[Senate Hearing 109-493]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 109-493
 
 BRIDGING THE GENDER GAP: ELIMINATING RETIREMENT INCOME DISPARITY FOR 
                                 WOMEN

=======================================================================

                                HEARING

                               before the

                       SPECIAL COMMITTEE ON AGING
                          UNITED STATES SENATE

                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                               __________

                             WASHINGTON, DC

                               __________

                             MARCH 15, 2006

                               __________

                           Serial No. 109-19

         Printed for the use of the Special Committee on Aging



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                       SPECIAL COMMITTEE ON AGING

                     GORDON SMITH, Oregon, Chairman
RICHARD SHELBY, Alabama              HERB KOHL, Wisconsin
SUSAN COLLINS, Maine                 JAMES M. JEFFORDS, Vermont
JAMES M. TALENT, Missouri            RON WYDEN, Oregon
ELIZABETH DOLE, North Carolina       BLANCHE L. LINCOLN, Arkansas
MEL MARTINEZ, Florida                EVAN BAYH, Indiana
LARRY E. CRAIG, Idaho                THOMAS R. CARPER, Delaware
RICK SANTORUM, Pennsylvania          BILL NELSON, Florida
CONRAD BURNS, Montana                HILLARY RODHAM CLINTON, New York
LAMAR ALEXANDER, Tennessee           KEN SALAZAR, Colorado
JIM DEMINT, South Carolina
                    Catherine Finley, Staff Director
               Julie Cohen, Ranking Member Staff Director

                                  (ii)




                            C O N T E N T S

                              ----------                              
                                                                   Page
Opening Statement of Senator Gordon Smith........................     1
Opening Statement of Senator Herb Kohl...........................     2
Opening Statement of Senator Ken Salazar.........................     4

                                Panel I

Jean Chatzky, editor-at-large, Money Magazine, and financial 
  editor, The Today Show, NBC....................................     5
Cindy Hounsell, president, Women's Institute for a Secure 
  Retirement.....................................................    11
Barbara B. Kennelly, president and chief executive officer, 
  National Committee to Preserve Social Security and Medicare....    21
Jack VanDerhei, research director, Employee Benefit Research 
  Institute Fellows Program......................................    26

                                Panel II

Karyne Jones, president and chief executive officer, The National 
  Caucus and Center on Black Aged, Inc...........................    48
Sara Cole Hart, director, Corporate Benefits, CNF Services 
  Company........................................................    54
Lynn Rollins, senior advisor for Women's Issues to New York 
  Governor Pataki................................................    69

                                APPENDIX

Prepared statement of Senator Mel Martinez.......................    77
Statement submitted by Kimberly A. Strassel, Celeste Colgan, and 
  John C. Goodman................................................    78
Statement submitted by the American Council of Life Insurers 
  (ACLI).........................................................    92
Information submitted by Prudential Financial....................    99
Statement submitted by Business and Professional Women/USA, Women 
  Entrepreneurs, Inc., Women in Farm Economics and Women 
  Impacting Public Policy on behalf of Americans for Secure 
  Retirement.....................................................   110

                                 (iii)

  


 BRIDGING THE GENDER GAP: ELIMINATING RETIREMENT INCOME DISPARITY FOR 
                                 WOMEN

                              ----------                              --



                       WEDNESDAY, MARCH 15, 2006

                                       U.S. Senate,
                                Special Committee on Aging,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10:10 a.m., in 
room SD-106, Dirksen Senate Office Building, Hon. Gordon H. 
Smith (chairman of the committee) presiding.
    Present: Senators Smith, Kohl, Carper, and Salazar.

      OPENING STATEMENT OF SENATOR GORDON SMITH, CHAIRMAN

    The Chairman. Good morning, and we thank you all for 
coming. We are here today to discuss a topic of growing concern 
in America, women and retirement security. We will explore 
reasons why there is a gap in retirement income between men and 
women and the factors behind why women face greater financial 
risk in retirement.
    Preparing for retirement and achieving financial security 
are daunting tasks for all Americans, to be sure. However, 
women face many unique challenges. For example, women still 
perform the primary caretaker role in our society. As a result, 
many women spend significant periods of their lives out of the 
workforce raising children or taking care of elderly parents, 
and significantly diluting their earning power. Women also are 
more likely to work part time, or work in industries where 
employers are less likely to offer retirement benefits; Women 
generally earn less than men. In 2004, women earned 77 cents 
for every dollar earned by men.
    All of these factors have a significant impact on what 
women receive from Social Security and pensions, as well as 
what they are able to accumulate through personal savings. The 
bottom line is, it is harder to accumulate retirement savings 
income when you are making less money and working for fewer 
years. As a result, women receive significantly less during 
retirement income than men. This is true for all three legs of 
the retirement income stool: Social Security, pensions, and 
savings.
    In 2004, the median annual income of women over the age of 
65 was $12,000. Men, on the other hand, had an income of about 
$21,000. Although this figure is extremely low for men as well, 
women received almost half of what men collected in retirement.
    This income gap is further exacerbated by the fact that 
women generally live longer than men, and therefore need to 
stretch their income over a longer period of time.
    Equally disturbing is the high rate of poverty among older 
women. Of the 3.5 million Americans over the age of 65 who were 
in poverty in 2004, about 70 percent of those were women.
    Due to many factors, including high divorce rates and the 
fact that women generally live longer, many women will spend a 
portion of their retirement years without a spouse or 
significant other. However, living alone can have serious 
consequences on one's financial security. In 2004, the poverty 
rate for married women over the age of 65 was 4.4 percent. For 
unmarried women, the poverty rate was 17.4 percent, almost four 
times higher. The rate is much higher for single Black and 
Hispanic women.
    I have spent a great deal of time over the last year 
examining the issues of retirement savings and security. Last 
June, I introduced a bipartisan bill with Senator Kent Conrad 
of North Dakota dealing with this issue. Although the bill is 
aimed at increasing savings and ensuring greater financial 
security in retirement for all Americans, many of the proposals 
address the unique challenges that women face.
    Our bill encourages employees to adopt automatic enrollment 
in 401(k) plans. It also expands the credit which encourages 
low and moderate income individuals to save. Another key 
component provides incentives for lifetime payments.
    Although these are good first steps, more needs to be done, 
and I am currently developing legislation with the specific 
goal of narrowing the retirement income gap between men and 
women.
    To assist in drafting this bill, I have organized a kitchen 
cabinet of retirement experts who are concerned with the 
financial security of women. This group includes benefits 
attorneys, financial services companies, advocacy groups, and 
organizations representing employers. My hope is that by 
bringing together this broad coalition, we will be able to 
develop a bipartisan solution to this very challenging problem.
    Last, I would like to thank our witnesses who join us this 
morning. I am eagerly anticipating your testimony, and look 
forward to a productive dialog on ways that we can begin to 
eliminate the retirement income gap. So, with that, I am 
pleased to turn to my colleague, the Ranking Member of this 
committee, Senator Kohl of Wisconsin, for his opening remarks.

             OPENING STATEMENT OF SENATOR HERB KOHL

    Senator Kohl. Thank you very much, Mr. Chairman, for 
holding this hearing. As we will hear today, women tend to 
receive less income during their retirement years than men. In 
fact, they get only about 53 percent of what men receive. The 
poverty rate for single women of retirement age is a staggering 
17 percent.
    Retirement security is often thought of as a three-legged 
stool: Social Security, employer pensions, and private savings. 
But it is clear that for too many women facing retirement, that 
stool is shaky. We must strengthen all three legs, and also 
promote a fourth leg--the opportunity to continue working past 
retirement age for those who need to do so.
    Social Security is the foundation of retirement security 
for everyone, especially women. In fact, it is the only source 
of income for over one-quarter of single elderly women. Social 
Security provides a guaranteed benefit, which is even more 
important now that individuals are bearing more risk in defined 
contribution plans. Furthermore, Social Security benefits are 
protected from inflation and guaranteed to last a lifetime. 
This is especially important for women, who on average live 
about 5 years longer than men. Finally, Social Security is 
progressive--it replaces a larger share of earnings for low 
earners, and women tend to earn less than men. Social Security 
is a lifesaver for many women, so we must protect and 
strengthen it.
    But because Social Security was never meant to be the sole 
support after retirement, we must also strengthen employer 
pensions and private savings. Women are more likely than men to 
work part time, and therefore are less likely to be covered by 
a pension plan. Women are also increasingly at risk of 
outliving their savings because, unlike traditional pensions, 
few defined contribution plans offer to pay out benefits as an 
annuity--an income stream that is guaranteed to last a 
lifetime. We should encourage 401(k) plans to offer an annuity 
payout, and encourage participants to choose this option. In 
addition, we should extend and expand the Saver's Credit, so we 
can help lower income people, many of whom are women, better 
save for retirement.
    Even with such improvements, many baby boomers will choose 
to work longer. Some will work to stay healthy and productive, 
and some will work because they need to build more savings for 
a comfortable retirement. This new fourth leg of the retirement 
stool--continued work past traditional retirement age--will be 
especially important for women, who tend to live longer than 
men.
    Yet for several reasons older women are less likely to 
participate in the labor force today, making saving for 
retirement more difficult. First, women are more likely to seek 
part-time and flexible work schedules, and companies are less 
likely to provide pension plans for part-time workers. Second, 
many women are responsible for caring for elderly or disabled 
relatives. Caregivers reduce their earnings, Social Security 
benefits, and pension benefits--on average a total loss of 
about $659,000 over a lifetime.
    I have introduced legislation that would address these 
barriers and expand the time that older workers have to work, 
save, and secure a more comfortable retirement. The bill would 
provide tax incentives for businesses that hire and retain 
older workers, offer them part-time and flex-time 
opportunities, and include them in the company's pension and 
health insurance plans. It also seeks to ease the burden on 
caregivers, who more often tend to be women, by giving a tax 
credit to workers for the care of their senior family members.
    So we face an enormous challenge, but if we can work 
together for common sense reform and encourage businesses to 
adopt best practices, we can ensure that all four legs of the 
retirement stool, including the opportunity to work, stand firm 
for women. I look forward to continuing that dialog with our 
guests here today.
    Thank you, Mr. Chairman.
    The Chairman. Thanks, Senator Kohl.
    Senator Salazar of Colorado.

