[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]



 
        THE CHALLENGE OF RETIREMENT SAVINGS FOR SMALL EMPLOYERS 

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

                                HEARING

                               before the

                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                              HEARING HELD
                            OCTOBER 2, 2013

                               __________

                 [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

            Small Business Committee Document Number 113-039
              Available via the GPO Website: www.fdsys.gov


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                   HOUSE COMMITTEE ON SMALL BUSINESS

                     SAM GRAVES, Missouri, Chairman
                           STEVE CHABOT, Ohio
                            STEVE KING, Iowa
                         MIKE COFFMAN, Colorado
                       BLAINE LUETKEMER, Missouri
                     MICK MULVANEY, South Carolina
                         SCOTT TIPTON, Colorado
                   JAIME HERRERA BEUTLER, Washington
                        RICHARD HANNA, New York
                         TIM HUELSKAMP, Kansas
                       DAVID SCHWEIKERT, Arizona
                       KERRY BENTIVOLIO, Michigan
                        CHRIS COLLINS, New York
                        TOM RICE, South Carolina
               NYDIA VELAZQUEZ, New York, Ranking Member
                         KURT SCHRADER, Oregon
                        YVETTE CLARKE, New York
                          JUDY CHU, California
                        JANICE HAHN, California
                     DONALD PAYNE, JR., New Jersey
                          GRACE MENG, New York
                        BRAD SCHNEIDER, Illinois
                          RON BARBER, Arizona
                    ANN McLANE KUSTER, New Hampshire
                        PATRICK MURPHY, Florida

                      Lori Salley, Staff Director
                    Paul Sass, Deputy Staff Director
                      Barry Pineles, Chief Counsel
                  Michael Day, Minority Staff Director



                            C O N T E N T S

                           OPENING STATEMENTS

                                                                   Page
Hon. Sam Graves..................................................     1
Hon. Nydia Velazquez.............................................     2

                               WITNESSES

Ms. Catherine Collinson, President, Transamerica Center for 
  Retirement Studies, Los Angeles, CA............................     3
Ms. Paula A. Calimafde, Bethesda, MD, testifying on behalf of the 
  Small Business Council of America and the Small Business 
  Legislative Council............................................     5
Mr. C. Roy Messick, III, CPA, QPA, TPP Retirement Plan 
  Specialists, LLC, Overland Park, KS............................     6
Mr. Ray Rucksdashel, Chief Financial Officer, Quest-Tec 
  Solutions, Inc., Houston, TX...................................     8

                                APPENDIX

Prepared Statements:
    Ms. Catherine Collinson, President, Transamerica Center for 
      Retirement Studies, Los Angeles, CA........................    28
    Ms. Paula A. Calimafde, Bethesda, MD, testifying on behalf of 
      the Small Business Council of America and the Small 
      Business Legislative Council...............................    35
    Mr. C. Roy Messick, III, CPA, QPA, TPP Retirement Plan 
      Specialists, LLC, Overland Park, KS........................    47
    Mr. Ray Rucksdashel, Chief Financial Officer, Quest-Tec 
      Solutions, Inc., Houston, TX...............................    55
Questions for the Record:
    None.
Answers for the Record:
    None.
Additional Material for the Record:
    ACLI - The American Council of Life Insurers.................    58
    AICPA - American Institute of CPAs...........................    64
    FSR - Financial Services Roundtable..........................    73
    Ndp/analytics - Nam D. Pham, Ph.D., Managing Partner and 
      Alexander J. Triantis, Ph.D., Senior Advisor...............    76
    Principal Financial Group....................................   111


        THE CHALLENGE OF RETIREMENT SAVINGS FOR SMALL EMPLOYERS

                              ----------                              


                       WEDNESDAY, OCTOBER 2, 2013

                  House of Representatives,
               Committee on Small Business,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 1:00 a.m., in Room 
2360, Rayburn House Office Building, Hon. Sam Graves [Chairman 
of the Committee] presiding.
    Present: Representatives Graves, Chabot, Coffman, 
Luetkemeyer, Mulvaney, Tipton, Hanna, Huelskamp, Schweikert, 
Bentivolio, Collins, Rice, Velazquez, Payne, Meng and Kuster.
    Chairman Graves. Good afternoon. I will call the hearing to 
order. Today we are going to meet to examine the challenges 
small employers face in saving for retirement.
    Americans have always found it difficult to save. In June, 
a bankrate.com survey found that 76 percent of Americans were 
living paycheck to paycheck. Our workforce is aging, life 
expectancy is increasing, and the future of the Social Security 
program still remains in doubt. With that, saving for 
retirement seems more important than ever.
    Small employers understand the importance of providing good 
benefits, including retirement savings options, to attract and 
retain quality employees. However, in today's economy that can 
be very challenging.
    The Government Accountability Office recently reported that 
only 14 percent of small employers sponsor a retirement savings 
plan for their employees. Some small business owners have said 
offering retirement plans is just too complex or too time-
consuming. Surveys by the Transamerica Center for Retirement 
Studies, whose president is testifying today, have found that 
small businesses continue to lag behind large companies in 
sponsoring retirement options. Small business confidence polls 
have shown that the economic recovery is still uneven, and 
entrepreneurs and their employees may not be saving more for 
retirement.
    We look forward to the new data that Transamerica is 
releasing at today's hearing, and during this hearing we will 
explore the state of retirement savings by small businesses and 
their employees, the barriers they face, and how we can 
encourage more small businesses to offer these important 
benefits.
    I do want to thank all of our witnesses for being here 
today. Some of you traveled a long way, and we appreciate that 
very much.
    And with that, I will turn to Ranking Member Velazquez.
    Ms. Velazquez. Thank you, Mr. Chairman.
    Retirement security is a universal goal for most Americans. 
As part of that retirement plan, most Americans rely on 
employer-based retirement plans. As the baby boomer generation 
ages, it is critical that small employers and their employees 
have financial security as they enter their retirement years. 
But the program remains that only 14 percent of small firms 
offer such a benefit. With 99 percent of all businesses in this 
country being small businesses, if we are truly going to make 
retirement security a reality, we must address their needs.
    Small firms not only face the challenge of offering a 
retirement vehicle, but enrolling their employees. Roughly 50 
percent of the private-sector workforce participates in an 
employer-sponsored pension plan. While much of the problem can 
be attributed to a lack of employer offerings, nearly 20 
million workers actively choose not to participate in plans 
offered by their employers. Improvements to the retirement 
system must meet the needs of business owners, while also 
encouraging more workers to participate.
    It is clear that small firms face many obstacles when 
setting up a retirement plan. First, there is the cost of 
selection and administration. The costs do not stop there 
either, since employers are required to make much in 
contributions much of the time.
    Finally, small firms face ongoing fiduciary duties, such as 
reviewing investment and running discrimination tests, all 
while trying to run a business. Our system seems to almost 
discourage small businesses from offering retirement packages, 
and helps explain the inequity in coverage rates for workers of 
small and large companies.
    It is clear that to encourage small businesses to start 
offering plans, something needs to be done to address this 
obstacle. Small employers face too many challenges and simply 
will not offer a retirement plan if they perceive that the 
burdens outweigh the benefits. Understanding these challenges 
can help us better address the solutions to low participation 
rates among small entities.
    One approach may be to offer increased tax incentives to 
small business owners who choose to sponsor a plan. Another 
method to encourage workers to participate is to create an 
automatic enrollment IRA.
    These and other ideas merit further discussion, but one 
thing is absolutely clear: We must act soon to help small 
businesses and their employees plan for their future. For these 
reasons we need to make sure that retirement plans are 
attractive for small businesses as their retirement savings is 
integral to our Nation's, and that--our Nation's future, and 
that is why we are here today. This hearing would allow members 
of this Committee to discuss the kind of vehicles that many 
small businesses use to provide retirement benefits and ways in 
which they can be improved upon. With the proper tools 
America's small firms can sustain the economic growth currently 
under way simply by investing in their futures.
    And with that, I thank all the witnesses for being here 
today, and I look forward to your comments.
    Thank you, Mr. Chairman. I yield back.
    Chairman Graves. All right. Our first witness today is 
Catherine Collinson, who is the president of Transamerica 
Center for Retirement Studies in Los Angeles, California. She 
is a retirement and market trend specialist and oversees all of 
Transamerica research and outreach activities, including its 
annual retirement survey, which is being released today at our 
hearing.
    We appreciate you coming all this way; thanks for being 
here.

