[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]
FULL COMMITTEE HEARING ON
DROP IN RETIREMENT SAVINGS:
THE CHALLENGES SMALL BUSINESSES FACE
FUNDING AND MAINTAINING RETIREMENT PLANS IN A STRUGGLING ECONOMY
=======================================================================
HEARING
before the
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
__________
HEARING HELD
FEBRUARY 25, 2009
__________
[GRAPHIC] [TIFF OMITTED] TONGRESS.#13
Small Business Committee Document Number 111-006
Available via the GPO Website: http://www.access.gpo.gov/congress/house
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HOUSE COMMITTEE ON SMALL BUSINESS
NYDIA M. VELAZQUEZ, New York, Chairwoman
DENNIS MOORE, Kansas
HEATH SHULER, North Carolina
KATHY DAHLKEMPER, Pennsylvania
KURT SCHRADER, Oregon
ANN KIRKPATRICK, Arizona
GLENN NYE, Virginia
MICHAEL MICHAUD, Maine
MELISSA BEAN, Illinois
DAN LIPINSKI, Illinois
JASON ALTMIRE, Pennsylvania
YVETTE CLARKE, New York
BRAD ELLSWORTH, Indiana
JOE SESTAK, Pennsylvania
BOBBY BRIGHT, Alabama
PARKER GRIFFITH, Alabama
DEBORAH HALVORSON, Illinois
SAM GRAVES, Missouri, Ranking Member
ROSCOE G. BARTLETT, Maryland
W. TODD AKIN, Missouri
STEVE KING, Iowa
LYNN A. WESTMORELAND, Georgia
LOUIE GOHMERT, Texas
MARY FALLIN, Oklahoma
VERN BUCHANAN, Florida
BLAINE LUETKEMEYER, Missouri
AARON SCHOCK, Illinois
GLENN THOMPSON, Pennsylvania
MIKE COFFMAN, Colorado
Michael Day, Majority Staff Director
Adam Minehardt, Deputy Staff Director
Tim Slattery, Chief Counsel
Karen Haas, Minority Staff Director
.........................................................
(ii)
?
STANDING SUBCOMMITTEES
______
Subcommittee on Contracting and Technology
GLENN NYE, Virginia, Chairman
YVETTE CLARKE, New York AARON SCHOCK, Illinois, Ranking
BRAD ELLSWORTH, Indiana ROSCOE BARTLETT, Maryland
KURT SCHRADER, Oregon TODD AKIN, Missouri
DEBORAH HALVORSON, Illinois MARY FALLIN, Oklahoma
MELISSA BEAN, Illinois GLENN THOMPSON, Pennsylvania
JOE SESTAK, Pennsylvania
PARKER GRIFFITH, Alabama
______
Subcommittee on Finance and Tax
KURT SCHRADER, Oregon, Chairman
DENNIS MOORE, Kansas VERN BUCHANAN, Florida, Ranking
ANN KIRKPATRICK, Arizona STEVE KING, Iowa
MELISSA BEAN, Illinois TODD AKIN, Missouri
JOE SESTAK, Pennsylvania BLAINE LUETKEMEYER, Missouri
DEBORAH HALVORSON, Illinois MIKE COFFMAN, Colorado
GLENN NYE, Virginia
MICHAEL MICHAUD, Maine
______
Subcommittee on Investigations and Oversight
JASON ALTMIRE, Pennsylvania, Chairman
HEATH SHULER, North Carolina MARY FALLIN, Oklahoma, Ranking
BRAD ELLSWORTH, Indiana LOUIE GOHMERT, Texas
PARKER GRIFFITH, Alabama
(iii)
?
Subcommittee on Regulations and Healthcare
KATHY DAHLKEMPER, Pennsylvania, Chairwoman
DAN LIPINSKI, Illinois LYNN WESTMORELAND, Georgia,
PARKER GRIFFITH, Alabama Ranking
MELISSA BEAN, Illinois STEVE KING, Iowa
JASON ALTMIRE, Pennsylvania VERN BUCHANAN, Florida
JOE SESTAK, Pennsylvania GLENN THOMPSON, Pennsylvania
BOBBY BRIGHT, Alabama MIKE COFFMAN, Colorado
______
Subcommittee on Rural Development, Entrepreneurship and Trade
HEATH SHULER, Pennsylvania, Chairman
MICHAEL MICHAUD, Maine BLAINE LUETKEMEYER, Missouri,
BOBBY BRIGHT, Alabama Ranking
KATHY DAHLKEMPER, Pennsylvania STEVE KING, Iowa
ANN KIRKPATRICK, Arizona AARON SCHOCK, Illinois
YVETTE CLARKE, New York GLENN THOMPSON, Pennsylvania
(iv)
?
C O N T E N T S
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OPENING STATEMENTS
Page
Velazquez, Hon. Nydia M.......................................... 1
Graves, Hon. Sam................................................. 2
WITNESSES
Dobrow. Mr. Stephen, CEO, Primark Benefits, Burlingame, CA. On
behalf of the American Society of Pension Professionals &
Actuaries...................................................... 3
Speer, Mr. Jason, Quality Float Works Inc., Schaumburg, IL. On
behalf of the U.S. Chamber of Commerce......................... 6
Keeler, Mr. Andrew, Everhart Financial Group, Dubling, OH. On
behalf of Financial Planning Association....................... 8
Collinson, Ms. Catherine, President, Transamerica Center for
Retirement Studies............................................. 10
Ferrigno, Mr. Edward, Vice President Washington Affairs, Profit
Sharing/401(k) Council of America.............................. 12
APPENDIX
Prepared Statements:
Dobrow. Mr. Stephen, CEO, Primark Benefits, Burlingame, CA. On
behalf of the American Society of Pension Professionals &
Actuaries...................................................... 29
Speer, Mr. Jason, Quality Float Works Inc., Schaumburg, IL. On
behalf of the U.S. Chamber of Commerce......................... 35
Keeler, Mr. Andrew, Everhart Financial Group, Dubling, OH. On
behalf of Financial Planning Association....................... 43
Collinson, Ms. Catherine, President, Transamerica Center for
Retirement Studies............................................. 52
Ferrigno, Mr. Edward, Vice President Washington Affairs, Profit
Sharing/401(k) Council of America.............................. 59
Statements for the Record:
American Benefits Council........................................ 67
(v)
FULL COMMITTEE HEARING ON
DROP IN RETIREMENT SAVINGS:
THE CHALLENGES SMALL BUSINESSES FACE FUNDING AND MAINTAINING RETIREMENT
PLANS IN A STRUGGLING ECONOMY
----------
Wednesday, February 25, 2009
U.S. House of Representatives,
Committee on Small Business,
Washington, DC.
The Committee met, pursuant to call, at 1:00 p.m., in Room
2360, Rayburn House Office Building, Hon. Nydia M. Velazquez
[Chair of the Committee] presiding.
Present: Representatives Velazquez, Moore, Dahlkemper,
Schrader, Bean, Clarke, Sestak, Bright, Halvorson, Graves,
Buchanan, Luetkemeyer, Schock, Thompson, and Coffman.
Chairwoman Velazquez. I call this hearing of the Committee
to order.
If we have learned anything from the current financial
crisis, it is that for better or worse, Main Street's economy
is tied to the markets on Wall Street. As a result, the recent
decline in the stock market has touched every corner of our
lives and the fallout is everywhere. But while much has been
made over indicators like tightened credit and reduced consumer
spending, there are other troubling consequences. One of the
most overlooked effects of the stock market slide has been the
impact on small business retirement plans. It has been
estimated that in the last 18 months, over $2 trillion in
retirement savings has been lost from retirement plans,
primarily due to the stock market's decline. Just in the last
year, 401(k) account balances for workers between 35 and 65
have shed over 20 percent of their value.
For small businesses and their employees, these problems
are compounded. Unlike Wall Street executives, small firms do
not have golden parachutes to fall back on. For many of these
men and women, pensions and 401(k) plans are their only form of
savings. So when the volatility in the stock market impacts
their accounts, entrepreneurs are hit particularly hard. As the
economic downturn hits retirement funds, small businesses that
provide these benefits are finding it even harder to stay
afloat. Employers that try to do the right thing and offer a
secure retirement to their workers are being hit the hardest.
For example, when the value of pensions drop, many small
business owners still find themselves on the hook for paying
out benefits.
With credit almost impossible to access, consumer spending
near an all-time low, and sales devastated, small firms simply
lack the revenue to fund retirement plans. In some cases, this
means entrepreneurs do not have the ability to meet their legal
obligations. In other instances, small businesses are scaling
back or ending their contributions. Overall, too many small
businesses are finding that continuing to fund their retirement
plans would put their entire business in jeopardy.
In today's hearing we will explore ways to help small
businesses that have offered retirement plans but are now in a
difficult position because of poor decisions made on Wall
Street.
One way to assist small business owners might be to cap the
amount of losses that they are responsible for paying during
market downturns. This could help keep solvent many firms with
defined benefit plans. Another approach would allow small firms
to look further ahead for pension values when calculating how
much they must pay into employees' retirements.
Other proposals would encourage small employers to offer
retirement plans by making it easier to borrow against them
during difficult economic periods.
These and other ideas merit further discussion. But while a
number of approaches can be taken, one thing is clear: We must
act soon to help small businesses struggling with retirement
fund obligations.
A secure retirement has long been part of the American
social contract. Now, too many small employers are suffering
for simply trying to live up to their side of the bargain.
Chairwoman Velazquez. I welcome our witnesses and now I
yield to Mr. Graves for an opening statement.
