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Keystone Saves Program

Keystone Saves Program Passes State House: What YOU Need to Know

Important: This bill has passed the Pennsylvania House of Representatives. It has NOT passed the Pennsylvania State Senate yet. This is not law. We are sharing this because we want PA business owners to understand what is being proposed and what it might mean for you down the road.

On May 6, 2025, House Bill 1263 moved out of the House Commerce Committee. The bill would create a state-run retirement program called Keystone Saves. If it passes in current form the Senate and the Governor signs it, it will change retirement planning for many Pennsylvania businesses.

Here is what it the State House version of the bill actually says in plain English.

Why Is This Being Proposed?

The PA Treasury Department says roughly two million working Pennsylvanians do not have retirement savings through their employer. This includes many people we see every day like hairstylists, truck drivers, and restaurant workers. Research shows that people are 15 times more likely to save when they have an option at work.

The state is worried about future costs. The Pennsylvania Independent Fiscal Office thinks the state could face $14.3 billion in added social costs by 2030 because of low retirement savings. This bill is an attempt to close that gap.

What Is Keystone Saves?

Keystone Saves would be an automatic enrollment IRA program run by the PA Treasury. If your business does not offer a retirement plan, the state would require you to enroll your employees in these accounts through payroll deductions.

Employees can opt out at any time. However, the default setting is that they are in the program. The plan would use Roth IRAs as the standard account type, but Traditional IRAs would also be an option.

Which Businesses Would Be Affected?

The bill in its current form covers almost any business or nonprofit in Pennsylvania that employs people. But there are important exemptions you should know about.

According to the House bill that has passed, you would NOT be covered if:

  • Your business has four or fewer employees
  • You have been in business for less than 15 months
  • You already offer a retirement plan like a 401(k), SIMPLE IRA, or SEP-IRA

That last point is the most important one. If you already have a plan in place, you are exempt. PERIOD.

When Would This Take Effect?

This bill still needs to pass the Senate, and could change form once it undergoes this stage of the legislative process. In current form if it becomes law, it uses a phased timeline based on how many people you employ. The clock starts once the law is officially effective.

  • 100 or more employees: 24 months to register
  • 20 to 99 employees: 30 months to register
  • 10 to 19 employees: 36 months to register
  • 5 to 9 employees: 48 months to register

Right now, the bill says there is no penalty for an employer who does not participate. But registration deadlines are written as requirements. The final version could look different if the Senate makes changes.

What Would Employers Have to Do?

If your business falls under the program, you would be responsible for registering with the state. You would have to automatically enroll employees who are 18 or older. You would also handle the payroll deductions and send them to the employee accounts.

There are things you would NOT do. You cannot contribute to employee accounts yourself. You also cannot promote the program. Most importantly, you are not treated as a fiduciary. That means you are not liable for the investment decisions because the state handles that part.

The state designed this to keep your burden low. You provide the employee list and process the deductions. The Treasury and a private vendor handle the rest of the administrative work.

What Would Employees Get?

Employees would have their own individual accounts that they own completely. Here are the basics for them:

  • A default contribution rate of 4% of their gross wages
  • An automatic increase of 1% each year up to a 10% maximum
  • The ability to change rates or opt out at any time
  • A choice of investment options like index funds or target date funds
  • Full portability so the account goes with them if they change jobs

What About Businesses That Already Have a Plan?

If your business already has a 401(k), SIMPLE IRA, or SEP-IRA, you are exempt from these requirements. We want every client to understand this clearly. Even if you start with Keystone Saves, you can replace it with your own private plan later if you choose. WE ARE HERE TO HELP YOU WEIGH THOSE OPTIONS.

What This Means for You Right Now

This is not law yet. The Senate can still change it. But the trend is very clear. Pennsylvania is moving toward requiring retirement access. More than a dozen other states have already done this.

If you already have a plan through PAC Financial, you are in a great spot. You are exempt from this mandate. If you do not have a plan, now is the time to think about it. Setting up your own plan on your own terms gives you more control. You pick the plan type and you decide the structure.

There are also big tax credits available right now. The SECURE 2.0 Act can cover up to 100% of your startup costs if you have 50 or fewer employees. You could get up to $5,000 a year for three years just to start a plan.

Have Questions? Let's Talk.

We know this is a lot to digest. If you want to know what this bill means for your specific business, give us a call. Whether you want to start a plan now or just wait and see what the Senate does, we can help. No jargon and no pressure.

CALL us at (717) 564-6400 or set up a FREE consultation today. OUR TEAM IS READY TO HELP.

Sources

Pennsylvania House Bill 1263, Printer's No. 1623, Session of 2025. Pennsylvania Treasury Department official releases.

Compliance Notice
This information is for educational purposes only. It is not financial, legal, or tax advice. House Bill 1263 has not been enacted into law yet and is subject to change. Details and timelines are based on the current bill version and may differ in the final version. Tax credits are based on the SECURE 2.0 Act and depend on your specific business situation. Consult with a tax professional regarding your eligibility. PAC Financial serves small business owners in Central Pennsylvania. Securities and advisory services are offered through Osaic Wealth, Inc. Member FINRA/SIPC.