  STATEMENTS OF CATHERINE COLLINSON, PRESIDENT, TRANSAMERICA 
 CENTER FOR RETIREMENT STUDIES, LOS ANGELES, CALIFORNIA; PAULA 
   A. CALIMAFDE, BETHESDA, MARYLAND, ON BEHALF OF THE SMALL 
BUSINESS COUNCIL OF AMERICA AND THE SMALL BUSINESS LEGISLATIVE 
  COUNCIL; C. ROY MESSICK, III, CPA, QPA, TPP RETIREMENT PLAN 
 SPECIALISTS, LLC, OVERLAND PARK, KANSAS; AND RAY RUCKSDASHEL, 
 CHIEF FINANCIAL OFFICER, QUEST-TEC SOLUTIONS, INC., HOUSTON, 
                             TEXAS

                STATEMENT OF CATHERINE COLLINSON

    Ms. Collinson. Well, thank you, and good afternoon. I am 
Catherine Collinson, president of the Transamerica Center for 
Retirement Studies, or TCRS.
    Today TCRS released new research as part of its 14th Annual 
Transamerica Retirement Survey of 750 employers and more than 
3,600 workers, including those from small companies of 10 to 
499 employees.
    Employer-sponsored retirement plans in small business play 
a critical role in facilitating savings among American workers. 
TCRS research findings underscore the importance of these 
benefits in helping workers prepare for retirement. Eighty-
eight percent of small-company workers value retirement 
benefits as important.
    I would now like to share four key findings from our 
research. Number one, plan sponsorship rates offer room for 
growth. Plan sponsorship rates, which may come as a surprise, 
are already relatively high. Seventy-one percent of companies 
with 10 to 99 employees offer a 401(k) or similar plan, such as 
a SIMPLE or SEP, and nearly 9 out of 10 companies with 100 to 
499 employees do so, but more can be done, especially for the 
smallest of companies.
    Nearly one-third of small companies that do not offer a 
plan say they would be likely to consider to joining a multiple 
employer plan, which is a type of group plan offered through an 
entity that handles many of the fiduciary and administrative 
functions.
    Key finding number two. Plan sponsorship often does not 
lead to coverage for part-time workers. Plan sponsorship is not 
necessarily synonymous with plan coverage. A critical component 
of expanding coverage is encouraging employers to extend 
eligibility to their part-time employees. At small companies 
only 36 percent of part-time workers are offered a plan 
compared to 68 percent of full-time workers.
    Key finding number three. Few companies use automatic 
enrollment. Automatic enrollment is widely recognized as one of 
the most effective ways to increase plan participation; 
however, only 19 percent of small companies take advantage of 
it. The median default contribution rate is just 3 percent of 
annual salary, which is insufficient to ensure a participant's 
secure retirement.
    Key finding number four. Most small business workers need 
to save more. The majority of small-company workers plan to 
work past age 65, and the majority plan to continue working 
after they have retired, mostly for income-related reasons to 
bridge savings shortfalls.
    Perhaps the ultimate measure of a worker's retirement 
outlook is his or her level of savings. In 2013, the estimated 
median household savings in retirement accounts among baby 
boomers, which the generation closest to retirement, is just 
$92,000 for small-company workers.
    It is clear that small business workers need to save more, 
and tax incentives are powerful motivators for saving, yet few 
small-company workers are aware of the saver's credit, which is 
available to low- to moderate-income tax filers who save in a 
qualified plan or IRA.
    In light of these research findings, TCRS offers the 
following five recommendations: One, expand tax incentives to 
help offset the cost for small employers to establish a new 
retirement savings plan. The current start-up tax credit only 
allows small businesses to claim up to $500 for 3 years.
    Two, for small businesses in which a stand-alone 401(k) 
plan is not feasible, make multiple employer plans, or MEPs, 
more attractive to small employers. MEPs should be simple to 
administer and provide safe harbors from fiduciary liability 
for each employer. In addition, small employers should be 
protected from liability-related errors by other employers who 
are participating in the plan, and tax incentives should be 
provided to encourage participation in these plans.
    Three, create additional tax incentives and safe harbors to 
encourage plan sponsors to expand coverage to their part-time 
employees.
    Four, increase the default contribution rates in plans 
using automatic enrollment. The current 3 percent minimum 
default contribution rate sends a misleading message to plan 
participants that savings at these levels is sufficient for a 
secure retirement. A new automatic enrollment Safe Harbor under 
which employees who are enrolled at 6 percent with increases up 
to 10 percent, coupled with a tax credit for adopting it, could 
drive up plan sponsorship rates as well as participant savings 
rates.
    And number five, increased savings along low- to moderate-
income workers by promoting the saver's credit and expanding it 
so that more tax filers are eligible.
    In conclusion, TCRS commends Committee Chairman Graves and 
Ranking Member Velazquez on their consideration of the 
particular challenges and needs of small business. We 
appreciate the opportunity to share our views and research.
    Ms. Velazquez. Mr. Chairman, it is my pleasure to introduce 
Ms. Paula Calimafde. Ms. Calimafde is a principal at the law 
firm of Paley Rothman, which is located in Bethesda, Maryland. 
She chairs the firm's retirement plans, employee benefits, and 
the government relations practice groups. Ms. Calimafde is 
testifying today on behalf of the Small Business Council of 
America and the Small Business Legislative Council.
    Welcome, and thank you for coming back to our Committee.