Mr. Graves. Thank you Madam Chair. And I want to thank you
for calling this hearing to examine the difficulty that small
businesses are having in maintaining and offering retirement
plans in the current economic climate. America's economy is
suffering a very difficult downturn. Right now consumer
confidence is declining, the housing slump endures, layoffs
continue, well-known enterprises are closing their doors or
declaring bankruptcy, and credit simply is not flowing to the
small firms as quickly as we had hoped.
Saving for retirement has always been a challenge for
Americans. In 2008 the Employee Benefit Research Institute
reported that almost half of workers who are saving for
retirement said they had less than $25,000 in total savings and
investments, excluding the value of their home and defined
benefit plans. That number is probably lower today. And that is
the savings level for workers who report that they save. Many
simply do not or cannot.
According to the Small Business Administration, small
companies represent over 99 percent of all employers. Yet a
National Federation of Independent Business Survey reports that
just 30 percent of small firms offer pension plans. These
companies face numerous barriers to offering retirement savings
such as the cost and complexity of administering a plan. As the
workforce ages, retirement savings is becoming even more
important.
In the current economic climate, the financial performance
of pension and retirement savings plans has been uneven, and
many employees and business owners are concerned. Increasingly,
large and small companies are mindful of how these plans affect
their earnings and their balance sheet. Some believe that plans
have over-relied on investments in the stock market. Given the
recent performance in the market, individuals and business
owners are concerned about the viability of their retirement
investments.
We have a very distinguished panel of witnesses today here,
and I look forward to hearing all of your thoughts and
appreciate you all coming in for this hearing.
Thank you Madam Chair. I yield back.
Chairwoman Velazquez. Thank you Mr. Graves.
Chairwoman Velazquez. I welcome Mr. Stephen L. Dobrow. He
is the President of Primark Benefits located in San Francisco,
California. Mr. Dobrow entered the retirement field over 30
years ago and has led Primark Benefits since 1990. Primark
Benefits provides consultant, administration and actuarial
services for qualified retirement plans. He is testifying on
behalf of the American Society of Pension Professionals and
Actuaries. He represents career retirement plan professionals.
Welcome and you have 5 minutes to make your testimony.
STATEMENT OF STEPHEN DOBROW, QPA, APA, CPC, CEO, PRIMARK
BENEFITS, BURLINGAME, CALIFORNIA; ON BEHALF OF AMERICAN SOCIETY
OF PENSION PROFESSIONALS AND ACTUARIES (ASPPA)
Mr. Dobrow. Chairwoman Velazquez and Ranking Member Graves,
the American Society of Pension Professionals and Actuaries,
ASPPA, appreciates this opportunity to testify before you today
on the challenges small businesses face in funding and
maintaining their retirement plans in a struggling economy.
I am Stephen L. Dobrow, the current President of ASPPA, and
president of Primark Benefits, a San Francisco-based employee
benefits firm that provides administration and actuarial
services for retirement plans.
ASPPA is a national organization of more than 6,500
retirement professionals of all disciplines, who provide
services for qualified retirement plans covering millions of
American workers. ASPPA members are united by a common
dedication to the private retirement plan system, with a
particular focus on the issues faced by small- to medium-sized
employers.
The current economic crisis is weighing heavily on the
heart of the American economy, our small businesses. Many small
companies are struggling to stay afloat as sales drop off. And
it is harder to come by loans. Many small businesses sponsor a
retirement plan and want to continue to do so. However, plan
sponsors are facing unprecedented pressures because of the
current economic conditions.
I would like to focus today on two important areas where
relief is critically needed: defined benefit pension plan
funding relief; and 401(k) safe harbor plan relief. If the
relief is not provided, many employers will be forced to freeze
or terminate their retirement plans.
In a defined benefit plan, the employer takes on all the
investment risks and contributes whatever it takes to pay for
promised benefits. Employers that have been willing to take on
this risk are now being slammed by the market downturn and
desperately need your help.
As a real-life example I want to tell you about one of my
defined benefit clients, a fruit importer with 15 employees.
Because of how pension plan rules work, as well as a drop in
the market value of the plan's assets, the minimum contribution
rose from $177,000 in 2008 to $474,000 in 2009. There is no way
that this employer can afford the nearly $300,000 increase.
Profits are down because of the economy. The sponsor cannot go
to a bank to borrow the money in this financial environment.
They may be forced to pay an excise tax this year because of
the inability to contribute the increased amount, and plan
termination will likely result unless adequate relief is
offered.
There are a variety of proposals for providing funding
relief. The ideal solution would be to provide options to
sponsors. These options would include basing the current year's
contribution upon the amount paid in the prior year, better use
of a tool called "asset smoothing," and allowing for interest-
only payments on the investment losses. The employer I
described earlier would receive substantial funding relief from
either the lookback or the interest-only approaches.
In general, 401(k) plans must satisfy a certain amount of
discrimination requirements. Under the popular 3 percent 401(k)
safe harbor plan design, an employer commits before the year
begins to contributing 3 percent of compensation to all
eligible employees. Treasury regulations do not permit an
employer to change his or her mind once making the commitment,
except by terminating the plan.
One of my clients, Cyclonix, a Silicon Valley company with
60 employees that does branding and trade show work, last year
they contributed $69,000 to their safe harbor plan for 2009 and
became obligated to contribute about $72,000 to the plan. They
contacted us last month to discuss their options because their
financial picture had changed, and they no longer could afford
all of the required contribution. And unfortunately under the
current rules, none of the options are good. They are now
considering terminating their 401(k) plan or possibly laying
off some employees.
To help Cyclonix and other small businesses maintain their
401(k) plans, ASPPA has asked the IRS to promptly issue
guidance to permitting employers to suspend safe harbor
contributions prospectively while still protecting the rights
of employees. Further, a new safe harbor should be created that
allows employers to adopt a wait-and-see attitude in meeting
the safe harbor.
Small employers are the heart of the American economy. As a
small business owner who provides services to other small
business owners, I can tell you that we want to do the right
thing by our employees. We just need your help. We are not
looking for a bailout, only for a life jacket to keep our heads
above water during these troubled times. Regulatory relief for
safe harbor 401(k)s and funding relief for pension plans are
straightforward ways to help small businesses meet cash demands
without resorting to plan termination and, in some cases,
dumping liability on the PBGC or laying off more workers.
Thank you for the opportunity to speak to you today.
Chairwoman Velazquez. Thank you Mr. Dobrow.
[The statement of Mr. Dobrow is included in the appendix at
page 29.]
Chairwoman Velazquez. And now the Chair recognizes the
Gentlelady from Illinois, Ms. Bean, for the purpose of
introducing the next witness.
Ms. Bean. Thank you, Madam Chairwoman. First of all, let me
thank all of our witnesses who are here to testify and share
your experiences and your subject matter expertise on this
important issue of trying to make sure that our small
businesses can maintain their pension coverage. I am delighted
to welcome our next witness, Jason Speer, whom I know
personally and have had the pleasure of working with and
visiting his business. He is the vice president and general
manager of Quality Float Works based in Schaumburg, Illinois,
in the beautiful Eighth District that I am honored to
represent.
Quality Float Works is a manufacturing company with 24
employees that produces premier metal float balls. He is
testifying today on behalf of the U.S. Chamber of Commerce, the
world's largest business federation, representing 3 million
businesses as well as State and local chambers and industry
associations.
Today Quality Float Works exports to such international
locations as Belgium, Canada, China, Germany, Indonesia,
Ireland, Mexico, Singapore, Vietnam and throughout the U. K.
This international growth is one of the reasons why Quality
Float Works was recently named one of the fastest growing
companies in America.
By harnessing his passion for manufacturing, Jason has
turned a virtually unknown family business on the verge of
financial collapse into an industry leader. He has also shared
his experiences with other businesses in my Eighth District. I
often invite various parts of the Federal Government to talk
about their programs, and I have had the Commerce Department
come out and talk about the gold key program and the value of
trade and exports to small businesses. And Jason was kind
enough to back that up, because when government says we are
here to help, businesses don't always believe it. But when we
have other businesses who have participated in these programs
successfully and can share that, they really establish a model.
So I thank you for encouraging others to follow your lead.
Thank you for participating today. And I am glad to welcome
you to Washington.
Mr. Graves. Madam Chair, may I ask what a metal float ball
is?
Mr. Speer. They are hollow metal balls, you see them on top
of flagpoles, weather vanes, kind of like a toilet float; also
for industrial uses, a wide range of different applications.
Chairwoman Velazquez. The gentleman is recognized for 5
minutes.
STATEMENT OF JASON SPEER, QUALITY FLOAT WORKS, INC.,
SCHAUMBURG, ILLINOIS; ON BEHALF OF THE U.S. CHAMBER OF COMMERCE
Mr. Speer. Thank you, Chairwoman Velazquez and Ranking
Member Graves and members of the Committee for this opportunity
to appear before you today to discuss challenges facing small
business in a struggling economy. My name is Jason Speer, vice
president and general manager of Quality Float Works
Incorporated based in Schaumburg, Illinois.
I am pleased to be able to testify today on behalf of the
U.S. Chamber of Commerce where I am a member of its Small
Business Council. The Chamber is the world's largest business
federation, representing more than 3 million businesses and
organizations of every size, sector and region. Over 96 percent
of the Chamber members are small businesses with fewer than 100
employees.
Quality Float Works is a family-owned and -operated company
that manufactures premier metal float balls. We are globally
engaged and have grown our sales in the international
marketplace. Quality Float Works has 24 employees and did
approximately $2.7 million in revenue for 2008. We offer
employees a 401(k) plan and provide up to a 4 percent match.
