Witnesses and members of the Senate Finance Committee discussed ways Congress can improve retirement and savings opportunities for American workers during the committee’s hearing, “Building a Bipartisan Retirement Legislation: How Can Congress Help?” on July 28.
“The past year was difficult for many Americans; by expanding the avenues for workers to save, they will be better able to plan for their futures,” said Aliya Robinson, senior vice president for retirement and compensation policy at the ERISA [Employee Retirement Income Security Act] Industry Committee (ERIC). “Lawmakers have the opportunity to create real, impactful legislation that would open pathways to financial security for millions of working Americans.”
ERIC’s list of recommendations to expand savings opportunities for employees included:
- increasing the age for required minimum distributions (RMDs) to 75;
- treating student loan payments as elective deferrals for the purpose of employer matching contributions;
- providing a safe harbor for the recovery of retirement plan overpayments;
- allowing for emergency savings as part of a retirement savings plan;
- providing additional savings opportunities for those close to retirement by the increasing catch-up limits in plans;
- modifying the definition of a highly compensated employee to encourage the inclusion of employees who meet the definition but are not on an executive or management level; and
- expanding cafeteria plans to allow participants additional pre-tax benefit options such as student loan repayment, disability insurance, long-term care insurance, longevity insurance, and retirement planning services.
Robinson also endorsed policies that would make offering a retirement plan to employees less costly and cumbersome for employers. “It is important that outdated and unnecessary administrative burdens be eliminated, allowing employers, like ERIC’s large employer member companies, that offer retirement benefits to put as many resources towards those offerings as possible,” she said.
ERIC’s recommendations in this area included:
- simplifying reporting and disclosure requirements by eliminating redundant and unnecessary disclosures;
- maintaining electronic disclosure as a default option for distributing disclosures and notices;
- establishing an office of retirement savings lost and found within the Pension Benefit Guaranty Corporation (PBGC) that would serve as a repository for information about all lost retirement accounts, to be made accessible to the public through a searchable online database;
- preventing the increase of single-employer PBGC premiums to pay for non-retirement legislation;
- expanding the ability for plan sponsors to self-correct plan errors; and
- protecting ERISA preemption to ensure that employers that voluntarily provide retirement benefits can do so on a uniform basis, in light of the establishment of different state programs.
Robinson noted that many of ERIC’s recommendations are included in bills already introduced to lawmakers, including the Securing a Strong Retirement Act, the Retirement Security and Savings Act and the Enhancing Emergency and Retirement Savings Act. The Securing a Strong Retirement Act was first introduced in 2020 and has been dubbed “SECURE 2.0,” a reference to 2019’s Setting Every Community Up for Retirement Enhancement (SECURE) Act. It already has strong bipartisan support, receiving a unanimous vote of support from the Ways and Means Committee of the U.S. House of Representatives.
During the hearing, committee member Senator Ron Wyden, D-Oregon, added that his proposed Encouraging Americans to Save Act (EASA) would also help employees accumulate retirement savings by expanding the saver’s tax credit and offering a COVID-19 recovery bonus for low- and middle-income workers. Wyden also urged his fellow lawmakers to act on the $1.67 trillion dollar student loan debt, naming another recent proposal—the Retirement Parity for Student Loans Act—that would allow 401(k), 403(b), and SIMPLE retirement plan sponsors to make matching contributions to employees as if their student loan payments were salary reduction contributions.
Wyden also said lawmakers “ought to make it easier for people to move their retirement accounts and continue saving when they change jobs. In 2021, hardly anybody in America stays with one employer for their entire career. However, it is a pain in the neck to move your retirement savings. Many Americans just give up and cash out their savings, losing out on a whole lot of earnings that would build up over time. The rules essentially penalize Americans for routine job changes in the modern economy, so the system ought to change.”
Committee member Senator Mike Crapo, R-Idaho, called on his fellow lawmakers to “enact policies that encourage workers to save,” for retirement, adding that while a Department of Labor (DOL) report says 71% of workers have access to retirement benefits, the same analysis finds only 55% participate in the plan.
Crapo said Congress should implement simpler and affordable plans for small business employers and expand government-controlled retirement plans for gig workers. “Our retirement system must adapt with this changing landscape, so every worker has a chance to save for retirement,” he said.
The Insured Retirement Institute (IRI) added to the conversation with a statement for the record from Wayne Chopus, president and CEO of the group. In it he said, “Legislation like the public policy measures contained in IRI’s 2021 Federal Retirement Security Blueprint, eleven of which are included in recently introduced legislation in the Senate, offer a solid foundation of common-sense, bipartisan solutions that will help more of our nation’s workers and retirees strengthen and enhance their retirement security.”
Among the ideas Chopus put forward was to authorize the formation of 403(b) pooled employer plans (PEPs). He noted that the SECURE Act allowed for the use of 401(k) PEPs, but “the benefits of a workplace retirement plan that could be offered by a small business employer through a MEP [multiple employer plan] or PEP in accordance with the changes made by the SECURE Act is not available to 501(c)(3) nonprofits, public educational organizations and religious institutions.” He noted that a provision to expand PEPs to the 403(b) market is included in the Improving Access to Retirement Savings Act.
Chopus also urged lawmakers to further facilitate the use of protected lifetime income solutions beyond provisions included in the SECURE Act. He noted that the Retirement Security and Savings Act would increase the amount of savings a person can use to purchase a qualifying longevity annuity contract. That legislation also directs the Treasury Department to amend legislation to allow exchange-traded funds (ETFs) to be offered within variable insurance products. “This would allow for ETF structured annuity offerings which would provide consumers with lower-cost investment options and allow for more consumers primarily in the fee-based advisory market to utilize and benefit from variable insurance products by obtaining protected lifetime income for their retirement years,” he explained.
A replay of the hearing, member statements and transcripts of witness testimony can be found at https://www.finance.senate.gov/hearings/building-on-bipartisan-retirement-legislation-how-can-congress-help.