                STATEMENT OF PAULA A. CALIMAFDE

    Ms. Calimafde. Well, thank you, Chairman Graves and Ranking 
Member Velazquez, for having these hearings today.
    As I think we all recognize, this is an extraordinarily 
important topic. The success of the private retirement plan 
system means the difference between a comfortable retirement 
and a not comfortable retirement, and so the work you are doing 
today, I can think of not many things that are more important 
than what you are doing.
    I will be citing a number of statistics and data that will 
show that the small business retirement plan system is far 
healthier than people believe--so, for instance, the 14 percent 
number, I think, the data that has been just released from the 
Social Security office is much more in line with the data that 
you just came up with--but the system is precariously balanced 
on tax benefits. And right now those tax benefits are in line 
so that when a small business owner or owners decide whether 
they want to sponsor a retirement plan or not, they go through 
a cost-benefit analysis, and they determine what are the 
benefits to be derived to the owners and the business, and they 
compare it to the costs and burdens that they will have to 
undertake to sponsor that plan. And one of the costs, by the 
way, are the costs of making contributions for the employees of 
the company, because the Tax Code forces significant 
contributions to be made to those employees.
    Because of this, any significant cuts to the benefits that 
can be derived by the owners will cause small business plan 
formation to either be stopped, plans frozen, or new plans will 
not be formed. So, it is critically important that steps that 
are taken by you--all assist in that cost-benefit analysis by 
not overburdening the costs and increase the benefits, or at 
least leave the benefits alone.
    There are places where the system can be simplified. We 
have set forth a number of ideas in the back of our testimony. 
I hope I can get to them today. If not, I am more than happy to 
discuss them with you. For instance, one idea is that we could 
come up with some kind of lottery system inside a small 
business, for instance. So any employee who is willing to make 
a 3 percent contribution into the plan is entered into a 
lottery, and the names of the non-highly compensated employees 
only are put into this hat. One name gets brought out, and that 
employee would get maybe $500 or $1,000 put into their plan or 
maybe made as a cash bonus to them. It sort of brings some 
excitement of why we want to save, kind of get people more 
excited about it.
    I think many times employees look at this as sort of almost 
like autopilot, and, in fact, one of the things I will talk 
about is that autoescalation and autoenrollment, which is where 
employees are literally just put into a 401(k) plan, they can 
opt out, but the numbers are startling. Very few opt out, and 
why? Well, we think it is because of inertia. It is easier to 
just stay in than take active steps to get out, and 
autoescalation increases the amount that employee is putting in 
on this automatic basis, and, again, the data is startling. 
People just let the amounts keep building up, so even at a 6 
percent contribution level, so this is 6 percent being taken 
out of their compensation, they just stay in and let the 6 
percent go in. And putting in 6 percent into your plan and 
letting it grow tax free is a very good way to save for your 
retirement.
    In fact, it is such a good way that EBRI was asked to do 
some work for the ASPPA, the American Society of Pension 
Professionals and Actuaries, and what they found is that 
workers are 14 times more likely to save in a retirement plan 
that is offered by their employer than they are to go and put 
money into an IRA. And that is a pretty significant statistic, 
14 times more likely to save.
    I think we are all sort of brought up and know that we--our 
retirement security in this Nation rests on a three-legged 
stool. The first leg is Social Security, a very fixed system, a 
defined-benefit system, you can't outlive it, very little 
flexibility in that system, and for many people it is a major 
portion of their retirement. For others, it is a safety net. It 
is working. I think that you all are going to have to fix it a 
little bit, but basically it is working.
    The private retirement system, even though highly regulated 
by Department of Labor and IRS, is much more flexible, and 
plans can be designed to fit a company structure and what they 
perceive is will be giving--will be most--they can design it so 
that the employees will appreciate it the most or it will fit 
best with their own employees, and that system is working 
extremely well actually.
    Part of it is payroll deduction. As I said, it is 
automatic. Employees don't have the money in their pockets. 
They can't spend it. They don't have to do anything. It just 
comes out of their payroll. It works really well. In the 401(k) 
and 403(b) environment, once the money is in the plan, it is 
difficult to get your hands on that money, which is one reason 
why the account balances tend to grow. If people are putting 
their money into an IRA, they can walk into that IRA and into 
the bank and take money out. It is much harder in the 401(k) or 
403(b) environment.
    So, I think I have gone past my time, but I will be happy 
to take questions. Thank you.
    Chairman Graves. Thank you very much.
    Our next witness is C. Roy Messick, who is a certified 
public accountant and qualified pension administrator with TPP 
Retirement Plan Specialists in Overland Park, Kansas.
    Mr. Messick has been a CPA for over 30 years, and he is 
responsible for coordinating TPP's retirement plan 
recordkeeping, consulting, and administrative services. His 
firm is a small business serving a lot of small business 
clients.
    Thank you for being here.

                STATEMENT OF C. ROY MESSICK, III

    Mr. Messick. Thank you.
    Chairman Graves, Ranking Member Velazquez, and members on 
the House Committee on Small Business, I appreciate the 
opportunity to be here. It is an honor and my pleasure to have 
some input into the process.
    Like Representative Graves said, I am a CPA and a qualified 
pension administrator as recognized by the American Society of 
Pension Professionals and Actuaries, or ASPPA for short. I head 
up our retirement plan division, TPP Retirement Plan 
Specialists, which is a subsidiary of TPP Certified Public 
Accountants located in Overland Park, Kansas, also with an 
office on Long Island, New York.
    We administer approximately and/or recordkeep 400 plans 
across the country, primarily 401(k) and 403(b) plans. Probably 
90 percent of those are under 100 employees, so I understand 
small businesses and the challenges they face in setting up 
these plans.
    In my written testimony I did summarize the types of plans 
that are commonly offered to small businesses, primarily 401(k) 
plans. I am not going to go into that in detail. But in my over 
30 years of experience, I have seen--there is a lot of reasons 
why employers do set up plans and a lot of reasons why they 
don't, some of which have been touched upon already.
    Well, why do they set them up? Let us talk about that 
first. First of all, employee retention and recruiting. It is a 
huge benefit. If you have a 401(k) plan, you need to go out 
there and get talent, you got to have a 401(k) plan. And I also 
think a lot of the businesses, it is really kind of a 
paternalistic/maternalistic instinct. I mean, they want--they 
want their employees to have a good retirement. I want our 
employees to have a good retirement. So I think that is a huge 
reason why these plans are offered, tax incentives, of course. 
So much easier to see--you know, defer on a pretax basis. It is 
just easier to save that way.
    The other nice thing about employer-sponsored plans is the 
contribution limits are higher than IRAs. You can put more away 
into a 401(k) plan than you can into an IRA, so that is good, 
too, for retirement. So that is another reason why they do.
    Payroll deduction makes it easy to save, I think we talked 
about that, but it is so much easier if that money is coming 
out of your paycheck versus you have to sit down on April 15 
and write a check to your IRA. Much easier.
    Now let us examine why employers don't offer plans 
necessarily to their workforce. One, these things are 
complicated, subject to a lot of Department of Labor and IRS 
rules and regulations, and with complexity comes expense. So 
that can be daunting for some small employers.
    And it is also all about proportionate cost. For example, 
if you have a million-dollar 10-person plan versus a $50,000 
10-person plan, same number of employees, totally different 
asset size, who is going to get the better deal? I mean, the 
recordkeeping and administrative cost is really about the same, 
whether it is the 50-grand plan or the million-dollar plan, so 
it is all about proportionate cost.
    Same thing with investment advice. Now, our firm doesn't 
provide investment advice or do investments, but that is a huge 
component to a plan. The person who has to advise these 10 
people takes the same amount of time whether there is 10 of 
them, you know, with 50 grand or 10 with a million. So that 
proportionate cost is a huge reason why some employers don't 
offer those.
    Not enough tax savings. Some employers won't offer a plan 
unless the tax savings more that offset the contribution for 
the employees. They just won't.
    Another reason might be why the business owner personally 
can't defer enough into the plan. In a traditional 401(k) plan, 
the amount that the business owner can defer is typically 
limited to 2 percentage points more than the average of the 
rank and file. So, for example, if the rank and file is 
deferring 4 percentage points on average, the business owner 
gets 6, that person makes 100 grand a year, they can only defer 
6,000, they may say, hey, that is not worth it, not going to 
set up a plan.
    Now, in a Safe Harbor plan, that is a variation on a 401(k) 
plan, that makes that test go away where the business owner can 
defer the maximum allowed by law, which is $17,500, but the 
trade-off is a required contribution of 3 to 4 percent of pay 
for the employees. They may not be able to afford that. Their 
finances may not be such that they can afford that. So that 
would be another reason why a small business may not offer 
those plans.
    Well, how can we get more participation? I think those tax 
credits, that has been alluded to already, that is huge. If we 
can expand that tax credit, maybe target more towards smaller 
business somehow, some way to get these people to help start a 
plan, I think that would be great.
    I think that the 401(k) and 403(b) deferral should actually 
be increased from the 17,500. I know it is a tax deduction, but 
it might spur some business owners to say, okay, hey, now I can 
put more away. Yeah, I think I will do that. So, I think that 
is something worth considering.
    Maybe another type of Safe Harbor 401(k) plan that doesn't 
mandate that 3 or 4 percent; maybe something a little bit less 
in return for maybe a lesser deferral limit for that business 
owner, kind of a compromise, maybe that something like that 
would help.
    So, with that, those are my thoughts, and I appreciate the 
opportunity to be here and welcome any questions you may have.
    Chairman Graves. Thank you, Mr. Messick.
    Our final witness today is Ray Rucksdashel, who is the 
chief financial officer with Quest-Tec Solutions, Incorporated, 
in Houston, Texas. He has over 40 years of wide-ranging 
financial and general operations experience with closely held 
and publicly held companies.
    Thank you for being here.