The Quality Float Works plan enables employees to choose funds,
change contribution rates at any time and work with an adviser
to seek guidance. We encourage all employees to participate, as
they are like family, and we want them to be prepared for their
retirement.
I am the administrator of the plan, and in that capacity it
is my responsibility to assist with enrollment, ensure that
contributions are transferred to the facilitator, and direct
questions to the appropriate person.
We are all aware of the current economic situation. The
equities markets have fallen an average between 30 and 50
percent, and this decline is reflected both in defined benefit
plan balances and the accounts of participants in 401(k) plans.
For Quality Float Works specifically, we are facing slowing
sales due to the economic climate even though our company is
diversified.
Quality Float Works has weathered many ups and downs in the
past 94 years, and recent additions for our product line led
record sales in 2008. However, due to the recent global
economic crisis, we predict that 2009 will be a difficult year
and we are unsure of how our sales will be in 2009, and will
potentially look at reducing expenses if sales decrease.
In that context, the challenges facing small business can
be particularly challenging. Quality Float Works established
its 401(k) plan in 2005. Prior to that we had an IRA, and we
stopped that in 2001 after another similar decrease in sales.
When we started the 401(k) plan, 12 employees enrolled. In
2008, five stopped participating, due to concerns about the
market, and several others have expressed similar concern in
recent months. If too many participants drop out of the plan,
we risk not meeting our minimum contribution requirements that
are required in the contract with our facilitator. Thus, even
though we would like to continue to maintain our 401(k) plan,
we may be not able to do so if our employees do not stay in the
plan.
In addition, due to the financial crisis, small business
plan sponsors are acutely aware of administrative costs. One
result of participant concern is that there is an increase in
demand for distributions, both hardship withdrawals and loans.
Moreover, participants may increase their request to make
changes to their investments. These events increase
administrative costs unexpectedly and take a significant toll
on small businesses already experiencing financial strain.
In December, Congress passed the Worker Retiree Employer
Recovery Act of 2008 which includes important changes for
retirement plans. We very much appreciate the work that
Congress did on this bill. However, there are some issues that
require additional attention. The law did not change 2008
distributions; therefore, beneficiaries who turn 70-1/2 in 2008
still have to take delayed distributions by April 1, 2009.
However, there are still some exceptions to the suspension of
the RMD rules that participants and plan sponsors may not be
fully aware of. For small business owners, communicating these
issues and ensuring that plan participants understand these
issues can be challenging. Many employees do not understand the
changes to the rules and look to me as the plan administrator
for advice. Thus, additional clarification of the changes to
the rules would help plan sponsors administrate these rules
effectively.
Moreover, defined benefit plans need additional help. Their
support show that the pension funding ratios have fallen
significantly over past 3 months and it is unlikely that these
markets will recover in the immediate future. Without further
legislative action, these unexpected funding requirements will
continue to require that companies choose between funding their
pension plans and laying off workers, closing plants and
postponing capital investments. This will result in increased
unemployment and slower economic recovery.
Finally, I believe it is important to highlight one
specific recommendation. The current challenges highlight how
small businesses continue to often need additional
consideration. To this end, the Chamber is encouraging Congress
to consider adding a small business representative to the ERISA
Advisory Council. The challenges facing small business plan
sponsors in the current economic downturn are substantial. In
the current economic environment it is more important than ever
that Congress focus on encouraging the implementation and
maintenance of retirement plans by small businesses.
I thank you on behalf of myself and the Chamber for the
opportunity to testify today and look forward to any questions
you might have.
Chairwoman Velazquez. Thank you Mr. Speer.
[The statement of Mr. Speer is included in the appendix at
page 35.]
Chairwoman Velazquez. Our next witness is Mr. Andrew
Keeler. He is a partner and founding firm member of Everhart
Financial Group. Everhart Financial Group helps individuals
with personal financial planning, investments and mortgages and
also serves mid- to large-sized corporations with flexible
customized retirement, 401(k) and profit sharing plans. He is
testifying on behalf of Financial Planning Association. FPA is
an organization that helps practitioners succeed as financial
planners. Welcome.
STATEMENT OF ANDREW KEELER, CFP, EVERHART FINANCIAL GROUP,
DUBLIN, OHIO; ON BEHALF OF THE FINANCIAL PLANNING ASSOCIATION
(FPA)
Mr. Keeler. Thank you, Chairwoman Velazquez, Ranking Member
Graves, and other Members of the Committee for inviting me to
talk to you about the challenges facing small businesses trying
to provide retirement plans for their employees during these
difficult economic times. I am Andy Keeler, a certified
financial planner practitioner and partner with the Everhart
Financial Group in Dublin, Ohio. I am honored to be here today
on behalf of the Financial Planning Association to address your
concerns about how the current economic environment is
affecting employees of small businesses' ability to save for
retirement and, more importantly, how it is affecting their
ability to achieve a positive financial outcome with respect to
retirement.
Our firm assists its corporate clients in establishing and
maintaining customized retirement plan solutions. The most
critical part of this process is face-to-face meetings where we
learn more about the participants as individuals and their
needs and expectations, and hoping those participants
understand the importance of saving for retirement and the
determinants of wealth.
As you might imagine, the largest determinant of wealth is
the amount of money that is being saved by or for a retirement
plan participant. Savings rates are the key factor followed by
market performance and security selection. As you all are well
aware, this country has seen a major shift of responsibility
for retirement planning from the employer to the employee. Yet
we as a society have neglected to explain to America's workers
how this shift of roles and responsibilities affects their
retirement income down the road.
Under the traditional defined benefit plan, retirees would
receive around 60 percent of pre-retirement income until death.
Worries about the stock market were nonexistent. Participants
didn't see a retirement plan balance or dollar value, nor were
they beat over the head with negative financial news. All the
participant had to do is simply count on a monthly income
stream in retirement. To finance this retirement liability,
employers had to contribute roughly 25 to 30 percent of the
employee's income into the defined benefit trust each and every
year.
As employers faded out the defined benefit plan and
implemented the defined contribution plan, we failed to inform
employees that they would need to receive annual additions of
between 25 and 30 percent of their income each year for the
next 30 years. Today, we are finding that employees either
choose to save nothing or they contribute up to the employer
match, which is often between 3 and 6 percent of pay. We find
that the lower the match, the lower the contribution rate for
the employee.
Not only are participants not saving enough, but they must
direct their own investments and make their own investment
decisions. This is a responsibility that the average American
is ill-prepared to do, or do well. Most people, once properly
informed and educated, understand that over long periods of
time, the stock market has historically provided the greatest
return.
However, now we are faced with the worst bear market since
the Great Depression and employees are losing faith in our
securities markets and questioning the fundamental premise of
investing over the long term. I often hear participants say, "I
can't afford to lose everything," or "Should I stop
contributing to the plan until the market goes back up?"
While most lay people are initially willing to take risk
over long periods. When they actually see losses on their
statements, their risk tolerance will shift and they will look
for more conservative options; options that reduce the chance
of a positive financial outcome. In addition, we have employees
that are laying off their workforce. No paycheck means no
savings.
Obviously, at the heart of the recession are businesses big
and small that are having a hard time staying in business. The
401(k) match is the first thing to go. If eliminating the match
is not enough, a more drastic measure is to terminate the plan.
Start-up fees, ongoing record keeping fees and administrative
fees can be easy targets for a CFO looking to cut cost in
difficult times. One incentive would be to enhance the current
tax credit that is being used to offset the start-up cost and
the cost of educating employees about the plan. This credit
should be broadened to include any employer with less than 500
employees and it should also be broadened to offset employer
contributions to a retirement plan. The credit would work like
the current tax credit for low-income and middle-income
consumers, which is detailed in my written testimony.
The best way to help participants from making poor
financial decisions is to improve financial literacy for
consumers, as we heard from the President yesterday. Public
service announcements could cover a lot of ground towards this
end. The Financial Planning Association and numerous
independent non-profits can offer stimulating and compelling
research that reinforces the value of saving and investing
prudently.
FPA, for example, maintains a partnership with Junior
Achievement in which personal financial literacy is taught to
students by certified financial practitioners. But that is not
enough. According to the Jump Start Coalition, a national
financial literacy group, only three States require at least a
one-semester course dedicated to personal finance while another
17 allow it to be integrated into another curriculum, usually
math.
Madam Chairman, Ranking Member Graves, ladies and
gentlemen, we are at a very important time in which Americans
are losing faith in the financial system and frustration is
building. Retirement assets have shrunk by roughly 40 percent
with the paper losses in the trillions of dollars. The
investing public is questioning the value of saving for
retirement. There have been many times over the past 200 years
that Americans came together and rallied for a common cause.
Sense of entitlement, jealousy and resentment often take the
back seat when times get rough or a situation is approached
properly. This is our problem. Participants may surprise you.
If they are made aware of the problem and armed with the
knowledge to make sound financial decisions, we will be
impressed by the outcome.
I am happy to respond to any questions.
Chairwoman Velazquez. Thank you Mr. Keeler.
[The statement of Mr. Keeler is included in the appendix at
page 43.]
Chairwoman Velazquez. Our next witness is Ms. Catherine
Collinson, senior vice president of strategic planning in
Transamerica Retirement Services in Los Angeles, California. In
this post she is responsible for developing and implementing
short- and long-term strategic business plans. The Transamerica
Center for Retirement Studies conducts studies of retirement
trends and issues facing the American workforce. Welcome. You
have 5 minutes.