            OPENING STATEMENT OF SENATOR KEN SALAZAR

    Senator Salazar. Thank you very much, Mr. Chairman and 
Ranking Member Kohl, for holding this important hearing. I 
appreciate the opportunity to shine a spotlight on the unique 
challenges facing women as they prepare for retirement.
    For me, I have a personal agenda in part here because I 
have, as my progeny, only two daughters who are now 17 and 18 
years old. I look forward to them at some point, after a long, 
productive life in the workforce, to be able to retire with 
security.
    Today we have in my State 431,000 individuals over the age 
of 65. Fifty-six percent of that entire number represent women 
in my State. Colorado is a relatively young State. The U.S. 
Census Bureau has ranked Colorado 48th in the Nation for the 
ratio of those older than 65 to the overall population. I 
believe that we have an opportunity to encourage our younger 
generations to save and to plan for their retirement.
    That said, Colorado is graying like the rest of the 
country. In fact, three Colorado counties, Douglas, Park, and 
Summit, were among seven across the country that saw the number 
of residents age 65 years and older double between 1990 and 
2000.
    While the demographics of the next generation of retired 
Americans will differ from previous generations, the next 
generation will be healthier and have higher levels of 
education and income, so not all the news is negative. Because 
of a decline in traditional pension plans, low accumulated 
savings, and longer life expectancy, however, we have many 
challenges and many women that will be retiring ill-prepared 
for retirement.
    In terms of women and retirement security, there are many 
complex factors which lead to the continued retirement income 
gap. Since relatively few older women--27 percent, precisely--
receive a pension income and have accumulated small personal 
savings, approximately $4,000 annually, social security plays a 
critical role in preventing older women from living in the 
poverty that we remember from the days of the Depression and 
before the advent of social security. Social security is in 
fact our country's most successful government program, and any 
changes to the program have the potential to dramatically 
impact women in our society.
    Last year I held a series of town hall meetings to gather 
the views of people from throughout the State of Colorado on 
the long-term health of our social security system. Time and 
again in those meetings, seniors, and particularly women whose 
sole source of income is their monthly check from the Social 
Security Administration, raised concerns about the long-term 
solvency of the program and some of the initiatives that had 
been proposed to change the social security program here in 
Washington.
    But we must remain committed to fulfilling the promise of 
social security. I believe there are steps we can take to 
ensure that all Americans are more prepared for retirement. I 
am eager to hear from the experts assembled here today. I am 
eager to work with the chairman, Senator Smith, and the ranking 
member, Senator Kohl, to address these issues on behalf of the 
women of our country and on behalf of our Nation.
    Again, than you, chairman, and thank you, ranking member, 
for holding this hearing on this very important issue.
    The Chairman. Thank you, Senator Salazar.
    Our first witness is Jean Chatzky, and it is nice to see 
you on this side of a TV set. She is the editor-at-large for 
Money magazine and the financial editor for NBC's Today Show. 
We are honored that you are here. As an expert witness on 
financial planning, Ms. Chatzky will discuss investment 
strategies that help women increase their retirement savings.
    Then we will hear from Cindy Hounsell, who is the executive 
director of the Women's Institute for a Secure Retirement. She 
will provide a broad overview of the women and retirement 
security issue, including a discussion of the factors behind 
the retirement income disparity.
    Then Mrs. Barbara Kennelly. She is the president of the 
National Committee to Preserve Social Security and Medicare, 
and a former congresswoman from the State of Connecticut. She 
will discuss the importance of Social Security for women, and 
earnings from work as a fourth leg of the retirement income 
stool.
    She will be followed by Dr. Jack VanDerhei. He is a fellow 
at the Employee Benefit Research Institute, and professor at 
Temple University in Philadelphia. His testimony will focus on 
trends related to employer retirement plans and Social 
Security.
    We thank you all for coming, and Jean, we will start with 
you.

STATEMENT OF JEAN CHATZKY, EDITOR-AT-LARGE, MONEY MAGAZINE, AND 
             FINANCIAL EDITOR, THE TODAY SHOW, NBC

    Ms. Chatzky. Chairman Smith, Ranking Member Kohl, thank you 
so much for inviting me here to address your committee today. 
It is an honor and a privilege, in particular because you are 
discussing this morning the issue of financial security for 
women, and that carries a lot of importance to me both 
personally and professionally.
    It is quite a problem that we are talking about this 
morning. According to the 2005 Retirement Confidence Survey 
conducted for the Employee Benefit Research Institute, only 40 
percent of women have even tried to calculate the amount of 
money they will need to live in retirement.
    Of those that have, most seem to be underestimating to 
quite a strong degree their true retirement needs. Nearly 40 
percent believe that they will need less than $250,000 to live 
through retirement, a figure that works out to roughly $10,000 
annually for the 20 to 25 year period that they expect to live 
during retirement.
    Equally discouraging, just 59 percent of women are actively 
saving for retirement, which means that 41 percent are not, 
with only 36 percent contributing to a workplace retirement 
savings plan. All in all, it is not surprising that just 35 
percent of women believe that they will have enough money to 
pay for their most basic expenses in retirement, and an even 
smaller percentage, just 23 percent, believe that they will 
have enough to live on comfortably during what are supposed to 
be their golden years. When you ask what percent of women 
believe they will have enough money to fund their health care 
and long term care needs, the percentages are even more 
discouraging.
    I was asked here this morning not to simply outline this 
crisis--and I do believe it is a crisis--but to offer specific 
solutions that could help women in particular meet their 
retirement needs. What many people do not understand about 
women is that we possess innate qualities that make us 
spectacular investors of our own money once we step up to the 
plate.
    Researchers from the University of California-Davis have 
looked at the discount brokerage records of thousands of 
investors and compared those of women to those of men, and 
found that women are far less likely than men to hold a losing 
investment too long. Women don't wait to sell winning 
investments, and men do. Men are much more likely to put all, 
or at least too many of their investment eggs in one basket, 
while women are more likely to diversify. Men trade securities 
so often, it is a drag on their investment returns. Women tend 
to buy and hold to their advantage.
    When women do make investing mistakes, we learn from them. 
We are much less likely than men to repeat these sort of 
destructive behaviors more than once.
    The upshot of all of these positive behaviors is that women 
make more money on their investments than men. The problem is 
that not enough of us are actually getting into this game, and 
once we do get into the game, because we leave the workforce so 
often to care for children or older parents, our stop-and-start 
retirement funds don't grow to be as large as they might.
    A few simple changes to the way most retirement funds are 
implemented could change that dramatically. First, we need to 
change the defaults. Today, more than 20 years after the 
introduction of the 401(k), 30 percent of employees still 
choose not to sign up, and in doing so they leave $30 billion 
annually in employee matching dollars on the table.
    Why are we making this mistake? Often it is because people 
do not understand the golden opportunity before them. That is 
why I believe that investing in 401(k)'s and other defined 
contribution plans should be opt-out rather than opt-in. In 
other words, employers should be able to assume participating 
is something that employees are going to do. This will, 
research shows, boost participation rates to 90 percent, and 
force those people who do not want to participate to actively 
consider their choice.
    Second, defined contribution plan employee contributions 
should increase automatically as an employee's wage rises over 
the years. This is a fairly new mechanism that some companies 
have started to put in place. Typically, contributions start at 
3 percent and rise at a rate of 1 percentage point a year. 
Today only about 25 percent of large companies have such large 
automatic escalation clauses. They should be mandatory.
    Third, an age-appropriate portfolio should also be 
automatic. One of the problems women investors in particular 
face is a reluctance to take risks. Unfortunately, a lifetime 
of savings in low-risk, low-reward money market and bond funds 
will not provide enough retirement security for most American 
women. The default instead should be a target date retirement 
or life cycle fund that automatically adjusts the underlying 
investment mix based on a woman's self-selected retirement 
date.
    Fourth, education needs to be part of the IRA rollover 
process. I applaud the recent change that made IRA rollovers 
the default for plan balances over $1,000. However, while 
rolling over is good, rolling over and continuing to contribute 
is far better.
    Anyone rolling into an IRA should be educated on the 
opportunity that they have to continue to make retirement 
contributions into a traditional, Roth, or spousal IRA on an 
automatic basis. Making the continuation of contributions part 
of the exit interview process means that a woman leaving the 
workforce has one less cumbersome step to take. Anything that 
simplifies that process ensures greater participation.
    These four changes will go a long way to ensuring the 
retirement of women who work for mid-size to large companies 
and other organizations that offer retirement plans. However, 
this still leaves self-employed women and women who are not in 
the traditional workforce in the lurch.
    Here is what we know: Self-employment is of great appeal to 
women who want to be able to take care of their children, take 
care of their parents, and still earn a living. That 
flexibility is one key reason why women start businesses at 
twice the rate of men. We also know self-employed individuals 
are less likely to save for retirement.
    Now, I am not very schooled in the way that the government 
operates, so please forgive me if these next suggestions are a 
bit naive or reaching, but I believe there must be some way for 
the government, just like a large company, to be able to offer 
these women a default option that ensures they are putting some 
of their own money away for retirement. Yes, there are 
incentives, but the incentives aren't working. I would suggest 
that the IRS and Social Security Administration both be asked 
to consider whether either could be the funnel that drives 
additional dollars into a place where they can be saved and 
they can be grown.
    Thank you.
    [The prepared statement of Ms. Chatzky follows:]