                  STATEMENT OF RAY RUCKSDASHEL

    Mr. Rucksdashel. Thank you, Chairman Graves, Representative 
Velazquez, members of the House Small Committee, thank you for 
inviting me to testify today.
    As said, I am here to testify to let the Committee know 
that retirement savings for the small business employees is not 
just a necessity, they are a critical component of my company's 
ability to attract and retain skilled employees.
    As a representative of small business, we offer a 401(k) 
benefit to our employees since the company's founding in 2001. 
We are not alone in using 401(k)s as a recruiting and retention 
strategy. According to a survey conducted by Sharebuilder 
401(k), 89 percent of small business owners that offer 401(k) 
plans state that their benefit is an important factor for 
attracting and retaining the best talent.
    So why is this benefit so critical to Quest-Tec? Quest-Tec 
is competing for employees in a marketplace where skilled 
workers are hard to find. These skilled workers are not just 
used in Houston, they are used in any place where the oil and 
gas industry is growing, west Texas, North Dakota, and they 
will move for higher salaries or better benefits. And so we are 
competing with companies all over the country, some of which 
are much larger than us.
    Quest-Tec learned early on in its 401(k) benefit was easy 
to sell to prospective employees since we were matching 50 
percent of their contributions. So why is Quest-Tec so generous 
with its 401(k) plan? It is simple. The cost is much less than 
training, attracting, and keeping good workers. Why? While 
401(k) plan is important to Quest-Tec, there is a drawback to 
small businesses. 401(k) administration is very complicated. I 
have 40 years of experience in financial operations in small 
companies, and I don't have the time or the experience to 
manage 401(k)s. They are just too complicated.
    In addition, there is significant risk in managing 401(k) 
plans, and that risk and exposure can serve as a detriment for 
small business to offer a 401(k) program. To avoid this risk 
and complexity, I have contracted with a professional employer 
organization to manage and administer my 401(k) plan.
    A PEO is a company that provides payroll, human resources, 
and employee benefit solutions to small and midsized companies. 
One of the services a PEO can provide to its small-business 
clients is access to its 401(k) benefits. By using a PEO to 
access 401(k) benefits, Quest-Tec no longer has the 
administrative burden associated with a 401(k). My personal 
risk associated with being the administrator is minimized, and 
Quest-Tec is able to offer benefits that are competitive with 
much larger companies.
    I think it is important for the Committee to understand 
that, in my view, administrative complexities of the 401(k) 
plan administration are the biggest obstacles to small 
businesses offering employee retirement services. I understand 
that the deferment of income for tax purposes is the primary 
reason for the 401(k)'s complexity, I understand the need for 
strong fiduciary standards, and I understand the need for 
strong oversight, but this protection and this disclosure comes 
at a price, and that price is complexity and a significant 
burden for plan administrators.
    Congress should look at ways to both encourage smaller 
companies to offer retirement benefits to their employees and 
at the same time look to simplify and streamline the 
administration of such benefits. Education, outreach, and 
improvement to access of the retirement program, like the 401s, 
is very important.
    I also hope that this forum helps bring to the attention of 
the policymakers the challenges facing small businesses who 
want to provide these benefits to their employees and begin 
discussions on how to make these plans for small businesses to 
offer to their employees more successful.
    Thank you again for the opportunity to testify, and I 
welcome any questions you may have.
    Chairman Graves. Thank you all for your testimony.
    We are going to start with Mr. Coffman.
    Mr. Coffman. Thank you, Mr. Chairman.
    I was a small-business employer with 20 employees and 
offered a healthcare plan, but we did not have a 401(k) plan 
with a match.
    For those firms, to me, small business start-ups 
particularly in the services industries that have 25 employees 
or less, that is a pretty daunting process. And so what kind--I 
think you mentioned some tax incentives to offset the 
administrative cost. Could you all go into what kind of 
incentives that you would see for the really small firms of 25 
or less employees?
    Mr. Messick. Sure. Why not? Yeah, the $500, I think that is 
nice. I mean, it is a nice start for 3 years, but----
    Mr. Coffman. Doesn't seem like a lot.
    Mr. Messick. It is just not enough to, you know, jump-start 
the bandwagon, if you will. It would be one of those things you 
might want to try to maybe even double it, maybe even more than 
that, phase it down maybe, because, you know, if you can get 
them into the plan, they are not going to terminate it after a 
year or two, probably not, unless they really have some kind of 
adverse business situation. So maybe make it tiered, start off 
high, kind of tier it down a little bit, get them hooked, if 
you will. So, just my thought off the cuff.
    Mr. Coffman. Anyone else? Yes.
    Ms. Calimafde. Well, I would say not so much the tax 
credit, though I--it is not like I am against it. I think it is 
a great idea--but there are things you can do with the law 
which would actually help, too. So, for instance, only small 
businesses are hit with these laws called the ``top heavy'' 
rules.
    Mr. Coffman. Uh-huh.
    Ms. Calimafde. Today--I mean, this is really an accurate 
statement. Today they are like an appendix in the human body. 
They don't serve any purpose, but they cause problems. And that 
is in the defined contribution area; I don't want to speak to 
the defined benefit area. But that is an extra additional cost 
on administration for small businesses that is truly 
unnecessary.
    Another thing would be to simplify the 401(k) test, which 
is what you were saying. They can be made more simple. There 
was a proposal years ago called the ERSA. Simplified, it would 
work out really well.
    A third idea would be sort of to go through the Code and 
take out things which are aimed at small businesses 
exclusively. And in this regard I am thinking of like required 
minimum distributions where only small-business owners are 
required to take money out while they are working from a plan 
at 70-\1/2\. You know, just blatant discrimination to small-
business owners.
    So my answer would be work with the tax credit, but there 
is things where you could simplify that would really help.
    Mr. Coffman. Ms. Collinson.
    Ms. Collinson. Okay. One thing I would like to add to this, 
especially for these small companies of, say, 25 employees, is 
the need to create greater opportunities for them to join a 
multiple-employer plan, which is a--conceptually it is a group 
plan with a plan sponsor that is in an entity who is well 
versed in retirement plans that can handle the fiduciary and 
administrative duties and take that off the small-business 
owners' shoulders. So to facilitate the offering of those types 
of plans and then even a tax credit for joining it could help 
go a long way towards inspiring plan sponsorship among the 
smallest of companies.
    Mr. Coffman. Okay. Mr. Rucksdashel.
    Mr. Rucksdashel. I have worked with small businesses my 
whole career, and the majority of the issues that come to bear 
for me when I have conversations about starting a 401(k) with a 
business is inertia. These businessmen don't get into business 
to run business; they get in business to buy something, sell 
something, manufacture something, provide a service. It is not 
to run a business. And so the talk about 401(k)s, they don't 
understand it. And so the risk involved far exceeds the benefit 
to their--what they perceive as their employees. They would 
like to help them with their retirement, but the risk to them. 
And so if we can minimize the regulation, the hurdles that 
are--that they view as getting them into this process, is 
going--would go a long way.
    Mr. Coffman. Thank you, Mr. Rucksdashel.
    I want to thank you all for testifying here today. I think 
it is a--you know, as a former small-business owner, and I 
think small businesses across the country, we really do need to 
have incentives for the owners and their employees to save for 
retirement, and so I thank you all for what you are doing, for 
testifying here today.
    I yield back.
    Chairman Graves. Ms. Velazquez.
    Ms. Velazquez. Thank you, Mr. Chairman.
    Ms. Collinson, your study noted that more than half of all 
workers feel less confident in their ability to achieve a 
financially secure retirement, and that 54 percent of workers 
plan to work after retirement.
    Given that all the workers have been more adversely 
affected by the recession, would allowing other workers the 
ability to make larger catch-up contributions be something to 
be considered?
    Ms. Collinson. Thank you for asking. Anything that we can 
do to help older workers save more for retirement, especially 
understanding that many will not be able to retire at 65, can 
only help better prepare them, help them to help themselves 
better prepare.
    Ms. Velazquez. And does your data indicate that all the 
workers will make those larger contributions despite the 
decreased confidence in the financial market?