STATEMENT OF CATHERINE COLLINSON, PRESIDENT, TRANSAMERICA,
CENTER FOR RETIREMENT STUDIES, LOS ANGELES, CALIFORNIA
Ms. Collinson. Thank you for this opportunity. Again, my
name is Catherine Collinson and today I am actually testifying
in the capacity of the Transamerica Center for Retirement
Studies, and I am very pleased to share with you some of our
recent research.
Employer-sponsored retirement plans in small business play
a critical role in facilitating savings for American workers.
The Transamerica Center for Retirement Studies just completed
the tenth annual Transamerica retirement survey of 3,466 full-
time and part-time workers across the country, over half of
whom work for companies employing between 10 and 499 persons.
That is what we are calling small business.
The survey found that 76 percent of workers who have access
to workplace defined contribution retirement plans participate
in them. Equally significant, workers who are offered a
company-sponsored retirement plan are more likely to save for
retirement outside of work--67 percent--than those who are not
offered a plan--52 percent.
Regarding retirement planning coverage and small business,
75 percent of full-time workers are offered a plan by their
employers compared to only 24 percent of part-time workers.
Because only 9 percent of the workers surveyed indicated that
they are offered a company-funded defined benefit plan, this
testimony will focus on defined contribution plans.
The economic downturn has already started taking its toll
on small business. Among the worker survey respondents, the
survey found that their employers had implemented the following
measures over the last 12 months: layoffs or downsizing, 32
percent; frozen salaries, 20 percent; eliminated bonuses, 18
percent; reduced or eliminated non-retirement benefits, 9
percent; and reduced or eliminated retirement benefits, 10
percent.
Of those indicating that their retirement benefits had been
reduced or eliminated, these were their responses. Company
match on 401(k) or similar was reduced or eliminated, 72
percent. 401(k) or similar plan was discontinued, 14 percent.
Pension plan was frozen or discontinued, 20 percent.
Fifty-six percent of the workers surveyed say they are less
confident in their ability to achieve a financially secure
retirement than they were 12 months ago and 29 percent expect
to work longer and retire at an older age. Forty percent of the
respondents indicated they plan to work past the age of 70,
including 17 percent who do not plan to retire. Yet despite
this gloomy outlook, workers are staying committed and
continuing to save in their company's retirement plans.
Ninety percent of workers still value a 401(k) plan as an
important benefit. Participation at 76 percent and median
salary contribution rate, 7 percent, remain stable. Even more
compelling, 18 percent indicated they have increased their
contributions over the last 12 months. Eleven percent have said
they have taken a loan and only 4 percent have taken a hardship
withdrawal.
The survey also found opportunities for improvement, as
evidenced by the 69 percent of workers who agree they don't
know as much as they should about retirement investing.
And now for recommendations:
First, preserving and improving upon the existing system.
While defined contribution plans are proving to be a highly
effective solution, the system is not without risk. More work
can be done to help workers navigate through this economic
downturn and equip them with tools to do so, including access
to affordable financial advice.
Second, funding and maintaining retirement plans in the
struggling economy. A key to avoiding any potential further
reductions in benefits will be to help alleviate the cost to
the employer. Possible solutions include tax credit for small
business employers who sponsor and make employer contributions
to a plan, and further simplification of nondiscrimination in
testing worlds.
In addition, plan coverage rates could be increased by the
following: additional tax incentives and safe harbors to
encourage plan sponsors to expand coverage to part-time
employees; increase the amount available and number of years
for the current start-up tax credit for small businesses to
establish a plan; and for small businesses in which a stand-
alone plan is not feasible, enable and provide incentives to
join a multiple employer or group plan. Lastly, increasing
savings of low- to middle-income workers.
The Transamerica survey found that 40 percent of low- to
middle-income workers reported less than $5,000 in total
household savings. The savers' credit offers a meaningful
incentive for them to save. However, only 18 percent are aware
of it. Recommendations include adding it to the 1040 easy form
and/or ensuring that online free file programs are designed to
catch the savers' credit if they are unaware. The IRS should
promote it, as well as consider increasing the eligible income
limits and making it refundable.
Thank you for this opportunity.
Chairwoman Velazquez. Thank you, Ms. Collinson.
[The statement of Ms. Collinson is included in the appendix
at page 52.]
Chairwoman Velazquez. And now I recognize Mr. Edward
Ferrigno. He is the vice president of Washington Affairs for
the Profit Sharing/401k Council of America. Mr. Ferrigno has
extensive experience in human resource management and
government relations. The Profit Sharing/401(k) Council of
America is an association of businesses which believe in the
success of profit sharing, 401(k) and related savings and
incentive programs. Welcome.
STATEMENT OF EDWARD FERRIGNO, VICE PRESIDENT, WASHINGTON
AFFAIRS PROFIT SHARING/401(K) COUNCIL OF AMERICA
Mr. Ferrigno. Thank you, Chairwoman Velazquez, Ranking
Member Graves and members of the Committee for the opportunity
to appear before you today. The Committee has asked how the
economic crisis affects small business retirement plans. My
initial response is the same as for large businesses, only
worse. After some thought, I identified two special ways in
which a small business retirement plan is impacted differently
than a large plan.
But first I would like to address the market crisis. 401(k)
plan participants working in partnership with employers can
successfully manage normal market risks and cycles and
accumulate ample assets for retirement; however, they cannot
succeed without sufficient and transparent capital markets. The
drop in 401(k) account balances was not caused by a defective
401(k) system or by ignorant participants. These plans are
caught in the same financial crisis that has paralyzed business
and financial organizations throughout the world. We urge the
Committee and Congress to direct their efforts to ensure a
similar market collapse never occurs again.
Contrary to several published reports, real current data
indicates that 401(k) participants are remaining resolute. They
are not stopping contributions or increasing loan activity. And
I certainly recognize Mr. Speer's situation. Hardship
withdrawals have increased slightly, but the percentage of
participants taking the hardship distribution remains well
below 2 percent.
The cost-benefit analysis for micro-plans changes in an
economic downturn. In very small business, the owner's personal
financial situation is a major factor in deciding to offer a
plan to employees. For the benefit of personally saving in a
tax-qualified plan, the owner must be willing to pay the
expenses of offering a retirement plan to employees. This
equation changes in an economic downturn. The benefit of a tax
deferral is diminished by the owner's reduced income from the
business.
On the cost side, plan service providers might increase
their fees because plan assets that drive asset-based fees are
lower, and participating activities resulting from the market
collapse is increasing. The owner may decide to terminate or
not offer a plan and contribute to an IRA. Another option is a
low-cost variable annuity with no contribution limits, in which
investment earnings are deferred the same as if in a qualified
plan. These products are available for as little as 25 basis
points over normal investment fees. If the owner has no current
tax liability, this option is probably significantly more
attractive than offering a plan.
Second, the top-heavy rules are more onerous in an economic
downturn. They provide that if 60 percent of a plan's assets
are in the accounts of the highly compensated or key employees,
the company must contribute 3 percent of pay for full-time
employees over the age of 21 with 1 year of service. As you
know, this onerous rule affects only small plans because there
is virtually no turnover of highly compensated employees, and
turnover among young employees is high. This is exacerbated
during an economic downturn. The top-heavy rules should be
repealed.
And to build on Mr. Dobrow's testimony, a 401(k) safe
harbor plan is not subject to the top-heavy rules. If we fix,
if we provide relief for the safe harbor plans, some are going
to go from the pot to the frying pan because they are going to
be top-heavy.
As Congress considers fee disclosure and other reforms, it
is critical that small plan issues be represented. Small
businesses do not have the resources of a large business to
meet their duties under ERISA. For example, small businesses
rely on service providers to tell them about plan fees. However
under ERISA, they, not the service provider, have the
responsibility to ensure that plan fees are reasonable. PSCA
supports legislation that shifts the burden from plan sponsors
to try to determine plan fees to service providers being
required to furnish this information.
Many small businesses prefer reviewing costs in an
aggregate or bundled manner. As long as they are fully informed
of the services being provided, they can compare and evaluate
whether the overall fees are reasonable, without being required
to analyze each fee on an itemized basis.
Finally, legislation should preserve this option.
In the 110th Congress legislation was introduced to create
mandatory payroll IRAs in which a business of 10 or more
employees that doesn't offer a retirement plan must offer a
payroll IRA plan. Employees age 18 or older must be
automatically enrolled at 3 percent of comp. A small credit is
intended to offset employer cost. President Obama supported
this proposal during his candidacy, and I expect it to be
included in the budget tomorrow.
Because a default investment is required, the plans are
subject to ERISA. The default investment must be prudently
selected and fees must be reasonable. This duty normally
entails significant cost, time and liability exposure to plan
sponsors. Last year's legislation includes a TSP-type board as
an alternative to managed investment. PSCA is concerned about
any mandatory benefit program. Additionally, the potential for
significant costs for small businesses when they can least
afford them has to be considered when this proposal is
reintroduced. Thank you.
Chairwoman Velazquez. Thank you.
[The statement of Mr. Ferrigno is included in the appendix
at page 59.]
Ms. Velazquez. And the House is taking a vote so the
Committee stands in recess until the next 20 minutes at least.
[Recess.]
Chairwoman Velazquez. I would like to address my first
question to Mr. Speer. You mentioned that employees had
recently dropped out of the company's retirement plan, which
threatens your ability to continue offering your plan. In your
view, is fear of losing money in the market your employees'
number one concern, or are there other factors making them pull
back?