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    The Chairman. Thank you very much.
    Cindy Hounsell.

STATEMENT OF CINDY HOUNSELL, PRESIDENT, WOMEN'S INSTITUTE FOR A 
                       SECURE RETIREMENT

    Ms. Hounsell. Chairman Smith, Senator Kohl, Senator 
Salazar, and Senator Carper, I very much appreciate the 
opportunity to be here today and thank you for holding this 
hearing.
    My testimony will briefly cover the reasons women face 
economic insecurity in retirement, and a lot of those issues 
have been brought up by the Senators already. We will offer 
recommendations for actions that policymakers, employers, and 
individuals can take to provide access to employer-sponsored 
plans, long-term care, spousal benefits, and to reduce the 
risks of losing retirement income along the life course.
    We believe this is also a crisis. The fundamental issues 
for women are that they work fewer years, earn less, live 
longer--we have heard the litany--and are likely to live alone 
in old age, which is highly correlated to poverty. While it is 
well-established that women tend to live longer, with living 
longer comes the very real prospect of living alone and needing 
care, and needing more income to obtain that care. Most older 
men will die married; most older women will die single. That is 
the story.
    Women continue to serve as the primary family caregivers. 
They take care of children, parents, in-laws. A recent study 
shows that there are 13 years of zero earnings in the 
computation of social security benefits. Providing family care 
is still not recognized in this country as an economic 
contribution.
    Women lose out, and it affects every aspect of their lives. 
Single women caring for elderly parents are likely to end up 
living in poverty. Married women are likely to end up 
impoverished after caring for a spouse. Divorce and widowhood 
is also a threat. Minority women, who work as the majority of 
the Nation's caregivers, have few benefits and will likely live 
out their lives in poverty.
    There are two important fact that are well-known, but they 
bear mentioning today: Older women living alone are much more 
likely to be poor, and that fact has not changed for decades. 
But the big problem coming along, and the issue for baby boomer 
women, is that there is going to be a major expansion of that 
group likely to live in poverty.
    The age 85 plus group is expected to double, and the 
numbers are daunting. At age 65 today there are about 6 million 
more women than men. Think of that tripling. At age 75 and 
older, 4 million more women than men. At age 85, nearly 2 
million more women than men.
    Now, everybody talks about the huge influx of women in the 
paid workforce and how it should be better in the future, but 
it is actually likely to be worse. At the same time that women 
were entering the workforce, the trend toward greater out-of-
pocket payments for health care benefits and for retirement 
savings increased.
    We have already talked about what women earn, and half of 
all women earn less than $31,000, but the figures on net worth 
tell the story. Married households had a median net worth of 
about $136,000, while households headed by single women had a 
net worth of under $30,000.
    We need to find a better way to educate people. Women, 
along with their male counterparts, tend to lack basic 
financial knowledge, and studies show that this is often the 
reason for not planning for retirement or for making serious 
financial mistakes. We hear from women all the time who thank 
us just for giving them the very basics so that they don't have 
a financial disaster.
    One of the stories I always like to tell is about Stan 
Hinden, who is a Washington Post financial reporter who says 
that the biggest mistake that he made, and he didn't 
understand, was not choosing a survivor benefit for his spouse. 
If Stan Hinden didn't know how to figure this out, people 
really need help on these issues.
    So women need the best information so that they do not make 
financial mistakes, and this information has to be targeted as 
spouses, as caregivers, and as employees. As policymakers, we 
need a vision to create new policies. As the distribution of 
wealth is so highly skewed, it is important for Congress to 
take the steps that will benefit a larger number of moderate-
income workers.
    Many of the incentives in the retirement system are not 
being utilized. The number of people who contribute the maximum 
to their 401(k)'s is barely 11 percent, and the number 
contributing to IRA's is even less.
    Social security programs should retain the income support 
figures on which low and moderate-income Americans most rely. 
Social security could also be improved by providing credits for 
years devoted to caregiving; changing divorce benefits to make 
sense for and recognize more frequent divorce; change widow's 
benefits to make sense for two-earner families.
    I won't repeat the suggestions, but I agree with the 
Saver's Tax Credit, all the things that Jean said in the 
opening statement, but we also need to encourage annuities not 
only generally but as an investment and distribution option, to 
make sure that people keep that money.
    We also need to promote incentives for older workers to 
continue working, and improve the employment training programs. 
Most of all, we need to address the spiraling health care 
costs, including the cost of long-term care, by recognizing 
that there can be no retirement security in the absence of 
health reform.
    Also, employers can make it easy and financially attractive 
for employees to get their benefits as an income guaranteed for 
life, and include a survivor option. It is important for women 
to know how to hold onto their assets, because they are much 
more likely to take a lump sum and spend it before retirement.
    Women also need to make retirement planning a priority, and 
learn as much as they can about their benefits on the job and 
their spouse's benefits, educate themselves about longevity 
risk, as this is a serious issue. Every woman we hear from who 
ends up running out of money will say the same thing: I never 
thought I would live this long. We look in our neighborhoods 
and we see people, aunts, sisters, who are living way beyond 
their expectation. Women of all ages need your help, but the 
coming generations need it most.
    Thank you very much.
    [The prepared statement of Ms. Hounsell follows:]

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    The Chairman. Thank you, Cindy.
    Barbara Kennelly.

STATEMENT OF BARBARA B. KENNELLY, PRESIDENT AND CHIEF EXECUTIVE 
  OFFICER, NATIONAL COMMITTEE TO PRESERVE SOCIAL SECURITY AND 
                            MEDICARE

