There’s Hope for Retirement Security Policies from Congress

"I think the retirement crisis is beyond a crisis,” says U.S. Representative Reid Ribble (R-Wisconsin).

Ribble, a member of the House Budget Committee, speaking with Alison Cooke Mintzer, global editor-in-chief of PLANSPONSOR before attendees of the 2014 PLANSPONSOR National Conference, noted that the Social Security Administration keeps moving up the projected date it will become insolvent. The shortfall is projected at $9.6 trillion. If nothing is done, within 20 years there will be drastic cuts to benefits, he said. According to Ribble, there’s tension between those in Congress who have said they will not touch Social Security benefits and those who have said they will not touch taxes. “They make these promises to the peril of older Americans,” he said. “Ten trillion dollars will require additional revenue or a change in benefit structure.”

In addition, according to Ribble, the number of individuals who are saving for retirement has dropped 10% since 2009, and the number that have less than $1,000 saved is 36% (see “Plan Offering Strongly Linked to Confidence”).

Ribble painted a picture of what drives Congress’ thoughts about solutions to retirement security: “In the peak of their savings years, mom and dad are helping kids pay for college. If you project forward, those college kids are paying for college debt for 20 years, at the same time they are trying to start a family and buy a house, then after the 20 years, they will have to help pay for their children’s college.” The result is a vicious circle making retirement savings difficult for all generations. 

Ribble said Congress is looking at solutions to this problem and other ways to help Americans learn skills for work—i.e., mentor relationships so young people can go immediately into work, learn a trade and not accumulate college debt. “One part of the solution is on the education side,” he told conference attendees.

Society needs to think differently in terms of what will be helpful—put a different value on areas of the economy that actually work, Ribble contended. For example, perhaps no one looks at their newborn and thinks, “I hope he becomes a roofer,” he said, but a mentoring program with a roofing company in 2009 would have started a high school graduate at $17.10 an hour and taught him or her a lifetime profession. “It doesn’t mean people shouldn’t go to college, but it’s another option.”

Congress is also considering changing the tax code to incent people to save for retirement on their own. Ribble contended the President’s myRA proposal may give Americans a foothold in retirement savings (see “myRA Program Details and Intent”), “but there is a shortfall of creative thinking around what employers can do for employees.” Ribble said an idea he’s been kicking around is to let employers take some corporate tax dollars they are sending to the government and instead choose to give the money to workers. Policymakers must shift the paradigm, he said. “The best way for people to have their own security is to own their security. Most policymakers are looking at ways to get people to do it on their own.”

The reason there’s a chance of getting meaningful retirement savings policy done, according to Ribble, is about one-third of Congress has been in Congress four years or less. “There are a lot of newcomers because American people want someone to tell them the whole truth,” he said. “There are legitimate, substantive conversations going on with members of congress, but you don’t hear about it, because it sells more media advertising to put the most controversial items in news.” There are a dozen proposals sharing the theme of requiring employers to auto-enroll and to make a mandatory match, he added.

However, “big changes take a lot of time,” he said, and there are some issues holding big changes back. Ribble noted that Congress now looks a lot like the room of conference attendees—some male, some female, all different races, some liberal and some conservative, but added, “you would be much more pragmatic in finding a solution [to the retirement crisis] because you deal with it every day.” He added that the reason there is no common ground among policy makers is because most do not look for it.

Another problem is how the Congressional Budget Office (CBO) views tax-deferred savings (see “Contributions Could Be Capped in 2015 Budget”). Ribble explained that the CBO is not allowed to score anything dynamically. The shortfall of income from taxes on plan contributions becomes part of debt now. He has introduced legislation that would have the CBO establish a long-term scoring option. “We’re trapped into the rules,” he said.

Another thing that slows change down is Congress’ structure, Ribble contended. There is not just one committee for each policy issue. For example, he noted there are 37 committees that have input on health care. “All of these committees are working in their own silos without any communication with each other.”

Ribble concluded he thinks a big, broad policy on tax reform will happen in the next five or six years, “but we must start with a blank piece of paper.”