Mr. Speer. Based on my experience and speaking with
employees, I think it is a combination. Some employees have
been fearful of seeing their money just disappear and keep
dwindling, and one or two employees have had some hardship
issues with housing and such, that they just needed the extra
money that was taken out of their paycheck.
Chairwoman Velazquez. Thank you.
Mr. Dobrow, given the state the market, you suggest
allowing employees to suspend or delay safe harbor
contributions. This makes sense if such contributions force
employers to drop their plans or, even worse, go out of
business. However, all employers do not need this type of
relief.
Is there a way to fix this while also ensuring unscrupulous
employers do not abuse the system?
Mr. Dobrow. Absolutely, because what would happen is that
after you suspend the safe harbor, then the regular rules
apply, and the regular nondiscrimination rules prevent abuse
and prevent everything from going awry. So we are just saying
that instead of waiting until December 31st to end the safe
harbor, let's end the safe harbor as of March 31st or whatever
notice period is available.
Chairwoman Velazquez. Do you want to comment, Mr. Ferrigno?
Mr. Ferrigno. I agree that there won't be an opportunity
for abuse at all. And I did mention it in my oral testimony
that for some plans they would then be subject to the top-heavy
rules which would require the 3 percent nonelective. That is
the problem that they are trying to get out from under with the
safe harbor.
Chairwoman Velazquez. Mr. Keeler, you mentioned that many
employees are simply not saving enough for retirement-- we all
know that--and the severe dip in stock values that made this
problem worse now. So, first, how can we get more workers
thinking about the importance of adequate savings; and, two,
how can we make it easier for small businesses to offer
retirement plans?
Mr. Keeler. I think the first way is educating the
employees how the old model worked, the model that their
parents or grandparents were accustomed to, whereby they worked
for a company for 30 years, they retired from that company, had
60 percent of their income replaced by the pension, another 20
percent replaced by Social Security. Their parents didn't need
to save. Their parents, because they didn't need to save, it
didn't matter what the stock market did. They could put their
money in a jar in the backyard or in the freezer, for all it
mattered, because any wealth that their parents accumulated
would have been passed to future generations. It wasn't needed
for retirement because they relied on Social Security and
pensions.
No one has gone to the investment public participants now
and said, the game has changed, and if you can still rely on
Social Security for that 20 percent, if you needed 70 to 80
percent, how are you going to fund that liability? Your
employer is only going to kick in 3 to 6 percent. How much do
you need to save over the next 30 years if you stay employed
that long to make the math work? And my numbers show somewhere
around 19 to 25 percent is what most people should be saving
for a 30-year period.
So educating employees that, you know--what happens when an
employee starts working at 25, the first question they will ask
is, Is there an employer match? Yes, it is 3 percent. Okay,
well I am going to put in at least 3 percent. Well, is that
enough? They don't know that it is not enough. So I would say
that is the first part.
As far as relief for employers contributing more, as I laid
out in my written testimony, there could be some sort of credit
for employer contributions. There is a credit for start-up
costs. There is a credit for costs of educating employees. That
could be broadened or increased and it could also be broadened
to include a credit against employer contributions, whether it
is profit sharing, match, some sort of tax credit, dollar-for-
dollar tax credit. If there is not money in the budget to allow
that now, and then it could be something that is phased in over
time, or it could be a situation where those credits build, you
know, on the tax return, those credits build and the employer
can take the credits down the road.
Chairwoman Velazquez. Thanks.
Ms. Collinson, individuals are trying to avoid pulling out
funds to rebound from record losses. Would you be in favor of
suspending distribution for accounts that have been
particularly hard hit? Can you discuss how this could keep
Americans from jeopardizing their long-term retirement
security?
Ms. Collinson. Yes. Many Americans may face the very
difficult decision of taking a loan or a hardship withdrawal
from their plan. One area of particular concern is when a
participant has taken a loan and they fully intend to repay
that loan in 5 years, and then they lose their job. And many
plans require that loan be repaid in full, within a certain
period of time, or it simply becomes a taxable event. Well,
chances are if that participant had the funds in the first
place, they wouldn't have taken out the loan.
So especially for individuals who find themselves in a job
loss situation, it is worthy of consideration to give them some
relief, at least on the penalties, on the 10 percent penalties.
Chairwoman Velazquez. Thank you.
Mr. Dobrow, you mentioned widening the 10 percent corridor
to help companies during the market downturn. However, there is
concern that this could lead companies to sharply undervalue
their pension liabilities.
First, how far would you widen the corridor? And more
importantly, how can you ensure that companies will not
undervalue their plans?
Mr. Dobrow. Well, the proposal so far has been to basically
temporarily change the corridor to a 20 percent corridor
instead of a 10 percent corridor. And the thing behind it here
is that if you have a 30-year time horizon for your assets, why
do we need to pay close attention to valuating them on only a
12-month basis? And so this smoothing stuff spreads it out over
a number of years.
And the thing about actuarial science is what relief you
get granted today, you have to pay for later. And so what
happens is in the rules, it makes sure that future
contributions are higher to make up for the contributions that
don't come in now. And by allowing this smoothing to occur, I
think the plan won't freeze and won't terminate.
Chairwoman Velazquez. So can you talk to us about the
consequences of when a plan is deemed under-funded?
Mr. Dobrow. Well, when a plan gets underfunded, there are
lots of things that kick in that aren't necessarily good. First
of all, if it is very underfunded, participants cannot receive
receive lump sum distributions. Secondly, the benefits freeze
at some point when the benefit becomes underfunded.
Chairwoman Velazquez. Thank you.
I recognize the Ranking Member now.
Mr. Graves. Thank you, Madam Chair. A question for Mr.
Dobrow. You mentioned smoothing assets in your testimony. Could
you expand on that just a little bit?
Mr. Dobrow. Okay. As I said before, you know, if you are
looking for a 30-year time horizon on having enough money in
there for folks who retire, it is kind of artificial that we
decide on a 12-month basis that we are going to value those
assets. And bear markets occur and assets fluctuate in value.
They go up, they go down. If you recognize all of the losses
all at once, it doesn't give you any anticipation that the
assets are ever going to come back, which is a normal part of
the economic ebb and flow. And so by widening out the amount of
time you are looking at those assets, you get to take into
account some of the flow, instead of all ebb.
Mr. Graves. I never heard the term "asset smoothing"
before.
Mr. Dobrow. It is an actuarial kind of term to determine--
you know, to not recognize all of the gains or all the losses
all at once.
Chairwoman Velazquez. Mr. Schrader.
Mr. Schrader. Thank you, Madam Chair. I am a small
businessman. I have been doing that for about 30 years. And the
underlying tone of the panel has been that our goal is to
provide for our own and our employees' retirement fully and
completely, in addition to Social Security, with whatever plan
our firm or business has. I guess I have never assumed that as
a small business person. To me that has always been totally
unaffordable.
I am a veterinarian. I have a small small business. To me,
given the current debacle that has gone on in our market and
the--in my opinion, and I would be curious about yours--the
extreme unlikelihood we will ever see a 14,000 Dow in our
lifetime, there will be a permanent correction as a result of
this debacle. But I am a small businessman, I want to attract
employees. I am going to go with the defined contribution plan
and put in as little or as much as I think I can afford to do
for myself and my employees, just to make my business grow, and
go. And if they want to put a little more money aside or if I
want to put a little more money aside, I will have to do it
differently.
That is real small business thinking here. That is not
grandiose. It is not like I am trying to save the world. I am
just trying to get by and help myself and my employees out.
Convince me that I should do differently is what I am asking.
Mr. Ferrigno. I don't think you should do anything
different. Indeed, a little bit different perspective on Mr.
Keeler's statement that he recommend people saving 19 percent
of pay. We would scare away at least half of our workers if we
told them that they had to save 19 percent of their pay.
The good news is the Congressional Research Service says if
you save 10 percent pay for 30 years, you are going to have 53
percent income replacement. And bear in mind that 10 percent
will include an employer match, which frequently is 3 percent
of pay. For the median-income replacement, Social Security
today is 42 percent of income. So if we are shooting for 70 to
80 percent replacement rate, then the burden for the 401(k)
plan for the median worker is in the 30 to 40 percent.
Mr. Schrader. I just don't think that is very real.
Mr. Ferrigno. It is. We just had testimony here which is
consistent with what we know, that the average worker defers 6
or 7 percent of pay. And there is ample, ample evidence that
level, particularly when accompanied by an employer match is
exceedingly likely to occur, is going to produce retirement
assets adequate for retirement.
Mr. Schrader. Other comments?
Mr. Dobrow. I have about 700 clients just like you, people
who come to me late in their career and say, I have this number
of employees who I really want to take care of and I haven't
saved any money for my retirement, and you know, our system
works really well; we are providing coverage, because when you
get the retirement plan for your retirement, you are going to
scoop in all of your employees at the same time, and it has
been working. We are getting more and more employees getting
benefits from their employer, because it benefits everybody
overall, and taking advantage of the tax break. And if we
didn't have this kind of thing, we would not have coverage of
employees. And I can show you a plan designed for your business
that would be attractive.
Chairwoman Velazquez. Mr. Coffman.
Mr. Coffman. Thank you, Madam Chairwoman. First of all, if
a small business has a defined benefit plan, and that firm is
dissolved, then what happens to the assets of the defined
benefit plan as to the employees that were covered under the
plan?
Mr. Dobrow. I can take that one. A company is not allowed
to dissolve until its defined benefit plan is taken care of.
And what usually happens in the real world of small business is
that all the employees get paid out 100 percent of their
benefit, and the owner gets then their benefit if there is
money left for them.