    Ms. Kennelly. Thank you, Mr. Chairman. Thank you for having 
me here, Ranking Member Kohl and Senator Salazar and my dear 
friend Senator Carper. I am honored to be here this morning.
    The National Committee to Preserve Social Security and 
Medicare is a grassroots organization of 4.6 million members 
and supporters. Our mission is to advocate for issues that 
affect the quality of life for American retirees. I have 
outlined the critical role that social security plays in our 
retirement, especially for women, in my written testimony. This 
morning I would like to focus on seniors and employment.
    As you know, we hear it constantly, we stand on the eve of 
the baby boomer retirements. According to the Census Bureau, 
almost 8,000 people a day will turn age 60 just through 2006. 
As we live longer and healthier lives, many workers expect to 
continue working well into their retirement years.
    Surveys, including one just released by AARP, show that 
more than two-thirds of today's older workers and 80 percent of 
baby boomers plan to work in retirement, yet a report released 
by the Census Bureau just last week shows that the reality is 
quite different. While nearly half of all men over age 65 were 
working in the 1950's, that number has dropped to one in five 
in 2003. Only 10 percent of women have kept working after 65, 
and that has been consistent over the last two decades.
    Nationwide, over 40 percent of the United States workforce 
will be eligible to retire over the next 5 years, and over one-
half of employers believe this will lead to a workforce 
shortage, yet only 14 percent of employers have any kind of 
formal program to retrain or attract older workers. Although 
employers understand the value of a stable and experienced 
workforce, the cost of employing older workers is a pervasive 
concern. Not only do they have higher salaries because of their 
long service with the employer, but the cost of their health 
care and pension benefits is also higher than that of younger 
workers.
    On the employee side, assuming the worker is healthy and 
financially secure enough to have a choice, the top three 
priorities for older workers are health care coverage, 
continued participation in the retirement system, and the 
ability to strike a balance between work and home. As you can 
see, some of the same items employers find most burdensome are 
the employees' highest priorities. Unless this conflict is 
resolved, I believe the clash between older workers' 
expectations and reality will continue.
    That is why I find the proposals such as Senator Kohl's 
Older Worker Opportunity Act extremely helpful. The centerpiece 
of his bill acknowledges the desire of older workers to have a 
better balance between work and home by providing a tax benefit 
for employers who allow them to work part time, and he 
addresses the concerns of both parties by helping subsidize the 
cost of allowing these older workers to continue receiving 
health care benefits and participate in company pension plans. 
By addressing the concerns of both parties to the employment 
equation, I believe this bill could help pave the way for 
significant increases in older worker employment.
    Another provision in the bill which I know you have worked 
on, Mr. Chairman, is the creation of an interagency task force 
to review impediments to keeping older workers employed. This 
provision is a critical first step toward identifying the legal 
and administrative road blocks to senior employment. It is the 
pension bill currently in conference, and I certainly hope that 
it is retained.
    Mr. Chairman, as our society ages, the need to keep older 
workers employed will become a much higher priority for both 
workers and employees. Unless we can significantly increase the 
resources women have when they retire, they need to continue to 
keep working or we can reach a crisis.
    Now is the time to explore the impediments for senior 
employment and begin removing them. This hearing is, in and of 
itself, an important step in highlighting the problem, and I 
believe the bills such as the Older Worker Opportunity Act are 
good first steps toward achieving that goal.
    I was in Congress from 1982 to 1998, and we looked at many 
of these issues starting back then. But, as you know, in 1983 
we also were faced with a crisis in Social Security which we 
solved for decades. As a result of that effort, it is the only 
program that has a surplus right now. The challenges of an 
aging society are not new. Some of these things, Senator Kohl 
and Senator Smith, that you are talking about, I worked on 
years ago.
    We did raise the retirement age as part of our solution. I 
have a daughter that was born in 1960. She won't get her social 
security until age 67. But we cannot continue to raise the 
retirement age indefinitely. What we need to do is address the 
fact, and I am Exhibit A, that older women can continue to 
work, but we have to make sure that the laws provide protection 
and the ability to keep working.
    [The prepared statement of Ms. Kennelly follows:]

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    The Chairman. Thank you so much. That was excellent.
    Jack VanDerhei.

   STATEMENT OF JACK VanDERHEI, RESEARCH DIRECTOR, EMPLOYEE 
           BENEFIT RESEARCH INSTITUTE FELLOWS PROGRAM

    Mr. VanDerhei. Mr. Chairman, Ranking Member Kohl, members 
of the committee, thank you for inviting me to testify today. I 
have been asked to discuss gender disparity with respect to 
employer retirement plans and social security.
    Most of the points that I had made in my written testimony 
with respect to those who have already retired, have already 
been made by previous comments by the Senators this morning. So 
if you don't mind, I will just skip ahead to gender disparities 
in retirement program participation among current workers.
    Although there is certainly a substantial amount of gender 
disparity among those already age 65 with respect to those 
receiving pension income, as has been mentioned earlier, it 
appears that this disparity will decrease sharply and for some 
worker types actually reverse. For example, in 1987, 40.7 
percent of female wage and salary workers ages 21 to 64 
participated in an employment-based retirement plan, compared 
with 51 percent by males, but by 2004 that gap had decreased 
from 10.3 percentage points down to only 3.7 percentage points.
    But if you look at where most of the retirement income is 
probably going to come from in the future, 401(k) plans, there 
are still many gender disparities. For example, there is a 
higher participation rate among those that are eligible. Males 
tend to participate 5.2 percentage points more than females. 
When they do contribute, they contribute a larger percentage of 
their compensation, .4 percent of compensation more for males 
than females, but by and large these differences are explained 
by income disparities among the genders.
    While all the previous material documented all these 
different component parts of the accumulation process while you 
are still working, working toward retirement income, I would 
submit that the real question from a public policy perspective 
should be whether both current and future retirees will be able 
to afford an adequate standard of living in retirement, which 
reflects many of the previous comments.
    EBRI's unique analysis models what percentage of retirees 
will have sufficient retirement income wealth to pay for a 
basket of non-luxury goods. We are not talking about replacing 
a particular portion of your pre-retirement income. We are 
talking about expenses that the elderly incur from a basic need 
or want of daily life, in addition to those that are 
exclusively health-related events, such as admission to a 
nursing care home, that are going to occur occasionally if ever 
for many retirees.
    So if I could turn your attention to Figure 8 on the chart, 
you will see a large number of percentages for various birth 
cohorts.
    The Chairman. I'm sorry. What is Figure 8?
    Mr. VanDerhei. Figure 8, are you able to see? Figure 8 is 
referring to the overall percentages of compensation that 
individuals are going to need to save while they are working, 
to be able to afford adequate retirement income for basic 
expenses in retirement, plus potential health care expenses, 75 
percent of the time.
    The point that we are trying to make here is that these are 
percentages of compensation that individuals would need to save 
every year from now until the time they actually retire. Even 
more importantly, this is compensation they would need to save 
in addition to what they are already putting away in 401(k) 
plans, to what employers are already putting away on their 
behalf in 401(k), if they have defined benefit, and the social 
security income under status quo.
    There are four very important points to take away from this 
analysis. First, the median individuals in these graphs that 
are on the verge of retirement, so people who are on the left-
hand side of that graph, have little chance of saving a 
sufficient amount of money to achieve this definition of 
retirement security unless they are very high- income, unless 
they are in the highest 25 percent.
    But, second, the results improve substantially for most 
groups as you move to the right of the chart, to the younger 
birth cohorts, because obviously the longer you are able to 
accumulate these monies, the more you are going to have for 
retirement.
    Third, for each age group, the higher income individuals 
need to save a significantly lower percentage of their income 
for retirement security. Again, this is because we are dealing 
with retirement security, not simply a specific replacement 
ratio target.
    But probably most importantly for today's hearing, for 
every age/income quartile that is displayed in those graphs, 
single females would have to contribute significantly more than 
single males to achieve the same level of retirement security. 
Oftentimes that is going to be due to such things as already 
mentioned: increasing longevity for females, and the fact that 
overall they tend to earn less than males during their working 
careers.
    Now, if that is not depressing enough, Figure 9, which is 
the same type of analysis, but instead of focusing on just 
having enough retirement income such that three chances out of 
four, you will have enough income during your retirement, this 
increases it up to 9 chances out of 10. As you will see, all 
the various contribution rates that would be required for the 
individuals are going to increase.
    In conclusion, I would just like to turn to the last 
figure, which is highlighting analysis which we just completed 
last week for EBRI to try and deal with the whole concept of 
pension freezes. As I am sure you are aware, many large 
corporations within the last few months have terminated their 
defined benefit plans and substituted in their place 401(k) 
plans.
    What we have done at EBRI is go back and simulate, for all 
defined benefit participants currently holding these plans, 
what would need to be contributed on an annual basis as a 
percentage of their compensation to actually financially 
indemnify them for the pensions that they would otherwise have 
received.
    We have broken it down by two different types of plans that 
you may be familiar with, career average plans and final 
average plans. Final average plans tend to look at only the 
last few years of compensation you have with an employer; 
career average is spread over the entire time that you are with 
the employer. We have done two different types of rates of 
return. On the left-hand side you have 4 percent; on the right-
hand side you have 8 percent.
    The point being, there are substantial amounts of 
additional compensation that would need to be contributed, 
whether from the employer, whether from a combination of 
employer and employee, to indemnify them for the benefits that 
they are no longer going to be accruing under the defined 
benefit plans. The one good news, though, is that because 
females do have a tendency to have lower tenure with an 
employer, they do tend to lose less as a result of these 
pension freezes. In fact, in every one of the cases we have 
simulated, at least the amounts that they are going to have to 
contribute will be slightly less.
    So I appreciate the opportunity to share this information 
with the committee, and look forward to assisting you in your 
important role with additional research in the future.
    [The prepared statement of Mr. VanDerhei follows:]

