The U.S. Senate Finance Committee hosted a lengthy hearing Wednesday on the state of the nation’s retirement planning system, with the specified goal of “investigating challenges to Americans’ retirement security.”
Following opening statements from Senators Rob Portman, R-Ohio, and Sherrod Brown, D-Ohio, in which the lawmakers voiced optimism about the potential for achieving retirement reform in 2021, the main part of the hearing included comments from four well-known retirement industry thought leaders. They were Scott Barr, a financial adviser with Edward Jones; Eric Stevenson, president, retirement plans, Nationwide; Michael P. Kreps, principal, Groom Law Group; and Joshua Luskin, president, National Association of Government Defined Contribution Administrators (NAGDCA).
Given that they represented the interests of different parts of the retirement planning industry, the speakers’ comments touched on many different challenges and areas of potential reforms. However, they all agreed that Congress should make retirement reform a legislative priority during 2021, as a potentially powerful means of complementing its wider response to the coronavirus pandemic.
Barr noted that Edward Jones recently partnered with Age Wave to conduct a survey on the topic of how the pandemic has impacted retirement savings, which were already facing significant projected income shortfalls.
“The study found the pandemic has altered the retirement timing of nearly 68 million Americans, most planning to retire later, and caused more than 20 million Americans to stop making retirement savings contributions,” Barr said. “These stats reinforce the importance of the meaningful legislation we are discussing today.”
Barr and the other speakers called on Congress to take a number of actions to improve the nation’s retirement outlook, including boosting the tax incentives that promote the creation of small-employer retirement plans. They also called for incentives for employers that embrace automatic enrollment and for the creation of pathways for employers to support retirement savers with competing financial priorities. On this point, Barr cited the example of permitting employers to make retirement plan matching contributions to their employees’ retirement accounts based on their employees’ student loan repayments.
Other items on the speakers’ wish list included permitting greater catch-up contributions for savers once they reach age 60 and increasing the required minimum distribution (RMD) age to 75. Stevenson said he wanted to see Congress expand the saver’s credit and reduce the service requirement for long-time part-time workers to access tax-advantaged savings opportunities. He also urged Congress to permit 403(b) plans to invest in collective investment trusts (CITs) as a means of lowering fees and expenses.
After highlighting some of the same points, Kreps took time to emphasize the importance of addressing the union-sponsored multiemployer pension funding crisis—and sooner rather than later.
“We cannot ignore the fact that we are on the brink of over a million Americans losing their hard-earned pension benefits,” Kreps said. “Most multiemployer pension plans are secure, but some plans—including some very large plans—will become insolvent in the next few years. The federal pension insurance program administered by the Pension Benefit Guaranty Corporation [PBGC] only guarantees a fraction of many multiemployer pension plan participants’ benefits. Worse yet, PBGC projects that its multiemployer insurance program will be insolvent in 2026. When that happens, PBGC will only be able to pay pennies on the dollar, meaning participants and retirees in insolvent plans will see their benefits slashed to the bone.”
Given his organization’s focus on governmental plans, Luskin had a bit of a different wish list, though it also included Stevenson’s call for CITs in 403(b) plans. His top six priorities for Congress included the following:
- Expand 403(b) plan funding vehicle options to include CITs;
- Permit non-spousal beneficiaries to roll inherited individual retirement account (IRA) assets into defined contribution (DC) plans;
- Eliminate the 457(b) “First Day of the Month” requirement;
- Allow participants with Roth accounts in DC plans to roll Roth IRA assets into these plans;
- Exempt Roth contributions in DC plans from required minimum distribution rules; and
- Permit DC plan participants to make qualified charitable distributions.