Now in some distressed situations, the plan might be turned
over to the Pension Benefit Guaranty Corporation, PBGC. But we
don't see that very often in the small business environment.
Mostly it is larger employers that do that.
So what happens is the employees get the money and get to
roll it into their new employer's plan, get to roll it in a IRA
or, in some cases, actually take the money and spend it, and we
call that leakage. But we think that part of it is well taken
care of.
Mr. Coffman. The following question to you. Let's say you
have 20 employees in a small business, and it is a defined
benefit plan. Do they, in and of themselves, form that
investment pool? Or do you throw them in with a bigger defined
benefit pool? How is that done? Because it seems like 20
employees, maybe you can tell me what the actual rate of return
would be and what the asset allocation would be in terms of
equities versus fixed income, because that seems like a pretty
perilous path for a small business.
Mr. Dobrow. Because small businesses are unique, all the
plans are unique. And virtually every small business person has
a financial adviser they are relying on. Defined benefit plans
are invested in the pool, and the pool has certain aspects to
it under ERISA that make it be conservative. And what I tell my
client is, please invest this money conservatively with your
adviser and make sure that it doesn't take too much risk,
because in any given year you really don't want to lose money.
In a normal market, that works great. You also don't want to
get high spikes, a lot of volatility. If you get too much it
will cut down your contribution. So being conservative is the
perfect answer.
Mr. Coffman. Equity versus fixed income, what is
allocation?
Mr. Dobrow. The smart ones were 30 to 40 percent in
equities leading up to this, and we see a lot of people have 80
percent.
Mr. Coffman. It seems that it is not a good deal for
employees because they come in and then the employer tells
them, we have this great plan here. We are going to give you a
lesser salary because we have this wonderful plan. But, of
course, now then we go down the road, then they are in a
distressed situation, so they have underfunded the plan, and
then if it goes into this guaranteed pool, they get pennies on
the dollar. So I just fail to see why that is a rational
decision for a small business.
Mr. Dobrow. First of all, it is just the really highly paid
people that get pennies on the dollar, because the normal rank-
and-file worker gets 100 percent guarantee.
Secondly, they are always paid out first. And I know when I
am doing my distributions to terminate participants and giving
them a check which sometimes is Hundreds of thousands of
dollars, they say this is more money than I have ever seen in
my whole life; thank you so much.
Mr. Coffman. What is 100 percent? Give me an income
scenario.
Mr. Dobrow. It is about $49,000 a year and PBGC sets that
every year.
Mr. Coffman. So $49,000, and below they are going to get
100 percent of what they were promised in their defined pension
plan?
Mr. Dobrow. That is the maximum benefit they would get, so
they might be making more than that.
Mr. Coffman. I think it is a bad bet for small business,
and certainly I do believe this Committee ought to look at
incentives for a defined contribution and how to make sure that
they are appropriate, so that those plans are retained.
Thank you, Madam Chairwoman, I yield the balance of my
time.
Chairwoman Velazquez. Ms. Clarke.
Ms. Clarke. Thank you, Madam Chairwoman, and to Ranking
Member Graves, thank you both for holding this very timely and
important hearing today. I want to also thank all of our
witnesses for testifying before this Committee.
I would just like to raise a few questions with the panel
and I would like to start with Ms. Collinson. Federal law
mandates a 5 percent government wide procurement goal for
women-owned small businesses. However, just 3.3 percent of
Federal contract dollars went to women-owned firms in fiscal
year 2005. In addition, only 34 out of 81 Federal departments,
agencies and commissions recorded by the FPDS met or exceeded
the goal in fiscal year 2005.
Increasing procurement from 3 to 5 percent may help to fund
retirement benefits. How can procurement for women-owned
businesses be improved?
Ms. Collinson. I am going to have to defer. That is really
beyond my expertise. However, I will say the Transamerica
Center for Retirement Studies has done extensive research on
women, and women planning and saving for retirement. And a lot
of the data and trends is very unsettling in that there
continues to be a wide gap in both real retirement confidence
as well as actual retirement savings between men and women in
the workplace.
Ms. Clarke. It would seem to me that certainly, a lot of it
has to do with some of the inequities in terms of how the
businesses are built and the access to the growth and
development and expansion of business. So I guess that is
something we would have to look further into, Madam Chair.
To Mr. Keeler, women-owned businesses invest billions on
benefits for their employees. Health benefits comprise a larger
share of benefit expenditures, with 2004 spending estimated at
about $38 billion. Estimated spending on retirement benefits,
life insurance and disability insurance comprise more than $16
billion, for a total of $54 billion in benefit expenditures.
These benefits are some of the first to be cut in economic
downturn.
What options do these firms have to fund employee benefits
at a time when the stock market has declined by over 30 percent
in the last year and sales have dropped considerably.
Mr. Keeler. Well, I think your assessment is accurate. A
lot of money spent on benefits, the first benefit to go is
usually the 401(k). Health benefits are the last to go because
they are the ones that employers use to attract and retain
employees. So I can't really speak to what kind of relief could
be given to that, and I don't know that relief needs to be
given. I think obviously there is a major problem with the
health care system overall. But that is a topic for another
day.
With respect to relief for retirement plan costs, as I
said, there could be credits that would offer tax credits to
employers based on the amount of money that is contributed.
Whether it is a profit sharing contribution or an employer
match, the employer would receive a tax credit. In addition to
that, broadening or increasing the tax credit for start-up
fees, plan start-up fees, ongoing maintenance fees for the
first, say, 3 to 5 years, I think now it is 3 years, and the
costs for educating participants, again, you have probably
picked up already.
I think there needs to be an emphasis on education because
in general, the investing public lacks the knowledge that they
need to make smart financial decisions. And whether
guaranteeing a positive financial outcome is the employer's
responsibility or not, giving the employee the fighting chance
to have a positive financial outcome and have the retirement
income that they need starts with educating and helping them
understand how to invest, where to invest, when to invest, how
much to invest and so on.
Ms. Clarke. Well, thank you very much. I yield back the
balance of my time, Madam Chairwoman.
Chairwoman Velazquez. Mr. Thompson.
Mr. Thompson. Thank you, Madam Chairwoman. The first
question I will just throw out to the whole panel regarding the
savers' credit, I know when the IRS drafted that it was very
confusing. So my question is of your opinions on what the
status is it actually being used? And, what can be done to
encourage more use of that?
Ms. Collinson. I would like to respond to that. First of
all, the Transamerica Center for Retirement Studies commends
the IRS for making changes to better promote the savers'
credit. When it was first implemented, it was legislated and
everybody on the Hill called it the savers' credit. Yet when
the tax forms were printed, it was referred to by a number of
different names including things like the credit for qualified
retirement savings contributions, sort of rather a complicated
version, and it was not real consistently described through the
forms and publications. And looking at the income eligibility
requirements, individuals who are likely to qualify for the
savers' credit are also likely to complete the 1040 EZ form.
Well, since the 401(k) contribution comes out pretax
dollars, the 1040 EZ wasn't even contemplating that question.
So the IRS, while they did not add it to the form itself, they
at least added it to the instructions, so that if somebody read
the instructions and knew that they contributed to a retirement
plan, then they would know to use a different form in order to
claim the credit. So that goes a long way.
However, given our survey reports, only 18 percent are
aware of it. There is a big risk that there are 401(k) savers--
in fact, 50 percent of our survey respondents in that income
demographic said they participate in the plan--there are a
large number of survey respondents and savers who may very well
qualify for the credit, they just don't know about it. And then
there is also the issue that, given that it is not refundable,
those without a tax liability obviously don't receive it right
now. So more can be done.
Mr. Ferrigno. If I can just comment, PSCA was very
instrumental in drafting the savers' credit and it is not by
accident that there is no obligation whatsoever for the
employer to administer that. We promoted heavily to our
organization with our members who are plan sponsors.
Ms. Collinson mentioned the fact that it is not refundable,
and you could, if you wanted to, go even one more. At some
point there are people who cannot afford to substitute
consumption for savings. The savers' credit even could exceed
the contribution it has made and actually replace the cash that
is saved. It is a matter of what you want to do and how much of
a tool you want it to be. But the fact that it is not
refundable is certainly a problem.
Mr. Thompson. Well, Mr. Ferrigno, while I have your
attention, I have a question specifically for you, please. Some
have encouraged mandatory payroll deductions for IRAs. I still
have some concerns about this, since there will likely be
administrative or, frankly, other burdens; and that mandatory
IRAs could dissuade employers from offering benefits as a part
of their package for attracting and retaining experienced
employees, specifically such as health insurance. What are your
views on that?
Mr. Ferrigno. First, the issue would mean that through
payroll that it is mandatory, and so in a world where employee
benefits are voluntary, it is disturbing for us that they are
talking about a mandate to provide a benefit. There is
definitely an element of substitution and, frankly, poor
substitution.
One thing we know is that when a small plan adopts a plan,
they are terrific champions. They have higher-than-normal
participation rates because the owner has personal contact with
all the participants. That would not exist in a mandatory
program where basically there would be a form. Actually this
would be a default,, but you wouldn't have the support of the
business owner; it would be something that would be forced on
them.
And, again, what is looming out there that isn't talked
about nearly enough is it is being portrayed as having minimal
or no impact on the small plan that is going to be required to
offer this. And as I mentioned in my oral testimony, if you
look at the legislation as introduced last year, these are
ERISA plans, and so there has to be a fiduciary that has to
select a default investment and has to determine that the fees
are reasonable. It can't be the IRA; the IRA provider cannot do
that. That is not allowed under ERISA.