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    The Chairman. Jack, I guess we all chuckle that you are 
finding a silver lining in that black cloud. The point is well 
taken, but it is tragic that the black cloud is there.
    First of all, we really appreciate the very insightful 
testimony each of you have given. But probably all of us in our 
lives have had a relative who is in a worst case circumstance.
    I am thinking specifically of a sister-in-law who was 
married for 20 years and had three children. Her husband was an 
independent contractor selling insurance and securities. I 
think she often just did clerical work, and I don't think any 
withholdings were ever made for her. The marriage broke up. She 
is now in another relationship--a part-time bus driver. I 
doubt, as she enters her 50's, she is in any way vested in 
Social Security or in a pension. To Barbara's point, we have 
got to do whatever we can to change the law so she can keep 
working, because she just has no other prospects.
    Jean, you talked about an idea you thought might be 
overreaching. I wonder if you can expand on your ideas of what 
we ought to do and how a woman like her might fit into those?
    Ms. Chatzky. I don't have a very good grasp of what the 
mechanism would be. I am focused a little more on the end 
result.
    What we know about people and saving and the fact that we 
have such a dismal savings rate right now in this country, is 
that if you can manage to get the money out of people's hands 
before they have the opportunity to spend it, that is a good 
thing. Even small amounts of money, if they are withdrawn 
automatically or if they are deducted from paychecks 
automatically, or moved out of a checking account into a 
savings account automatically, all of those mechanisms actually 
work to help people put something away for the future.
    So in trying to come up with a solution for people who are 
not in corporations or other employment situations that would 
help them save something for the future, I just sort of started 
thinking about the IRS and Social Security and other 
organizations that do have a hand in the pot already. If there 
were any way, as political contributions are sometimes taken 
out of tax filings, to enable people to just check a box and 
put something small away for the future, it may motivate them 
to help them save something more in years to come.
    The Chairman. That is a good idea. Maybe we will add it to 
the bill. Because, I despair for this woman, and I know too 
many like her in rural places--that just utterly are unprepared 
for being alone and having any income.
    Ms. Chatzky. Right, and people don't think that they can 
save until they actually try it, until they actually accomplish 
it. Then they think that they can do a little more, but it is a 
little like a diet. You need to sort of see those initial 
results before you feel that you are actually able to tackle 
the next five pounds.
    The Chairman. Yes. Senator Kohl?
    Senator Kohl. Thank you very much, Ms. Kennelly. I 
appreciate very much your support of the legislation that I 
have introduced with Senators Cochran and Durbin, called, as 
you know, the Older Worker Opportunity Act, which would help 
older Americans work longer if they choose and remove barriers 
that make it harder for them to do so.
    You noted in your testimony the importance of work as the 
new fourth leg of today's retirement stool. Could you elaborate 
just a little more on why you think expanded work opportunities 
are particularly important for older women?
    Ms. Kennelly. Well, I think, Senator, as I said in my 
testimony, we are living longer, but fortunately many of us are 
living healthier lives, so that we can work beyond the age we 
used to work at. When I hear cases like the one you mentioned 
Senator Smith, I feel terrible. But you need to know that is an 
unusual case. Most people who have worked are covered by Social 
Security because they pay throughout their working lives. Yours 
is an unfortunate and very rare case.
    But the fact of the matter is, while social security is 
extremely important to women, it's not perfect. It is a very 
moderate program, and if you are living on social security 
alone you are not living a huge wonderful life. You are living 
on the basics.
    So women want to work longer, but it's hard to because of 
the barriers. For example, we have laws that say if you retire 
from a particular company and you want to stay at that company 
part time, you can't be part of the pension plan. You have to 
get out of that company. In your bill I think you address this, 
that we can have part-time work and have benefits.
    Another thing I love about your bill is that you include 
tax incentives to encourage companies to offer benefits for 
health care and benefits for retirement so we're be able to 
keep the older person working. As we see in all the studies, 
people who are 65 and older, they want to work but they don't 
want to work full time. Let me tell you something, women have 
to work.
    So if your bill was to become legislation, employers would 
be much more willing to keep people on part time, and that is a 
big, big advantage for an older worker. Not everybody, as they 
get older, can work full time.
    Senator Kohl. Thank you very much.
    Cindy Hounsell, in your testimony you recommend encouraging 
annuities in defined contribution plans, expanding the Saver's 
Credit, and promoting incentives for older workers to continue 
working. For any or all three of these recommendations, could 
you elaborate on what proposals seem promising to you?
    Ms. Hounsell. You mean existing proposals or--well, I think 
there are a number of bills out there that actually provide tax 
incentives for people to purchase annuities. I think one of the 
problems is that people just don't understand how annuities 
work.
    You know, we see that, that every time there is a lump sum 
opportunity, people just take that money because they think 
they need it in their hands, and then as soon as they get it, 
they don't know what to do with it. They are either looking for 
somebody else to manage it or where to put it. So I think, you 
know, having it become an option that people have on the job, 
and get some education from employers, is crucial.
    I mean, I would just like to add to what Jean said. 
Recently I was talking to someone and they said, ``You know, 
what we need is a campaign, because in the 1980's when the 
first IRAs were deductible for everyone, if you can remember 
those times, I myself, personally I would have never started an 
IRA, but everybody was talking about it.'' ``You've got to do 
this. You've got to do this.'' ``I don't have $2,000.'' ``Well, 
you have to put something in.''
    We need something like that right now, to get so that 
everybody is talking about you have to do this, even if it is 
only for a year. We just need something to get people talking 
about how to do it.
    Senator Kohl. Thank you. Thank you, Mr. Chairman. This was 
a very good panel.
    The Chairman. Let me thank you as well. You have each 
contributed to our understanding, and highlighted many of the 
things Senator Kohl and I are trying to do in different bills 
that will help improve the situation. Your testimony, and 
obviously C-SPAN covering it, is important and we hope that 
your wise counsel will encourage more provident living and 
people making choices in their lives that will provide for 
their retirement and not their poverty. So thank you so very 
much, and with that we will call up our next panel.
    Ms. Kennelly. Senator Smith and Senator Kohl, we thank you, 
because we can't do it. You can.
    The Chairman. Well, you helped us do it.
    Our next panel will consist of three women: Ms. Karyne 
Jones, who is president and chief executive officer of the 
National Caucus and Center on Black Aged, Inc. Ms. Jones' 
testimony will focus on the challenges minority women face 
preparing for retirement.
    Then Ms. Sara Hart, the director of Corporate Benefits at 
CNF Service Company in Portland, OR, and as my constituent I 
doubly welcome you here. Ms. Hart will discuss the role that 
employers play in helping women prepare for retirement.
    Ms. Lynn Rollins is a senior advisor on Women's Issues to 
New York Governor Pataki. Ms. Rollins will discuss her personal 
story of widowhood and the challenges she has faced.
    We thank each of you for being here. Karyne, the microphone 
is yours.

   STATEMENT OF KARYNE JONES, PRESIDENT AND CHIEF EXECUTIVE 
  OFFICER, THE NATIONAL CAUCUS AND CENTER ON BLACK AGED, INC.

    Ms. Jones. Thank you very much, Senator. Senators, it is a 
pleasure for me to be here. The National Caucus and Center on 
Black Aged is pleased to testify before this committee on the 
special challenges of women preparing for financial security in 
retirement. NCBA has a 36-year history of focusing our efforts 
on improving the quality of life for elderly, low-income 
minorities in this country.
    Retirement planning is important for everyone, but it is 
especially important and challenging for minority women. 
Minority women are less likely to work in jobs covered by 
pensions. Only 15 percent of black and 8 percent of Hispanic 
older women received pension incomes in 2000. For those working 
today, 38 percent of black women, 26 percent of Hispanic women, 
and 38 percent of Asian/Pacific Islander women are covered by a 
pension plan. This rate drops sharply when looking at part-time 
workers: 11 percent of black women, 7 percent of Hispanic, and 
10 percent of Asian/Pacific Islander women are covered in 
pension plans.
    Despite the overall decline in poverty rates among older 
Americans during the last several decades, many older women 
remain poor. Approximately 12.4 percent of women age 65 and 
older are poor, compared to 7 percent of men in this age group, 
and the likelihood of a woman being poor in retirement 
increases with age.
    The poverty rate for single black women over the age of 65 
is 41.5 percent, and for a single Hispanic woman it is 49.2 
percent. twice the rate of white women. The reality is that 
many women rely on social security as their primary source of 
income for their retirement. In fact, social security is the 
only source of retirement income for 45 percent of unmarried 
black women and 46 percent of unmarried Hispanic women over the 
age of 65. The problem is that social security is not designed 
to be the retiree's sole source of income, but instead was 
meant to provide only a bare minimum of protection.
    We understand the current push for Americans to save. 
However, women's lower earnings often leave them with few 
resources to invest. Women usually have little or no money left 
to save for retirement after paying their bills. Furthermore, 
the current generation of elderly women of all races has little 
in the way of savings and investment for their retirement. In 
fact, half of all unmarried older women have less than $1,278 a 
year in asset income, which is only about $106 a month.
    Now, it is our hope that women would in fact start to save 
money, because on an average they live about 4 years longer 
than men. Therefore, they will need more money to support 
themselves. However, older women are also more likely to have 
higher expenses for health care and prescription drugs.
    Unfortunately, women average lower earnings and spend more 
time out of the workforce for caregiving, which all of our 
previous panelists have mentioned. In return, this makes it 
more difficult for women to save the amounts needed for 
retirement, much less have the resources to make later 
contributions.
    Experts are projecting that by the year 2050 there will be 
at least five times more minority women and men ages 65 and 
older, and about 13 times more who are aged 85 and older. 
Minority populations are also living longer, and minority women 
will comprise larger percentages of older populations in the 
years ahead.
    Minority women with limited work histories or who have 
lived on the margin economically, the retirement picture looks 
particularly bleak. For example, minority women who might have 
worked in domestic capacities or were day laborers probably did 
not earn enough money to contribute to a personal savings 
account and certainly did not have a pension plan.
    Women overall have made many financial improvements over 
the past 25 years, and some are finding reason for optimism, 
but a recent survey of African American women on behalf of the 
Fannie Mae Foundation suggests that while half of African 
American women are struggling to make ends meet, they are 
optimistic that their financial situation will improve over the 
next year.
    Younger minority women who spend many more years in the 
workforce and in higher-paid jobs will most likely be able to 
save and plan for a financially secure old age. Most women, 
though, regardless of race or ethnicity, will need to plan 
carefully in order to deal with the risk of outliving their 
assets, and to manage carefully to cover the high cost of 
health care and longer life spans.
    NCBA has focused our attention on educating young people on 
preparing old age in hopes of addressing these concerns. One of 
the things that I always say to young people when I speak to 
them is that aging is not just old people; aging is all of us 
if we are blessed with a long life.
    The harsh reality remains that as long as most minority 
women earn less money than other women and men and have fewer 
opportunities to save, they will have less retirement income 
and face the highest risk of poverty in old age. Some of the 
suggestions that we would like to give you--and we also commend 
the bill that you are working on, Senator Kohl, and the efforts 
that you have made, Senator--many improvements can be made by 
policymakers to provide low-income minority women with greater 
retirement security.
    Some of the pension reform proposals currently under 
consideration by lawmakers that could enhance women's 
retirement security include increasing pension coverage for 
lower-wage, part-time, and temporary workers; increasing 
survivor benefits; making pension division upon divorce more 
equitable for women; and giving women credit for caregiving.
    As society, we have an obligation to provide older women 
with the opportunity to live out their later years with 
adequate resources that will lead to a dignified retirement. 
However, as long as most minority women earn less money than 
other women and men and have fewer opportunities to save, they 
will have less retirement income and face the highest risk of 
poverty in their old age.
    I thank you for this opportunity, and we hope that we can 
work together on this very, very important issue.
    [The prepared statement of Ms. Jones follows:]