    Ms. Collinson. That is an excellent question, and the first 
key to it is awareness. And I spoke in my testimony about 
awareness of the saver's credit, which is still low. Among 
small company workers it is 23 percent are aware of it. So to 
offer some sort of catch-up contribution above and beyond the 
current catch-up contribution or incentives, one of the first 
things is to make sure that people know about it so that they 
can take advantage of it, and also look at it in the context of 
when they will conceivably be collecting Social Security, 
because many workers plan to work past 65, past 70, are going 
to look to generate income from part-time work and may 
encounter some sort of conflict with Social Security if they 
need to start collecting benefits.
    Ms. Velazquez. Thank you.
    Paula, one of the biggest challenges, and I believe it was 
Mr. Messick that made reference to that, is worker retention. 
And we know that many small businesses want to provide a full 
range of benefits for their employees. What we find is that 
employers realize that health care is generally more important 
to the employees and can be more attractive to potential hires.
    How often do you experience a small-business owner 
allocating their limited employee-benefit dollars to offering 
or improving health benefits in lieu of retirement savings?
    Ms. Calimafde. Well, it is an excellent question, and it is 
probably one of the biggest hurdles for small business owners.
    Ms. Velazquez. Uh-huh.
    Ms. Calimafde. I think most of us who have been in the 
small-business world know that the first 5 years of a small 
business' life is fraught with difficulty, and, in fact, the 
Small Business Administration has told us back--I think using 
2012 data, that 50 percent of all new small businesses don't 
make it through the first 5 years. So, you know, the first 5 
years are critical to getting stability.
    Then, as soon as a company can, it usually goes into the 
health insurance market. One reason why is the employees 
appreciate that benefit more than retirement plans. And one of 
the things I have been trying to figure out is how do you get 
employees to appreciate retirement plans more than they do 
today, because, particularly if you talk to younger employees, 
they would prefer a cash bonus.
    Ms. Velazquez. Or how can we avoid creating an either/or 
situation for small-business workers when it comes to these two 
priorities?
    Ms. Calimafde. Right. I think that----
    Ms. Velazquez. Would any of the other witnesses like to 
comment?
    Ms. Calimafde. I think health care usually just wins, and 
then once the business gets a little more stable, a little more 
profitable, then the retirement plan. But this is an area where 
education across the board would be really helpful with 
employees realizing the younger they save, the better off they 
will be.
    Ms. Velazquez. Yeah.
    Mr. Messick.
    Mr. Messick. I will talk about that a little bit, too. 
There is no doubt that health care is number one. It is the big 
elephant in the room. There is no doubt. That will always be 
number one.
    As far as being able to integrate a plan, too, it is that 
issue is like you got to take care of the health insurance for 
your employees first, and then the qualified plan comes second, 
so that the issue is is there something we can do to maybe take 
some of that burden for starting it up off that employer so 
that they say, yeah, you know what, I can do this, I can do 
both, start off small, and it gets better once you get some 
dollars into it, but that start-up is tough.
    Ms. Velazquez. Okay. I guess they are calling.
    Chairman Graves. No.
    Ms. Velazquez. I have time for 1 more minute.
    Mr. Messick, borrowing against retirement is not always a 
good first option. Yet for small businesses having difficulty 
accessing loans, it might be their only option to invest in 
their business or create cash flow during difficult times, hard 
times. In your experience, does the ability to borrow from 
401(k) plans and not in SEP and SIMPLE plans affect a small 
business decision to offer a retirement plan?
    Mr. Messick. I think it does somewhat. I mean, there is no 
doubt that people like that--or a lot of employees like the 
ability to borrow from their account. And one of the things is, 
yeah, you can borrow up to half of your invested account 
balance, 50 grand is the cap, and that is nice.
    The issue becomes, though, with the employees that borrow. 
I mean, you obviously have to offer that to them, too. I mean, 
that is only fair. But the problem is is when they leave 
employment, they never pay those loans back, and then taxwise 
they get crunched. You know, they are always under 59-\1/2\, so 
they have the 10 percent penalty. They are paying the Federal 
tax and the State tax. They don't have much left for 
retirement. So, I am more concerned about that than the 
business owner being able to borrow to maybe help start his 
business.
    Ms. Velazquez. Thank you.
    Yes.
    Ms. Calimafde. One way of looking at loans is that the key 
is to get employees to save in their retirement plan, because 
we know that works. When you have the ability to borrow money, 
I think, psychologically it makes employees think, I will put 
in a little bit more because if hard times come, I know I can 
get back--get this money back. So I think it actually is 
something that increases the amount of savings is having the 
ability to borrow it if you really needed it, and borrowing 
from a plan, there is usually a cost involved.
    You know, most of the small-business plans run through 
either a TPA or an institution, and there is usually, you know, 
$50, $100 fee to borrow. So you are not going to go in and try 
to borrow $500 for something that is sort of not that critical 
when you know $100 is going to go right off the bat.
    So, the money doesn't get--it is usually not spent 
frivolously, I don't think.
    Ms. Velazquez. Thank you.
    Thank you, Mr. Chairman.
    Chairman Graves. Mr. Tipton.
    Mr. Tipton. Thank you, Mr. Chairman, and thank the panel 
for being here.
    Ms. Calimafde, could we maybe explore a little more in what 
the ranking member's question was in regards of either/or when 
it comes to health care versus a retirement plan. Do you see a 
real challenge as we continue to see government regulations 
increasing costs on small businesses? Out of the small business 
department, we have the statistics that we $10,585 per employee 
in just regulatory costs alone that are being assumed by 
businesses. We are seeing the hourly wage right now of 
Americans actually being hurt based off of rules, regulations, 
and law redefining the workweek in America from 40 hours to 30 
hours. You know, there was a time in this country when we 
fought to have a 40-hour workweek, and now we are trying to 
fight to get a 40-hour workweek back in this country.
    So do you see some opportunities? Do you have some advice 
for Congress to help get out of the way of business so that 
they can actually not be in that either/or sort of a situation, 
but actually to be able to take some of the resources that 
government is demanding to meet government regulations, 
government rules, and actually get it in the pockets of people 
that are working hard and struggling right now?
    Ms. Calimafde. There is no question that the cost of 
regulation in the qualified retirement plan system is 
significant and could definitely be reduced. So, for instance, 
there is a number of groups that are trying to persuade 
Department of Labor that we should be able to have electronic 
delivery of notices. We are still--you know, right now we are 
still doing paper delivery of notices. And if you were to see 
the amount of notices that a small business is supposed to give 
employees not just in the qualified retirement plan area, but 
that alone is enough, but then when you get into health 
insurance and these other areas, I mean, literally there is 
like hundreds of notices required and all different dates.
    [1:45 p.m.]
    Ms. Calimafde. And unfortunately most of these notices are 
very long, complicated types of notices that most employees 
don't even read. So it would be far more effective to have 
electronic delivery. You could have big boxes and colors and, 
you know, dollar signs, put money in the retirement plan; would 
get far more than 10 pages of fee disclosures, for instance. So 
absolutely there could be a lot done to help us out here.
    Mr. Tipton. Great.
    Ms. Collinson, you deal with a lot of people. Are you 
seeing a trend now, given expanded rules, expanded regulations, 
and law now, to where we are seeing more and more people become 
part-time employees, actually hurting the American workforce, 
that this is going to really be discouraging employers and 
employees as well because they aren't going to be able to get a 
40-hour workweek anymore, it is now 30 hours, from really 
participating in a retirement program?
    Ms. Collinson. Well, one thing that our research found is 
that in small business in our survey sample population, the 
workforce was more likely to be a part-time employee compared 
to large companies. So part-time employees are widely used 
among small business, and so that is something to be very 
mindful of.
    We have not yet seen the trend that you are alluding to, 
will employers start moving employees to part time.
    Mr. Tipton. Yeah, this is brand new coming in.
    Ms. Collinson. We are on the lookout for that, have not 
seen that yet, but that is something that we are monitoring for 