So I urge this Committee when this issue is raised--and
again I think it is going to be in the budget tomorrow-- to
take a look at it from the small business perspective.
Mr. Thompson. Thank you sir. Thank you, Madam Chair.
Chairwoman Velazquez. Sure. Mrs. Dahlkemper.
Mrs. Dahlkemper. Thank you, Madam Chairwoman.
Mr. Keeler, currently the ERISA rules limit the amount of
pre-funding a plan can undertake. Someone suggested increasing
or removing the limits so employers can save as much as they
can during the good years.
What are the concerns with allowing businesses to make
these larger contributions? And do you believe that pre-funding
would ease some of the challenges caused during downturns in
the economy such as we are experiencing right now.
Mr. Keeler. Are you speaking about defined contribution
plans--
Mrs. Dahlkemper. Yes.
Mr. Keeler.--or defined benefit? Allowing employees to put
more than, say, 25 percent of covered payroll in, I don't see
any reason to limit it to 25 percent. So I don't see a
disadvantage to that. I think it would be a good thing. I don't
know how many employers, especially right now, would do that or
could afford to do that. But by all means, I think it is a
great, great idea.
Mrs. Dahlkemper. During the good times--obviously these are
not those times--but as we look forward to the future. Would
anyone else like to comment?
Mr. Dobrow. I would. The Pension Protection Act for defined
benefit plans actually allows you to pre-fund a little bit more
than you would before, and it has had a great effect. The only
downside I see to allowing defined contribution plans to do it
is the loss of revenue.
Mrs. Dahlkemper. Okay, thank you. I yield back my time now.
Chairwoman Velazquez. Mrs. Halvorson.
Mrs. Halvorson. Thank you, Madam Chairwoman.
I am going to start with Mr. Speer, basically because we
are both fellow Illinoisans, and then if anybody else would
like to touch this one. My husband and I have two small
businesses and many people in my district are all small
business. And because of the economic downturn, they are
finding it very difficult to borrow and meet the capital needs
of the business expenses of their costs. So one of the
proposals that has been put forward to us and to a lot of other
people are to use the funds from their SEP IRAs.
Now can you tell me, in your view, what are some of the
potential downsides of doing this?
And Mr. Speer, if you would like to start, and if anybody
else would like to talk about that.
Mr. Speer. Sure. I can just give you my personal views on
that. Again I am not an expert on this, but, you know, we being
a small business try to encourage people to save money long
term and you never want people to take their money out for the
short term. So we try to do our best, we treat our employees
like family, like most small businesses do, and try to do
whatever we can to have them think, to educate them for the
long term. And so I would probably try and discourage our
employees from taking out short term and think long term.
Mrs. Halvorson. Not so much employees we are talking-- my
husband and I own the business, we have to make ends meet, we
have to make payroll. And if the banks are not loaning there
has to be a way. And when somebody says, well, you can borrow
against this--and that might be some people's only way to do
it--you can say you need to save or discourage it, but there
has to be something.
Mr. Speer. I would agree with that, when people come to
desperate measures there are certain things that are happening
now and people might result in desperate actions. But it is
hard to dissuade people from doing that.
Mrs. Halvorson. Anybody else want to answer that?
Mr. Ferrigno. My only caution is that the IRS might be
interested in these transactions. There are limits on what you
can do and what you can't do. And I am not an expert.
Mrs. Halvorson. Why are accountants suggesting it then?
You can't always trust your accountant? Okay.
Mr. Ferrigno. I am not a tax attorney.
Mr. Keeler. I would just comment that most defined
contribution plans, not simple IRAs or SEP IRAs, could have
them in provision and it would be perfectly legal for you or
your husband to take a loan. Plan costs have come down a lot in
the last 5 to 10 years, so for a small business with 5 or 10
employees to have a 401(k) plan, it wouldn't be cost
prohibitive in any way, shape, or form. You simply check a box
saying you want to have a loan provision, and you are able to
borrow against that balance, up to 50 percent of the balance in
the account.
Now, there are other types of plans where loans to owners
are prohibited, and for good reason, you know; there could be
fraudulent activities, and the Department of Labor doesn't want
to allow any employer to be able to access employee funds in a
pooled retirement account. But in the case of a modern-day
401(k), you would be allowed to do that.
Mrs. Halvorson. Lucky for us we don't have to. But a lot of
the other employers that come to us, they are like, what do we
do? We can't even get another loan, the banks aren't loaning.
So it is a huge concern. And so when that is brought up to
them, they are trying to figure out ways to figure out what is
going to be in their best interest.
Mr. Dobrow. I will give you my business card. I think I can
take care of that for you.
Mrs. Halvorson. I got it. Thank you.
Chairwoman Velazquez. Mr. Sestak.
Mr. Sestak. Thank you, Madam Chairwoman. I am sorry I
wasn't here earlier. If you answered these, I apologize.
I will ask you three quick questions. In the tough
environment we are in, would it help us to go back to the pre-
PPA corridor of 80--I think it was 80 to 120 percent of market
value--rather than the present 90 to 110 to do that now? Would
that help?
Mr. Dobrow. Yes, it would help. You know, that is one of
the proposals that has been offered forth.
Mr. Sestak. And I guess you had it in your testimony. I am
sorry I missed. Before, when you evaluated your interest rate,
you used to be able to do it--I think it was corporate bonds if
I am not mistaken--over 30 years. We might not even want to
change that to this three-segment type. Should we go back, at
least temporarily, to the old pre-PPA era, straight valuation?
Mr. Dobrow. A lot of compromises get made. I think that a
lot of people were happy with the three-segment rates. And I am
not sure that changing them backward would be all that great an
idea.
Mr. Sestak. Because of the compromises?
Mr. Dobrow. The Treasury and what they are trying to
accomplish.
Mr. Sestak. How about amortizing unfunded liabilities? It
used to be 3 years. Would you extend that at this time?
Mr. Dobrow. We are asking for a temporary, like 1 or 2
years, just the interest on it for 2 years and then amortize it
over 7. That would give the asset some time to probably come
back a little bit and help make it less onerous.
Mr. Sestak. I don't know if this is yours or not, and I
apologize for popping in here late. Some 401s are supposed to
take care of investor risk. I am not sure they do. I think that
is a little challenge, but I don't think we do longevity risk
very well, which is annuities. Should we move towards that
almost as a "you must opt out" type of an approach to take care
of the longevity risk?
Mr. Ferrigno. Recently I think that way. But first of all,
as far as managing investment risk in almost any 401(k) plan in
America, if you want to, you can invest in a government
securities bond or a stable value product or a money market
fund.
Mr. Sestak. Should we make it mandatory that everybody
offers an index fund, for example?
Mr. Ferrigno. No, no; 75 percent of the plans that are
surveyed do offer an index fund. I think that a plan sponsor
has to consider an index fund. But when we get into mandating
various planned investments it is a very slippery slope.
Mr. Sestak. Slippery towards what?
Mr. Ferrigno. Well, there is talk about socially targeted
investments. In State government plans there are politically
directed investments. So we have some concern in that area.
On the subject of annuities, and I was present yesterday at
Ed and Labor, you have to understand that 20 percent of 401(k)-
type plans offer an annuity option. Nobody selects it. Nobody
selects it. There is no demand for it. And in a defined benefit
plan, some defined benefit plans let you have a lump sum
distribution. A defaulted defined benefit plan is an annuity
payout. About half of the defined benefit plans offer a lump
sum. In order to get that lump sum you have to, if you are
married, you have to get a waiver of the joint annuity. You
have to go and find a notary and waive your right to get a lump
sum. Ninety to 95 percent of folks do that.
So the bottom line is there is no demand for annuity
product at retirement because what you are saying is, I haven't
even retired yet, I am going to retire, and you want me to make
a decision now about what to do with my money for the rest of
my life. What we have found is that after people are retired
for a period of time, they do consider annuities. You have to
remember the role of Social Security, that Social Security
provides more than half of the income for most retirees. That
is in the form of an annuity. So maybe they are making the
rationale decision--
Mr. Sestak. Would it help--if I could ask one last
question--would it help people make a rational decision, if we
can, to post trading activity; how many transaction costs, how
many transactions there are each year in your 401 or your
mutual fund?
Mr. Ferrigno. Yes. There is a debate about that and plan
sponsors are responsible for reviewing fees. Transaction costs
are a fee. And we had taken a public position that transaction
costs should be provided.
Mr. Sestak. Should be provided also.
Mr. Ferrigno. Yes, that is our position. And they can be
very material.
Chairwoman Velazquez.. Mr. Moore.
Mr. Moore. Thank you. I would like to pose a question to
anybody on the panel who cares to respond. I would like to ask
a question about the state of our Nation's retirement system,
the need to consider more comprehensive proposals for reform.
Data shows that many members of the baby-boom generation don't
have sufficient resources to maintain their standard of living
in retirement, a situation that has been made worse by the
decline in housing values and economic downturn recently in the
past year.
Now, the lack of retirement plan coverage is an issue for
small business owners and employees. Not only do small
businesses often not have the resources available to offer
retirement plans, but the movement towards low-cost defined
contribution retirement plans has increased the volatility of
plan assets, as they are invested heavily in equities.
What types of comprehensive reform efforts are needed to
help ensure that a larger number of people have safe and stable
ways to save for retirement? For example, a gentleman by the
name of Dean Baker, an economist for the Center for Economic
and Policy Resources, suggests the creation of a voluntary
federally run pension program that would offer participants a
modest but guaranteed rate of return.