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    The Chairman. Thank you, Karyne. Just a question that is on 
my mind, so I don't forget it in my old age. You talk about how 
pensions are divided at divorce? Generally, what would the 
split be? Are women getting less than half?
    Ms. Jones. In most cases. I don't have my statistics right 
in front of me, but I am a victim of that. I was married for 25 
years and didn't work for about 15 of those, and so I am in a 
catch-up phase. When we did go for a divorce, he had done some 
other things with the retirement and they hadn't gotten my 
permission, and when they did divide it up, he ended up getting 
more than I did.
    Fortunately, I am able to work, and I am able to still be 
able to take care of myself, and I am playing catch-up right 
now, and I am worried about my financial security. But to take 
it away from the personal attention on me, for the women that I 
represent with my organization, they don't even have the 
benefit of that. Usually they just want to get out of the 
marriage for whatever reason.
    The Chairman. There may not even be a pension to split.
    Ms. Jones. There might not even be a pension to split.
    The Chairman. But to the degree there is, do you think 
courts are mindful of this issue?
    Ms. Jones. I would hope that we could look very carefully 
at the laws to determine that there is--I know in the military 
they are very, you know, judicial in that fashion. But I have 
to check. I don't want to make a statement on the record that--
--
    The Chairman. No, your comment just raises a question. 
Although divorce is governed by State law, maybe we need to put 
in some directives as it relates to some of the Federal 
matters. Perhaps there is something we could do.
    Ms. Jones. Well, I have got a lot of upset friends who have 
been through this process, and they don't feel they got a fair 
shake.
    The Chairman. I understand.
    Sara, thanks for coming all the way from Oregon.

STATEMENT OF SARA COLE HART, DIRECTOR, CORPORATE BENEFITS, CNF 
                        SERVICES COMPANY

    Ms. Hart. Thank you very much, Senator Smith and Ranking 
Member Kohl. Sheridan, OR, to be precise, a small town. I 
appreciate the opportunity to discuss the important issue of 
the special challenges of retirement facing women.
    Some of the testimony from the Senators and from the other 
presenters has been very powerful, and I don't want to take up 
this time to go over some of the issues that we all pretty much 
concur on: that women live longer; they are subject to greater 
risk in retirement; they have interrupted, noncontiguous work; 
by living longer, they are more subject to the risk of losing 
their earnings to inflation; and particularly the risk of 
higher medical bills, long-term care issues, and the issue of 
not being able to live independently.
    We think that the power of government taking action to 
establish a national retirement policy, partnered with private 
employers, can change millions of lives. I want to spend a few 
minutes talking about the recommendations that we have from the 
employer side to help women and other retirees throughout their 
career and through the retirement process.
    First and foremost from where we stand is to support and 
encourage education, including a financial curriculum, as early 
as primary school. In order for employers to grow the economy 
and achieve optimal productivity, employers must have an 
available resource of educated, talented individuals. 
Addressing the retirement issues facing women must begin as 
early as possible in order to mitigate the lost opportunities 
by the lack of a strong education.
    We encourage that the EGTRRA pension retirement savings 
provisions be made permanent, permitting Americans to save more 
in employer plans and in IRAs. EGTRRA provides significant 
administrative relief to employers who sponsor plans and 
enhances the portability among the various plans.
    Women are particularly benefited by the Saver's Credit, 
which assists low-income savers, and also by the catch-up 
contributions that permit older workers to save more. This is, 
of course, if those individuals have the money to save in the 
retirement plans.
    Federal income tax code discourages saving. Savings 
opportunities must be simplified and incentivized for savings 
to be established. Employers are particularly constrained by 
cumbersome pension and benefit regulations imposed by the IRC, 
ERISA--the erosion of ERISA protection--and the ADEA. Employers 
need flexibility in age and service eligibility to maintain 
retirement benefits.
    Women covered by employer plans will benefit from the 
transition from defined benefit to defined contribution plans 
because the structure of a defined contribution plan supports 
savings accumulation in earlier years of employment and 
generally will vest earlier. We urge Congress to promote the 
establishment of a 401(k) type benefit at a Federal level or at 
least simplify the various 401(k) type plans to make it easier 
for employers to sponsor those plans.
    Additionally, there are several proposals in play right now 
that could have the potential to undermine the chance of 
individuals achieving a successful retirement. To balance these 
proposals, we urge the following:
    We urge Congress to help employers and individuals attain 
some kind of annuity which assists in the protection of income 
during one's lifetime. Lump sum payments often jeopardize 
income security, especially for women who live longer.
    Second, we urge you not to support proposals that make it 
easier for active employees to take money out of their 
retirement savings programs for any reason. Employees have 
historically understood that defined benefit plan accumulations 
were not available for pre-retirement expenses. Defined 
contribution assets should be treated the same way.
    We also encourage the Senate not to adopt the House-
sponsored benefit for distributing retirement income to 
military reservists, as this is a short-term proposition that 
could have long-term, significant negative effects for our 
military personnel.
    We urge you to strengthen rules permitting a rollover from 
an employer-sponsored plan to an eligible IRA or other 
qualified retirement plan, and increase disincentives for 
taking distributions prior to retirement.
    Early on, when 401(k) plans were established, defined 
benefit plans were the rule, and it was deemed necessary for 
employers to offer loans, hardship withdrawals, and other 
withdrawals to encourage participation in a 401(k) plan. Now, 
with the transition to defined contribution plans as a primary 
retirement savings vehicle offered by employers, and the 
prevalence of the defined contribution plans, we must curtail 
loans, withdrawals, hardship withdrawals, and other mechanisms 
that allow people to borrow against their retirement savings. 
Curtailment of these types of withdrawals is crucial, and 
education about the adverse effects of early withdrawals is 
essential.
    We urge support of the auto enrollment process and auto 
increases in a 401(k) plan, encourage and support establishing 
a safe harbor for employers that provide those automatic 
benefits.
    Employers need 404(c) relief. We urge the DOL to affirm 
permissible asset classes and investment types for default 
investments in the 401(k) plans.
    Employers need a fiduciary safe harbor for employers who 
select qualified independent investment advisors to assist 
workers. Education, and particularly financial education, is 
extremely important for an individual to be able to accumulate 
retirement savings. Tax advice and investment advice is 
invaluable.
    We also encourage promotion of changes to ERISA, the tax 
code and the labor code that simplify and permit more 
flexibility. There are so many required notices that even 
participants don't pay attention, and many of the required 
notices are no longer either important or applicable.
    We support expanded benefit statements and the DOL web site 
for retirement planning, and encourage simplified 5500 and 
other Federal reporting.
    Employers recognize that the defined benefit system is in 
serious financial trouble and jeopardizes the pension benefits 
for millions of people. The PBGC obviously has a substantial 
deficit. However, the concept of insurance in the PBGC is truly 
broken, and the few DB plan sponsors that are left among 
employers are required to pay higher premiums, submit to 
substantial administrative, accounting, reporting and funding 
changes that make it much more difficult to sponsor a defined 
benefit plan. The increased volatility produced by the 
combination of reduced smoothing and elimination or restriction 
of credit balances are further disincentives for employers to 
continue to sponsor DB plans.
    Employers would like to see a resolution in the social 
security funding issues. Benefits sponsored by employers as a 
share of workers' earnings are expected to decline. Medicare 
premiums, which are subtracted from social security benefits, 
as we know, have already begun to be means tested. That is 
rolling out next year. Social security benefits could be 
further reduced or have a risk of being further reduced to 
solve short-term funding crises.
    We urge elimination of the rules and incentives that 
discourage employees from continuing to work beyond retirement 
age. The current social security system contains many benefits 
that must be maintained and strengthened, including the full 
cost-of-living adjustments, guaranteed lifetime benefits, a 
progressive benefit formula, and spousal, disability, and 
widow's benefits. Social security improvements must maintain 
these guaranteed benefits and consider them equity of pension 
benefits and retirement security for women.
    We also support social security credits for time spent as a 
non-paid caregiver, and we propose that this could be funded by 
means testing for wealthier retirees. Consider a type of 
retirement account open to people without earned income so that 
caregivers could hold something in their own names.
    We encourage the implementation of phased retirement 
programs, and particularly Senator Kohl's proposals. Currently 
retirement programs, defined benefit programs, defined 
contribution programs, do not allow an individual to take down 
or draw down their pension plan while they are working for 
their current employer, so this is a talent drain for 
employers. In addition, what it really forces employees to do 
is go work for somebody else when they want to use phased 
retirement, if they need to get part of their retirement 
income.
    Recognize that the traditional concept of retirement is 
changing from the work, save, and retire model and being 
replaced by a life style change. Gradual transition keeps 
talent in the workforce and helps employers retain productive, 
educated workers while they are transitioning to retirement 
with lower hours and reduced responsibility. Seasoned employees 
want to continue to make a difference. We support regulations 
that eliminate the confusion and allow for the establishment of 
phased retirement.
    Employers are also looking to Congress to affirm 
established precedent in hybrid plans, as well as settle the 
issues surrounding hybrid plans on a prospective basis.
    Women face special challenges in finding a new job, a 
career, an employment path, and maintaining a place in the 
workforce to become economically self-sufficient. Congress must 
support maximization of ongoing training opportunities that 
balance the retirement of a modern workforce with the income, 
civic, family and social needs of individuals. Tax incentives 
for employers to hire and train women returning to the 
workforce are undoubtedly a win-win cause and a solution to the 
under-utilization of women's talent.
    Today, with so much attention focused on the issue of 
retirement and pension reform, we have a meaningful and 
powerful opportunity to strengthen, not strangle, employer-
sponsored retirement systems, thereby offering stability to 
women and other workers.
    Thank you for having me today.
    [The prepared statement of Ms. Hart follows:]