in our research, given all of the news reports of it.
    Mr. Tipton. Great.
    Well, Mr. Messick, you were alluding as well when small 
businesses--and we just heard great testimony--that are 
struggling, having a tough time particularly those first 5 
years, trying to do the right thing. Because I am a small 
business guy. Your employees become your family. You spend more 
time with them than you do with your family actually. But when 
they are trying to do it, we are actually seeing government 
rules, government regulations, government law that is just 
making it prohibitive and complex to actually even put a 
program together to incentivize savings. Is that accurate?
    Mr. Messick. Well, it is tough. I mean, there are a lot of 
rules and regulations, and you really have to hire somebody 
like me to figure it out, and I am appreciative of it, thank 
you very much. But it is rough, and that is why I was--I talked 
a little bit about maybe streamlining, some kind of a 
simplified, you know, Safe Harbor 401(k), you know, maybe make 
the required contribution a little bit less, maybe take some of 
the fiduciary liability off the table by just saying if you 
just invest in target date funds, you are good to go.
    I mean, there are some things you could do that would 
encourage small business, I think, to maybe offer some of these 
plans without it being hugely burdensome, you know, maybe a 
simplified 5500 reporting for that type of plan, you know, a 
one-pager, you know, and people will charge less then. I mean, 
we will. I mean, the marketplace will force us to, and I think 
that would be good for these small employers.
    Mr. Tipton. We will hold you to that charging.
    Mr. Messick. Well, yeah. We will talk. We will talk. Okay.
    Mr. Tipton. Thank you, Mr. Chairman.
    Chairman Graves. Ms. Kuster?
    Ms. Kuster. Thank you very much, Mr. Chairman, and thank 
you for your testimony.
    I am also a small business--was in small business, and I am 
very appreciative of the opportunity that we had for retirement 
savings. Particularly with two sons in college and the expenses 
that you have in life, it is important.
    I wanted to delve into an issue that you may be aware of, 
and this is the Department of Labor finalizing a proposal for a 
new definition of ``fiduciary investment advice'' under ERISA. 
It sort of gets at, Mr. Messick, what your role is. But I 
wanted to probe a little bit further, because I am concerned 
about an additional hurdle for the type of people that can 
provide the information that small businesses need for their 
employees.
    So if this new definition prohibits plan providers from 
assisting small-business plan sponsors in selecting and 
monitoring investment options, how would that impact your 
ability and willingness to offer a plan? And specifically would 
it increase costs?
    What this new proposal is about is that they are changing 
the definition on ``fiduciary investment advice'' and making it 
more stringent so that people can't--they would have to be 
highly regulated if they were offering that kind of advice.
    Yes, Mr. Messick?
    Mr. Messick. Well, we don't offer investment advice. I 
mean, we are just third-party administrators and recordkeepers. 
But intuitively--I might defer to some of my colleagues here, 
but intuitively that just may not--I don't think you want to 
make it harder on small businesses. It sounds like it might 
make it harder, and then they are just going to say, well, 
gosh, you know, if I can't get any help, any assistance, and 
these things are expensive, it is just going to make it worse 
potentially. But like I said, I am not totally an expert in 
that specific area.
    Ms. Kuster. Right.
    I didn't know if any of the other witnesses had anything to 
add to that.
    Ms. Calimafde. I have a thought on this, which is I think 
the problem the Department of Labor is getting at is if you 
have a plan with an institution, and you are dealing with a 
broker, it is probably human nature, or it may be human nature, 
that that broker would try to steer some of the employees in 
the plan more to the institutional's products than some other 
institution's product because the broker will get a greater 
commission.
    So I think that is the issue, and the question is is this 
the best way to go about it, and my guess is it probably is 
not. It is a difficult issue, and I know like if every small 
business could afford to have an independent adviser, 
investment adviser, that would be the best way, but I would go 
at it almost completely the opposite way. I would say that a 
small business that has gone out and has found an institution 
that has X amount of assets under its investment, or--that they 
should not have fiduciary responsibility at all at that point. 
You know, so for instance if I go out to, you know, Vanguard or 
Fidelity, or name any of them, that that is--just by definition 
that institution should be releasing me from fiduciary 
responsibility versus me going to my uncle who has, you know, 
$1,000 under his own management and I say, here, manage my 
fund. Well, clearly I have breached my fiduciary responsibility 
if I am an owner sponsoring a plan.
    Ms. Kuster. Thank you very much.
    Any other comments?
    That was the gist of my concern, and I am concerned about 
this rule, that it will make it more difficult, more expensive 
for small businesses to be able to offer plans.
    So on that I yield back and thank you, Mr. Chairman.
    Chairman Graves. Mr. Rice.
    Mr. Rice. Thank you, Mr. Chairman, and thank you, panel, 
for being here today. A lot of you came a long way, and 
appreciate your expertise.
    I spent my professional career as a tax lawyer and a CPA. I 
set up a couple of these plans, but this area is so very 
complex, that it got to where I would just refer these people 
out rather than setting these things up. It is a specialty 
under tax law, and even people who practice, tax lawyers, are 
such nerds that normal lawyers don't even want to do that. So 
it is a very, very complex area, and just my observation would 
be anything we can do to relieve that complexity and liability 
on small employers is what we need to do.
    Do you see these--a lot of breaches of fiduciary duty in 
your practices? Just curious. Do you see that as a big problem, 
employers stealing from or mismanaging these funds? Do you see 
that?
    Ms. Calimafde. I will start, but I am sure more--everyone 
should join in on this. And the answer is a resounding no in 
the small business area because this retirement plan is the 
primary way that that owner or owners are going to be able to 
save for their own retirement, because most small businesses 
can't be sold, or certainly not sold for enough money that they 
are going to be able to retire on it. And the whole world of 
nonqualified deferred compensation plans is not available to 
small business owners because of the Tax Code, so that means 
the retirement plan is their way to save for their own 
retirement. They have invested a lot of money into that plan. 
Why would they do anything that would jeopardize that--those 
investments? So, to me, I have always sort of felt like if you 
want to look at fiduciary issues, you are in the wrong place 
when you are in the small-business world.
    And sometimes I kind of bristle when I hear about the sort 
of notion that these small-business owners are sort of these 
clueless blobs just out there without any idea what is going on 
with their money, or their plan, or, you know, any of this, and 
I just--to me it is--these are the folks who are running our 
entire economy to a large extent. These are people who have put 
their life on the line to start this business. Many of them 
have put their houses on the line to start this business. What 
makes us think that these people are incapable of understanding 
that they have got a lot of their savings in a retirement plan, 
and that they are not going to take care of it?
    So I just start from the entirely opposite premise. We 
have--I can't think of a time that I have ever heard or seen in 
my practice any issues with fiduciary responsibility.
    Mr. Rice. Nor I.
    Mr. Messick?
    Mr. Messick. Oh, I concur. I mean, we work with lots of 
quality investment advisers, and they are picking the fund 
line-ups from, you know, various places, and it is a total 
nonissue. Never an issue. And I think every business owner is 
smart enough to know that, you know, I don't think I am just 
going to offer a precious metals fund, and that is it, we will 
be fine. So it is really a nonissue.
    Mr. Rice. And Ms. Collinson?
    Ms. Collinson. The thing I would like to add is we are 
talking about small businesses and encouraging them to sponsor 
retirement plans. Our research has found that cost, 
administrative complexity, and concerns about the potential 
fiduciary liability are deterrents to them, and anything that 
we can do to help alleviate that is going to encourage them to 
sponsor plans and help their workers to save.
    Mr. Rice. I totally agree, you know, and I think one of the 
problems we suffer from here in this job as legislators is we 
think that we need to issue all these laws to protect people 
from things that just aren't real problems, and that creates 
all these strict guidelines and creates jobs for you and myself 
as a tax lawyer and a CPA. And I think anything we can do to 
relieve all these strict requirements and regulations is what 
we need to do if we really want people to participate in this 
on a broader scale.
    Thank you very much for being here.
    Chairman Graves. Mr. Payne.