Any thoughts about that or other plans?
Mr. Keeler. I would just say, to expand on a key issue that
you have pointed out and Mr. Coffman pointed out before he
left, I think the emphasis needs to be on defined contribution
plans more so than defined benefit plans, because defined
contributions are more prevalent.
Possibly differing from Mr. Ferrigno's testimony, I find
that about only 56 percent of people participate in a 401(k)
plan. That is nationwide; 56 percent participate and only 15 to
20 percent of small businesses have 401(k).
So, to your point regarding--was it Mr. Dean's testimony
earlier this morning--there is a broad, very broad problem. Is
it a small business owner's responsibility to guarantee a
positive financial outcome for every employee that they have?
Probably not. It is not feasible to do that. But, again, when
the statistics may say that Social Security provides 50 percent
of people's retirement benefits and that if somebody saves 6 to
7 percent and the employer matches 3 they get 10 percent they
are going to be fine,.
I am seeing a lot of people that are 55 that have 35- to
$50,000 saved for retirement. The statistics show, if you want
to talk statistics, the average account balance of people in
their fifties is about $50,000. That is not enough to provide a
positive financial outcome. So we can look at who is saving and
who isn't and what the statistics are, but I am seeing on the
ground that the numbers don't add up.
How the government steps in to mandate a plan or provide a
plan that people can opt into, again, I come back to education.
Everybody wants a silver bullet. They think that if Social
Security is reformed, that they are going to be fine in
retirement. Social Security was never intended to be the only
means of retirement income. There is a three-legged stool most
of you probably learned about back in home economics class:
savings, pensions, and Social Security. Well, Social Security
is at risk. Savings is at an all-time low. The stock market we
are, you know, down 40 percent. People are questioning the
validity of long-term savings. So I don't know what needs to be
done, but something needs to be done.
Ms. Collinson.. I would like to add to his response. Our
research at the Transamerica Center for Retirement Studies has
found that--corroborates everything that we have heard. Baby
boomers aren't saving enough and haven't saved enough and are
now facing a real crisis. But our research has also found that
there are a lot of things baby boomers can and should be doing
for themselves in order to help better their situation in terms
of learning more about saving and investing, actually
calculating a retirement savings goal versus guessing at the
amount which nearly half say they have guessed. Very few have a
written plan. They don't know how they are going to bridge
their savings gap. And the common solution is a very large
percentage plan to work beyond the age of 70. Well, reality is
sometimes life dictates otherwise. Something could force
somebody out of the workforce.
So as we think about ways to help the baby boomers, I think
it is really important to think of ways that we can help them
help themselves. Because by the time you reach 50 years old, no
two situations are alike. People have different facts and
circumstances, expenses, families, commitments, levels of
savings. So to help educate people and get them the advice that
they need or at least access to advice so that they can make
informed decisions and put together a more rational plan.
Chairwoman Velazquez. Would the gentleman yield?
Mr. Moore. Certainly.
Chairwoman Velazquez. Ms. Collinson, at what point, how can
we address the issue of educating people, young people, at what
level? Whose responsibility? Because it is just amazing that
they go to college, graduate, and still don't know the value of
saving and thinking ahead of terms of retirement.
Ms. Collinson. Well, one of our research questions which I
found really interesting and compelling, we are still sorting
through the data, but directionally there is a real high level
of interest in terms of what the government can do, and that is
to start Americans early in terms of educating about financial
literacy, and that could be junior high school. You know, first
and foremost, we want kids to graduate from high school with
basic math skills so that they can balance a checkbook or
understand compounding investments or compounding interest.
However, starting early financial literacy in schools can help
prepare kids. And where we are at right now in terms of
education, the extent to which parents are helping their kids
with their homework, there could be some residual benefit for
grown-ups as well.
Mr. Keeler. About 2 years ago, a college professor asked me
to fill in for one of his undergraduate classes, and it was the
second day of class. And he warned me, he said most of the
students haven't gotten their textbooks yet. They had a reading
assignment but most of them don't have their text, so they
won't have read it. We have some jocks in there, they will fall
asleep. So I am warning you up front.
So I go in and I covered the two or three chapters that
they were supposed to have read. Then I just started covering
stuff that I thought was important, like what is a mutual fund?
How do you choose between a mutual fund? And why would you buy
a house instead of renting an apartment? How do you buy a
house? Why would you do it? And I can tell you, there weren't
any jocks sleeping. They were all, they were hanging on every
word I was saying to them. They were soaking it up like
sponges. And at the end, this doctoral candidate said to me,
Mr. Keeler, I have been in school almost my whole life and no
one has ever taught me this stuff. Why am I just now learning
this? And I am not even learning it out of a textbook. I am
learning it because you are ad-libbing and shooting from the
hip because you didn't want to pace the class and go through
the chapters.
FPA and a lot of other nonprofits are already geared to try
to provide this kind of literacy. There is a program called
Junior Achievement, where financial planners go out to schools
and teach this kind of thing. It just needs to be mandated. As
I shared in my oral testimony, only three States require at
least one semester course dedicated to personal finance. And in
another 17, it is integrated into math. So it is kind of lost
in the process.
So I think that is where it starts. And even public service
announcements or TV ads that show modern-day plan participants,
not kids in high school, why you don't try to time the market,
statistical data that shows market timing doesn't work, that
shows that if you are not in the market every day you are not
going to have a fighting chance to get market returns, and that
you are just shooting yourself in the foot.
Mr. Ferrigno. We are having a big problem in that we are
making value judgments about the 401(k) system based on 60-
year-olds. The first 401(k)s came in around the mid-eighties
but were relatively unheard of until the nineties, and they
took off in the mid-nineties. So we are judging the system
based on the experience of someone that may, if they are lucky,
have had probably 10 years in the plan. There is data
available, a huge database about half the 401(k) participants
in the country, and they looked at people who have been in the
plan since between 1999 and 2006. They found that people in
their sixties that had been with an employer for 30 years but
hadn't been in the plan for 30 years averaged $193,000 in their
final balance. So it is a great concern to me.
And you referenced Mr. Baker, that judgments are being made
on a system without saying what is it going to do when it is
mature? And the good news is that these people did have this
opportunity, because the bottom line is the defined benefit
system provided benefits to very, very few people.
So your question about what can we do, what we have seen in
the system, which is terrific, is by design 401(k) plans are
very flexible and the government has cooperated in that. And by
turning things around in the marketplace, we came back with
automatic enrollment, we came up with target date funds, we
made advances in education and advice. So what we need from the
government is to be the referee, but let us play the game.
Chairwoman Velazquez. Thank you. Mr. Graves.
Mr. Graves. Just a point of clarification. You mentioned,
Mr. Ferrigno, you mentioned the average person. What, 6 or 7
percent; is that what you said?
Mr. Ferrigno. Yes.
Mr. Graves. And you mentioned 19 percent would be optimum.
Does that include the employer?
Mr. Ferrigno. No. The 6 or 7 percent does not include--that
is a good range of what we are getting for deferral. And the
most common employee match is 50 percent of the first 6, is 3
percent going on in there. And what I cited was government work
from the Congressional Research Service that says if you do
contribute that level, you are going to have very adequate
income replacement. We have to fix this market crisis. We can't
do anything if the markets don't work.
Chairwoman Velazquez. I would like to ask a question, to
all the members at least, any of you who might want to answer;
but, in light of the Committee here, focusing on providing some
type of retirement relief, given the current economic
conditions and the fact that so many workers reaching
retirement age have suffered staggering losses in their
investment accounts, would you be in favor of raising the
required minimum distribution age from 70-1/2 as a way to
provide temporary relief for these workers?
Mr. Keeler. I would. And I commend Congress for doing that
for 2009. I think it is pretty likely that it should be done
again for 2010. But, by all means, I think it should be raised.
I don't think it should be a requirement. Let's face it, based
on what I am saying, a lot of people need that money anyway,
because they have they haven't sufficiently saved for
retirement. So whether it is required or not, they have
probably been taking it since they were 65. But for those that
are fortunate enough to be in a position where they don't need
to, they shouldn't be forced to, especially in a down market.
Mr. Ferrigno. These are tax policies. They should be
repealed permanently.
Mr. Dobrow. We agree.
Chairwoman Velazquez. And given that older workers have
been more adversely affected than younger ones, should we
consider allowing older workers, ones over 55, the ability to
make larger catch-up contributions?
Mr. Ferrigno. Absolutely.
Mr. Keeler. Sure. Why not?
Chairwoman Velazquez. If there is anything in your data--
and I would like to ask this question to Ms. Collinson--
indicating older workers will make those larger contributions,
given the decreased confidence in the financial market?
Ms. Collinson. What I can share from our data is there is
an opportunity to further increase awareness of catch-up
contributions of what we have right now. Many of the workers
surveyed indicated they do have the opportunity through their
company-sponsored plan. And I believe about 25 percent, I would
have to recheck the number, are taking advantage. And those who
aren't we asked why, and it is, by and large, because right now
they can't afford to.
Chairwoman Velazquez. Okay. Well, let me take this
opportunity to thank all of you. This is a very important
issue. And we are going to continue to look at any regulatory
relief in ways of distribution and contribution that could be
made by the IRS administratively, talk to them and see what can
be done. And also, we are going to be having discussions with
the Committee on Ed and Labor regarding some of the issues and
concerns that you have raised.
I ask unanimous consent that members will have 5 days to
submit a statement and supporting materials for the Record.
Without objection, so ordered. This hearing is now adjourned.
[Whereupon, at 3:00 p.m., the committee was adjourned.]
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