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    The Chairman. Thank you, Sara. Those are many excellent 
ideas, some of which we have in our bills, and maybe some we 
ought to add to them.
    Lynn Rollins.

STATEMENT OF LYNN ROLLINS, SENIOR ADVISOR FOR WOMEN'S ISSUES TO 
                    NEW YORK GOVERNOR PATAKI

    Ms. Rollins. Do I recommend legislation to keep men alive 
longer first or last?
    Mr. Chairman and Ranking Member Kohl, thank you very much 
for inviting me to testify. I am one of the many faces of 
widowhood. I always did what I was told to do.
    I grew up, I got good grades. When I asked my father for 
guidance in college, he said to major in what I loved. My 
purpose in being there was to be a well-educated housewife. I 
married. I wasn't too old. I produced beautiful and healthy 
children, one of each sex. I did not fight with my mother-in-
law.
    My first job in New York City was as a computer programmer 
and then I became a systems analyst. I was capable of taking 
care of myself. I gave up working when my first child was born, 
and I then moved cross-country four times and did five kitchens 
from scratch. During this time I accumulated 13 years of zeros 
in my social security average.
    When I was 44 and my husband was 47, he was diagnosed with 
cancer and I was told he had 2 weeks to live. At that point we 
had one child about to go to college and one in high school. I 
lived in an affluent community in Westchester County, and my 
husband had $125,000 worth of life insurance. He was a marathon 
runner and he had not thought about mortality.
    We were very lucky. He lived almost 4 years, and though our 
savings were depleted by the end of those years, the company he 
worked for changed insurance carriers during that time and he 
had a one-time opportunity, without a physical, to buy more 
life insurance. In addition, the company he worked for did not 
put him on disability for over 3 years.
    Two years after his death, with my children's permission, I 
moved into New York City and because I was lonely, I went back 
to school. I took financial planning courses and ended up 
taking the national exam to become a Certified Financial 
Planner. As I was taking these classes, I was horrified, one, 
that I wasn't left a multimillionaire and, two, that I looked 
back at some of our mistakes. I want to note that my husband 
was an Ivy League graduate and he was fiscally very 
conservative. He didn't know any more than I knew.
    What were a few of our worst mistakes? Well, we lived in 
Texas during the oil crisis, when property values were falling 
1\1/2\ percent per month. So when we had to move back East, in 
order to buy a house for us my husband cashed in his 401(k). I 
remember writing a check to the government for $125,000 worth 
of taxes, but I had no idea what I had just done. We didn't 
know that if you pay your own disability premium, the money 
comes to you tax-free. I now know that more people need 
disability during their lifetime than life insurance.
    We clearly had no idea about the adequate amount of life 
insurance. One woman I know whose husband dropped dead on the 
golf course was told by her husband's lawyers to take her life 
insurance money and flee to Florida. She had signed a loan 
against her home for her husband to invest in a business, and 
because her name was on the loan, his life insurance belonged 
to the bank that held the note. What wife would not have signed 
that note, unaware as we would have been of the consequences?
    In addition, my husband worked for an investment bank for 
10 years. He had an annuity with them that they made me take as 
if he had taken it when he turned 55. My widow's half for these 
10 years of his work is a taxable $168.31 a month. I did 
receive a $250 death benefit from social security and nothing 
more, because my youngest child had just turned 18.
    I had many part-time jobs over the years, but it was a 
completely different world trying to go back into the 
workforce. Computers had changed in 20 years. But in that area 
I have been most fortunate. I have been working for Governor 
George Pataki for 11 years on women's issues, and it has been 
extraordinarily rewarding.
    I now have interns who work for me during the summers or 
school year, who get financial planning immediately. One of 
them told me recently that she had used information I had 
taught her in a talk she gave in her college class. She said 
the teacher commented that she wished someone had given her 
that information at an early age. I had another intern who left 
her business card and a big note for me on my desk that said, 
``I have a Roth IRA and a 401(k). Hurrah!'' I don't know that I 
would have made different life decisions, but with more 
knowledge like the financial education program that WISER 
gives, my husband and I would have been better able to plan for 
our family's future. The point is, I didn't understand the 
decisions I was making, and more importantly, not making.
    I suppose I could say I would have been well taken care of 
if life hadn't taken an unexpected turn, but unexpected seems 
to be more of the norm than not. Has my standard of living 
changed? May I just say that I am not making today what my 
husband was making 25 years ago.
    I was married 26 years and I have been a widow already for 
14, and I have decades more to go. The average age of widowhood 
in this country is 56, and though I was younger than that, I am 
only one of thousands of widows who are facing a retirement for 
which they did not prepare.
    On a lighter note I want to end that when you really get 
passionate about this, which I am, and you start talking to 
your children about it, and the first question you ask them 
when they tell you about a significant other is, ``Are they 
funding their IRA?'' you will get very strange looks sometimes. 
[Laughter.]
    I was actually very interested to know whether Senator 
Salazar was funding his 18-year-old daughter's IRA, because she 
is old enough to start.
    Thank you very much.
    [The prepared statement of Ms. Rollins follows:]