    Mr. Payne. Thank you, Mr. Chairman.
    Ms. Calimafde, you noted in your testimony that about half 
of new businesses survive their first 5 years, and only about a 
third of new businesses survive for 10 years or more. You also 
said that no matter how much a small business owner cares about 
his or her employees, and we know that they tend to end up 
being like family, offering a retirement plan is often a 
secondary concern.
    Do you or any of the other panelists know the percentage of 
new small businesses that offer retirement plans? And has a 
connection been found between the business' retirement plan 
offerings and its longevity?
    Ms. Calimafde. Well, we have some data. We don't have--
anecdotally I can tell you in my practice it is clear that once 
a business--it is not longevity as much as once a business 
becomes profitable and stable, then right away they move into 
the retirement plan area if they can.
    But we do know from this study that was done by Social 
Security, and it is cited in my testimony, that the size of the 
company makes a difference in how much coverage--how many of 
those businesses sponsor retirement plans, which is not 
surprising because the smaller the company, the more likely 
they are to be in that start-up phase. So we know that 46 
percent of small businesses with more than 10 employees, but 
less than 25 offer a retirement plan. And we know 60 percent of 
small businesses with 25 employees, but less than 50 offer a 
plan. It moves up to 70 percent when you have 50 employees, but 
less than 100. It goes to 84 percent when you have 100. What we 
don't know in this particular study, we don't know the 
breakdown after 100, and most people think of small business as 
going up to 250 employees or 500 employees. So my guess is once 
you get up to the 250, you are at a level that is very similar 
to larger businesses.
    So that is sort of a half answer for you, but there is no 
question if a business owner feels like he or she or they are 
fighting for their lives and can't make payroll, it is just 
probably not a good time to start talking to them about setting 
up a retirement plan.
    Mr. Payne. Right.
    Any of the other panelists?
    Ms. Collinson. Yes. In our research, when we asked small-
business owners why they don't plan to offer a plan in the next 
couple of years, the subject of business stability also comes 
up in terms of they are encountering difficult business 
conditions, which is a deterrent from setting up a plan. They 
are focused on staying afloat.
    Mr. Payne. Okay. Please?
    Mr. Rucksdashel. Yeah, it has been my experience that the 
entrepreneur, the guy that starts the business, when he gets 
profitable enough to start generating his own cash flow, he is 
going to want to save it, and that is going to be when he 
realizes the best way for him to save it is through this 
retirement vehicle. And that is when he begins thinking about 
spreading this across to all his employees not only because of 
the regulations, but because, like it was said before, these 
are really his family. You know, they think about their 
employees as their family. And so it is not until they reach 
that profitability level that many of the people that I have 
been associated with really get into this opportunity. It takes 
a while to get to there.
    Mr. Payne. Okay. You know, also in addition to incentives, 
how do we build awareness and support so that small-business 
owners make retirement offerings a priority?
    Ms. Calimafde. I have one idea. This is once we have got a 
stable company. The folks who pretty much bring the idea of the 
plan and the understanding of the plan to the small-business 
owners are very often the small-business advisers. So it could 
be a CPA, it could be their attorney, it could be an insurance 
fellow that they work with. But to the extent we can educate 
these advisers about how important it is to set up the plan as 
soon as they can, and how it brings along the employees and 
employees' savings to the 401(k) plan or the feature, that is 
really an audience we need to target is those small-business 
financial advisers or their CPAs, attorneys, saying, hey, you 
really need a plan; this is how you can do it.
    And, you know, there is this sort of--the laws surrounding 
the plans are almost ridiculous, and I can say that working 
with them for years and years, but a small-business owner 
doesn't have to be an expert in retirement plans. They can go 
to an institution, and they can find a 401(k) plan and work 
with somebody to get that plan set up, or they can go to a TPA 
or their accountant. So it is not like we are requiring the 
small-business owners to become experts in retirement plan law. 
If that were the case, there would be no small business plans.
    Mr. Payne. Thank you.
    I yield back, Mr. Chairman.
    Chairman Graves. Mr. Hanna.
    Mr. Hanna. Thank you, Mr. Chairman. I want to ask about 
``vestages'' rules. What do most of you consider, and how are 
they handled within the plans that you have?
    Mr. Messick. I will answer that. Vesting, that applies 
where the employer makes a contribution, either a matching 
contribution or a profit-sharing contribution. They will 
subject that money to a vesting schedule, and what that usually 
means is--the most common one we see is like what we call a 
graded 6; zero, 20, 40, 60, 80, 100, so that after 6 years of 
employment that person is 100 percent vested in that money. If 
they leave early, 5 years, 80 percent. So they leave 20 percent 
on the table.
    So it is designed to encourage some longevity with the 
employer. You know, it is that employee retention component. So 
it is a good thing. Now, in a Safe Harbor plan, money is 100 
percent vested day 1, and that is just one of the deals.
    Mr. Hanna. Right. I understand what is going on. What I 
want to get to, though, is if an employee--is it appropriate 
for an employer to use someone's vestages--vestage plan to 
create longevity, and if they earn the money the day they get 
there, shouldn't all plans perhaps be treated as Safe Harbor 
plans, especially in a climate where people change their jobs 
seven or eight times as opposed to, you know, my father and 
myself?
    I want to ask another question, Ms. Calimafde. You 
mentioned that the top heavy rule, you thought, was biased. I 
don't know if that was the exact word you used, but I am very 
familiar with that. Why do you think that?
    Ms. Calimafde. Well, for starters it is based on the 
mathematical test, as you know. So if you--a small business 
generally has a significant amount of owners compared to 
employees, and so they almost always become top heavy. And, I 
mean, once you are top heavy today, nothing much happens, 
because the way the other rules in the Tax Code operate, you 
still have the same vesting schedule. If you are a Safe Harbor 
plan, you are basically at the same 3 percent level. So it is 
like--the reason why is because it is a mathematical test.
    Mr. Hanna. But you said it was biased. I take exception to 
that. I mean, I think that what it really does is it guarantees 
that a single ownership, one boss, two bosses own the company, 
are put in a position where they can't treat themselves 
disproportionately better than their employees.
    And in terms of we talked about things like fiduciary 
responsibility, there has to be some law there to protect the 
employee, because this is all they have for their life as they 
save it going through. I reference back to vestage rules.
    The other thing is that we all remember Bernie Madoff. I 
know that he didn't have a lot of small companies perhaps or a 
lot of individuals, but the world is replete with fees in that 
particular business. Everybody looks good in that business; 
they all have the jargon down.
    So if you don't like that, if you would like clean 
fiduciary responsibility rules, what do you do to save and 
protect the average guy who is working day to day, 8 hours a 
day, turns 55 years old and expects it to be there, and his 
employer borrowed that money out? Because we see every day the 
IRS going after the--for people who take FICA money, don't keep 
it in a separate account, and spend it, go broke, and there is 
no recourse. So people can borrow money out of a retirement 
plan, spend. If an individual can go broke, you said leave 
their job and not pay it back, what about a business that uses 
it, and can't pay it back, and borrows it because they are 
already in trouble?
    Ms. Calimafde. Well, very good questions, but let us go all 
the way back to the top heavy rules, because if your point is 
you need some kind of rules to make sure that the employees get 
contributions in the retirement plan, the Tax Code does that 
without the top heavy rules. That is why I say the top heavy 
rules are just like an old appendage that aren't needed. So the 
protection is built into the Tax Code, but it is built in in a 
number of different discrimination tests today. So 401(a)(4) 
provides that kind of protection, and 401(k) provides that kind 
of protection. So the Tax Code does protect non-highly 
compensated employees.
    Mr. Hanna. It provides it if you use it, but you don't have 
to use it.
    Ms. Calimafde. Well, now, if you are positing what happens 
if you have a small business owner who doesn't pay attention to 
the brokerage house, or the insurance company, or the TPA and 
says, I am putting in whatever I want to--and, by the way, 
employers are not allowed to borrow against their retirement 
plans; that is a prohibited transaction. Employees are allowed 
