP, the advocacy group for people over 50, and the City Controller's Office will host a symposium bringing together national and local experts to talk over possible approaches.
"All of the debates about pensions is from the perspective of the government and the employers on how they are going to make payments" into pension systems, City Controller Alan Butkovitz said. "But people are not thinking about the impact on individuals as they reach retirement age" and don't have enough savings to add to Social Security.
"Nearly half of baby boomers and Gen Xers will lack the income to meet basic retirement expenses and health-care costs," said Bill Johnston-Walsh, AARP state director for Pennsylvania.
Research shows that retirement savings go up when people save through payroll deductions, but in Philadelphia, less than half of all employees have access to workplace retirement savings plans.
The idea is to create what would amount to a city-government-administered plug-and-play system for small employers who have neither the money nor the expertise to create retirement plans for their employees.
That would be Nancy Morozin, owner of the Dining Car diner in Northeast Philadelphia, which employs about 100.
"I would like to do anything and everything for my employees. We can't afford to do it," Morozin said. "Our margins are too small. Our overhead is too high. We're rocking a 55-year-old business, and a building that is that old, too."
It's not only the cost, though. Some days, make that most days, it gets so crazy busy that Morozin has to hop on the cash register, package takeout orders, or check the platters leaving the kitchen, making sure a dollop of tartar sauce goes out with every deviled crab entrée.
"You'd practically need a person to manage something like" a retirement savings plan, she said. "We don't have the office personnel."
Here's how the city's plan might work:
Employers would instruct their payroll companies to set up another deduction - that's simple.
The hard parts - figuring out who should invest the money collected and administering the accounts with monthly statements and tax forms - would be handled by the city, either using the same services it uses to manage and administer the municipal retirement savings accounts or by putting the project out for bid to a big investment firm, such as Vanguard or Prudential.
The city's funds and the employers' funds would not be mixed.
The most common model, the IRA model, requires employers to set up the individual retirement accounts. Negotiable is whether employees would have to join or whether they would be automatically enrolled with an option to opt out. Participation typically increases when employees are automatically enrolled.
With IRAs, employers would not be able to add to the plans, and employees under age 50 would not be able to save more than $5,500 a year.
New Jersey has a marketplace approach, providing a shopping guide for employers. The original plan, an IRA model, was passed by the legislature but vetoed by Gov. Christie, who wanted a market.
Butkovitz prefers a multiemployer plan, which has not been tried in any of the seven states.
Unlike the IRA model, employer participation would be voluntary, he said, perhaps making it more palatable to companies resisting government mandates. But participating employers also could choose to contribute to their employees' accounts.
In any plan, deductions would be pretax, and the plans would be portable if employees changed jobs.
"We're doing a lot of outreach to business," Butkovitz said.
Last week, as a precursor to the Oct. 19 symposium, Butkovitz made his way to the Northeast Philadelphia Chamber of Commerce, which Morozin chairs, to talk up his ideas.
"What a more healthy city for our employees, if we can start them thinking about retirement at an early age. The power of compounding, my God, they'll have some money when they retire," Morozin said.
And, she said, it may allow people who like restaurant work to stay, rather than leaving for a more financially secure career.
Dining Car chef Larry Thum, 58, said he'd be interested, "if I thought it was a good deal."
Besides Butkovitz, AARP officials and representatives of investment firms, participants in the Oct. 19 symposium, set for 8:30 a.m. at the University of Pennsylvania's Houston Hall, will include Assistant U.S. Secretary of Labor Phyllis Borz; Penn's Olivia S. Mitchell, director of the Pension Research Council; Drexel law professor Norman Stein; and Kathleen Kennedy Townsend, chief executive of the Center for Retirement Initiatives at Georgetown University.
"Philadelphia is really on the cutting edge," said Sarah Gill, AARP senior legislative representative.
A May report from the City Controller's Office found that Philadelphia's current elderly population is poor.
The report estimated that a senior couple need an annual income of $28,750 to meet basic needs without public assistance but that the median household income of Philadelphians age 65 and older is $26,533.
One-third have incomes below 150 percent of the federal poverty level; 21 percent need food stamps.
The situation has implications beyond the private lives of the city's elderly, Butkovitz said.
It also will be tough for the region's economy as baby boomers retire and don't have enough money to spend on anything other than the necessities.
"Collectively," he said, "it's going to hurt demand in the economy and force a long-term slowdown."