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    The Chairman. Thank you, Lynn. Yours is both a sad story 
but also very helpful because of what you have done with your 
life's choices.
    Ms. Rollins. Thank you.
    The Chairman. I just hope that every woman in America could 
hear what you just said. Do you have a sense of when public 
schools ought to be teaching these provident living principles? 
I mean, several witnesses have commented, I think, that our 
economic literacy is just appalling.
    Ms. Rollins. Well, you know, it is interesting because 
there are I think like 9 million high school students in this 
country, and of those 9 million, 500,000 drop out of school 
every year. So if you really want to teach everybody just a 
little bit about it, you clearly need to start it either in 
middle school, elementary school, or certainly before high 
school is finished, because otherwise there is a whole group of 
people who are probably going to be on the lower income level, 
who aren't going to have any knowledge of it at all.
    My experience has also shown--and I have lots of 
anecdotes--that men don't know anything more than women. It is 
just that they don't live as long and they make more money. So 
they need to be educated, too, and I would say you need to get 
everybody really early.
    The Chairman. I know you are not in the public school 
system in New York, but working with the Governor and as a 
financial planner concerned with women's issues, are you aware 
of whether New York is doing anything on this in the 
curriculum?
    Ms. Rollins. I actually know that there is a Council on 
Economic Education that Robert Duvall is in charge of, that is 
trying to get economics taught in all of the high schools in 
the United States, and they have curriculum. It is there.
    There is also a economist in the Buffalo area who went to 
the local school board and said, ``I'd like to do this program. 
It's not going to cost you anything.'' He put it on the 
internet. He paid teachers like $125 to come for training, and 
then all the teachers said to the students is, ``This is going 
to count toward 20 percent of your grade.'' So they all went on 
the internet and they went through this class that he had. So 
it didn't cost the school system anything, and he actually got 
funding to pay for the teachers to go for training.
    So the curriculum is out there for people to be taught, and 
there are actually a lot of States that are beginning to 
require economics to be taught. I am not positive how much 
financial planning is in that, but it certainly is a 
possibility to get it. It is available. The curriculum is 
available lots of places.
    The Chairman. Just an observation from my own family life. 
My daughter did reasonably well in school, and she is now a 
junior at Brigham Young University. She recently commented to 
me that, ``You know, I took algebra all those years, and 
calculus and some other things.'' She just recently got married 
and she said, ``It doesn't mean anything to me now.''
    I mean, I know it is good to learn for the sake of 
learning, but what she was saying is, ``I wish I had had a 
class in just finance for daily life or business math, how to 
calculate interest, how to understand these policies that are 
coming in, and what compounding interest, means and what is 
good and what isn't good.'' I just think our Nation ought to 
look at some fundamentals, and not denigrating these other math 
courses, but how about just basic business math?
    Ms. Rollins. Well, and you might say that parents ought to 
be teaching their children.
    The Chairman. Maybe the parents don't know.
    Ms. Rollins. But the parents don't know it either. 
Sometimes I get interns, and I had one whose father is really 
pretty famous, and I said to her, ``You tell your father to 
fund your IRA if you can't.'' So she went home and she said, 
``Dad, Lynn says you need to be funding my IRA.'' But if you 
teach your children about compound interest, if they start at--
I mean, there is that story that if you fund your IRA from 18 
to 26 and you never fund it again, you will be ahead of that 
person who starts at 26 and funds it the whole rest of their 
life, simply because of that last 7 years of compound interest. 
So we need, as soon as kids start making money, they need to be 
taught to put X amount of dollars away, to begin saving that 
money. Parents don't know, either.
    So you could begin by teaching the whole Senate, and then 
go to the House, and they should go home to their constituents. 
My daughter is actually one of your constituents.
    The Chairman. Oh, OK. Give her a hug for me, because I am 
not supposed to.
    Ms. Rollins. You are not supposed to.
    The Chairman. I won't.
    Sara, I think I heard you say that defined contribution 
plans were in fact proving more beneficial to women. Is that 
true?
    Ms. Hart. Two things. First of all, a defined benefit plan, 
which is generally always paid out in the form of an annuity, 
does benefit women because they live longer. However, most 
defined benefit pension plans don't have COLAs, so the erosion 
of the purchasing power of that lifetime benefit is much more 
serious for women.
    The Chairman. Don't they also tend to favor the fellows at 
the top?
    Ms. Hart. Absolutely not.
    The Chairman. Absolutely.
    Ms. Hart. We have non-discrimination rules.
    The Chairman. OK.
    Ms. Hart. As far as defined contribution plans, I think 
there is more opportunity for women who come in and out of the 
workforce, particularly because they can save--in a defined 
benefit plan the biggest part of the benefit is earned in your 
last 5 years of employment, so it does benefit people who stay 
in an employment situation for a career or a long period of 
time. Defined contribution plans are much more portable, and 
significant accounts can be built up by people who are in the 
work force for shorter periods of time.
    The Chairman. Very good.
    Senator Kohl.
    Senator Kohl. Ms. Rollins, how much longer do you 
anticipate you are going to have to be in the work force in 
order to get the financial security you will need to retire, 
and how difficult will it be for people like yourself to find 
that kind of work as time moves on in your life?
    Ms. Rollins. Well, it is interesting you ask that question 
because I am out of a job at the end of this year because the 
Governor is out of office. So I will let you know next year if 
there is age discrimination in the workforce.
    I would like to work, I am 63 years old now and I would 
like to work until I am 70. I am in really very good health, 
and I am hopeful that I will be able to find a job, but I am 
perfectly aware that there is age discrimination. So we will 
see what happens, but I will let you know soon, if you would 
like.
    Senator Kohl. Thank you.
    Ms. Hart, you mentioned in your testimony that women 
covered by employer plans will benefit from the shift to a 
401(k) or a defined contribution plan arrangement. As you know, 
we need to get the most benefit for the buck with respect to 
the kinds of tax arrangements we make, and I was interested in 
your opinion on the Saver's Credit as an important provision to 
help lower income women save. Do you feel strongly about the 
Saver's Credit being a priority?
    Ms. Hart. Absolutely. The Saver's Credit is a huge priority 
and should be made permanent. The only problem with the Saver's 
Credit is like an earlier witness testified: People don't know 
about it, and if they don't know about it, they are not going 
to use it. So even though we try in our company to educate 
people, it needs a lot more attention and a lot more 
communication so people understand what the effects of the 
credit are for people. They essentially can save more. It is 
very important.
    Senator Kohl. Thank you.
    Thank you, Mr. Chairman.
    The Chairman. Well, I appreciate so much you coming and 
sharing your advocacy and your recommendations and obviously, 
Lynn, your very heartwarming personal story. Each of you have 
added measurably to the Senate record today, and we hope those 
women listening in might take all the good advice that you have 
offered here today. Obviously Senator Kohl and I have work to 
do to make sure these things happen, and facilitate your jobs 
and your future and your advocacy.
    So with that, we are adjourned.
    [Whereupon, at 11:40 a.m., the committee was adjourned.]


                            A P P E N D I X

                              ----------                              


               Prepared Statement of Senator Mel Martinez

    I would like to thank Chairman Smith and Ranking member 
Kohl for having this hearing. Planning for retirement is 
something that all Americans need to be engaged in, regardless 
of age. While there certainly are discrepancies in regards to 
earned income and retirement income between men and women, I 
think the focus of this hearing should also address a larger 
issue prevalent in both genders.
    Americans simply do not save enough, for retirement or 
otherwise. Unfortunately the latest survey from the Financial 
Services Forum paints exactly that picture. The report released 
two weeks ago indicates that more than half of all Americans 
(52 percent) are worried about their retirement security.
    The poll also indicates that they are worried for good 
reason:
    Nearly a third of Americans saved nothing for retirement 
last year.
    One out of four Americans in their peak earning years, and 
nearing retirement (age 50-65), saved nothing for retirement in 
the last year.
    To add to this, last year was the first full year since the 
Depression that Americans spent more than they earned, for a 
negative savings rate.
    So the question that needs to be asked is: Would Americans 
save more if the federal government streamlined the current 
abundance of tax breaks for saving? A report by the president's 
Advisory Panel on Federal Tax Reform suggests boiling all the 
current retirement plans into three simpler ones, all of which 
would be allowed to grow tax-free.
    Another suggestion worthy of discussion is for the 
government to encourage employers to automatically enroll 
workers in 401(k) accounts and allow them to opt out if they 
choose. Studies have shown that automatic enrollment increases 
workers' savings amounts, especially among the younger and 
lower-income workers who are the least likely to save in the 
first place.
    Last week this committee had a hearing regarding the 
importance of long term care planning, an issue that is often 
over looked when doing overall retirement planning. Long-term 
care is truly a women's issue. A typical scenario: A woman 
cares for her increasingly frail husband, eventually outliving 
him. She then needs care herself, but there's nobody to help 
and she ends up in a nursing home.
    According to studies, people who spend years in a nursing 
home tend to be single, female, over age 80 and suffering from 
dementia. Their spouses have died and they don't have family 
support, so they are unable to live independently. This 
highlights the need to consider these scenarios while 
constructing an overall retirement plan and it is why I am a 
cosponsor of legislation, S 1706 by Senator Allen, that would 
allow individuals to use their 401(k), and 403(b) plans to 
purchase long-term care insurance with pretax dollars at any 
age and without early withdrawal penalty.
    Under this legislation, the consumer has the option to 
purchase long-term care insurance at the most appropriate 
levels for their own needs and their spouses. Congress should 
also consider providing a tax credit to individuals who 
purchase long term care insurance, as Chairman Smith and others 
have proposed. I hope that both of these proposals as well as 
retirement security legislation will soon get consideration in 
the Finance committee.
    All of these ideas need to be considered as we look for 
ways to increase personal saving while also addressing our 
complex tax code. I look forward to hearing the panelists hear 
today, and I ask that my remarks be included in the record. 
Thank you.

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