to borrow against their own account balances if it is at 
certain limits. But, you know, if you are positing if a group 
of owners does everything wrong, well, are there folks out 
there? I am sure there are bad apples out there. Surprisingly, 
you would be, I think, I was surprised how much DOL is all over 
that. Employees can call the Department of Labor and say, I 
don't think my company is running this correctly, and very 
often that will trigger an audit.
    But in my practice--and it may be because if owners are 
coming to me to say, how do I run my plan, then clearly they 
are not going to waste their money coming to me and then do 
just what they want. They just would skip coming to me and save 
my fees, so--and I think that is probably true of everyone on 
this panel, you know. Owners are not going to be coming to TPAs 
to find out what the rules are and then completely ignore them.
    Mr. Hanna. My time has expired. Thank you, ma'am. Thank you 
all.
    Chairman Graves. Mr. Collins?
    Mr. Collins. I want to thank everyone for coming. And, Mr. 
Messick, I think you articulated that business owners make a 
calculation as to, in some cases, their benefits of 
participating, and certainly that is one of the incentives you 
get into a profit-sharing or a Safe Harbor contribution 
especially.
    But I just want to share a story and see if you have heard 
anything like this. The medical device tax part of Obamacare 
took place January 1. It is 2.3 percent of sales, not profits. 
We talk about a 401(k) profit-sharing plan. If there is no 
profits, there is no 401(k) profit-sharing plan, 2.3 percent of 
revenue in many cases exceeds the profits of the company and 
has wiped the profits out. So you could have a fairly 
profitable company making 2-\1/2\ percent of sales in profits. 
Now all the profits are gone.
    There is one local company in the Buffalo, New York, area 
that terminated their 401(k) plan the first of the year as a 
direct result of Obamacare, of the medical device tax. They had 
no choice; they have no more profits. Now, we are early on the 
first year of this. I am just wondering, would you see the 
sense of a company like that terminating their 401(k) when 
their profits are gone, call it an unintended consequence of 
Obamacare, but a consequence nevertheless?
    Mr. Messick. I will answer that, not that we have any of 
those type of clients that I can think of, but it is obvious. 
If you are taking 2.3 percent right off the top, and that is 
obviously impacting your cash flow and your profitability, you 
are going to look for cost-cutting measures, period, and one of 
the first things you are going to do is you are going to look 
at the match in the 401(k) because that is low-hanging fruit. 
You are going to say, well, yeah, we were matching 50 cents on 
the dollar up to 6 percent or whatever. Well, at a minimum we 
are going to knock that back to 25 cents on the dollar versus 
spend it entirely.
    But you are right, the law of unintended consequences is a 
huge law and one I am a firm believer in.
    Mr. Collins. Yeah. Ms. Collinson, do you have----
    Ms. Collinson. Yes, thank you.
    In the work that we do, our annual survey of employers, we 
also do trend analysis in addition to the snapshot that I 
presented earlier, and looking at what happened with employer-
sponsored retirement plans during the worst of times, from 2007 
to 2012, there was actually some good news in there that 
employers were very, very reluctant to terminate their plans. 
What we did see was a significant percentage suspending or 
reducing their matching contribution, which any reduction in 
benefits is clearly disappointing. However, they--we saw--we 
did not see evidence of terminating their plan unless the 
business itself was going out of business.
    Ms. Calimafde. Can I sort of take your question and turn it 
around a little bit?
    Mr. Collins. Not a problem.
    Ms. Calimafde. Though I can say that both of the groups 
that I am representing today are not in favor of the medical 
device tax, but when you talk about unintended effects, one of 
the things that we are very concerned about is in the analysis 
of how to reduce the debt, folks have spent a lot of time 
looking at this concept of tax expenditures, and the qualified 
retirement field gets a really big price tag next to the tax 
expenditure. And one of the things we are concerned about is if 
the amount of contributions allowed to retirement plan were to 
be cut back, or contributions being put into the plan now 
became taxable if your tax rate was over a certain amount, that 
might seem like, well, that is not going to have much of an 
effect, but in the small business-world that will have a 
tremendous impact.
    And it is because of what we have been talking about when 
the owners are going through this analysis if--you know, folks 
sort of forget that the owners own the profit, and they don't 
have to give it to their employees. They could take it out as 
compensation, they could put it back in the business, or they 
could do some mixture of those. Well, if the cutback to 
contributions in the retirement plan area is significant, and 
you still have all the same costs and burdens, most owners, I 
think, would say, okay, we will take out the money as 
compensation, or we will put more money back in the company, 
but we are not going to put it in that plan, because the plan 
costs too much. It is just not a good deal for us.
    And so what I am worried about is on one hand saying, well, 
we are going to get all of this revenue because the tax 
expenditure number is so high, and at the other hand you end up 
with the retirement security of millions of small business 
employees being affected; not the owners, the employees. And 
meanwhile, I think those numbers are really skewed because of 
the budget, that--the budget time period they are looking at, 
and if you ran out knowing that all that retirement plan money 
ends up coming back into the system again as taxable, I think 
you would find that the real cost is the cost of the time value 
of money and not that enormous price tag they are putting on 
it.
    Mr. Collins. That is a point well made. I appreciate your 
comments and yield back, Mr. Chairman.
    Chairman Graves. Mr. Huelskamp.
    Mr. Huelskamp. Thank you, Mr. Chairman. I appreciate you 
having this hearing today. There are some folks that think we 
are not working. We certainly are on the House side. There 
might be some misimpressions based on perhaps the other 
Chamber.
    But thank you, gentlemen, for being here. I appreciate the 
gentleman from Kansas. I might take exception with Overland 
Park being a suburb of somewhere in Missouri, but I will visit 
with the Governor about it. I hope you do live in the State of 
Kansas. The tax rates are very different, Mr. Chairman, as you 
know. But with that, a couple questions.
    I think it was mentioned about the regulatory burden on 
what you all do that are in the business of advising and 
helping out, give a few examples. Can you repeat a few of those 
examples and others that you say, hey, this is a significant 
burden to limiting what small businesses are willing to do, and 
the cost, and the type of paperwork, and things that--as they 
always say, the longer the paperwork, the less likely folks are 
to read it. You probably see that. Could you give a few more 
examples and describe more, and I will ask at the end that you 
provide that stack of stuff that is required for the employer 
and the employee later to the Committee. So if you could share 
some more information on that front, whoever would like to 
answer that.
    Ms. Calimafde. Well, I will give you one example, and I am 
sure the folks to the right and left of me will be able to give 
you some more. One is this thing called interim amendments, and 
right now we are not getting hit with them that much, but that 
is simply because there hasn't been a number of laws recently 
in this area.
    But what has happened is you all would pass a law, and IRS 
would then do--make--you know, do their regulations on it. And 
then IRS would say, okay, you have to go amend your plans now 
to incorporate the changes we just did in our regulations, 
which then meant in the private-practice world--and this goes 
to, you know, the huge institutions as well. So they may have 
20,000 plans, they are sending out 20,000 of these interim 
amendments, you end up with an amendment going to the company 
that is, frankly, just gobbledygook. I mean, I could line up a 
bunch of ERISA experts, and they would say, who knows what this 
means. I mean, it is that bad.
    So, you know, we are dancing on the head of a pin. This 
amendment gets sent out to the owners. There is usually a price 
tag with that amendment, because everyone can't do this for 
free, and you end up with owners saying to the TPAs or the 
institutions, what does this mean? Why are you giving this to 
me? And I am supposed to hand this out to my employees, and 
they are supposed to make sense of this?
    So this was happening year after year after year, and the 
costs were getting significant, and you had a number of small-
business owners who don't like notices to begin with, let alone 
nonsensical notices, and it was really getting bad.
    Now, IRS is trying to figure out how to work their way 
around this, but one easy way is for you all, anytime you pass 
a bill where you are trying to help us out, which you do on a 
fairly regular basis in this area, it would be great to have 
something that says, and, by the way, no amendments are 
required to plans until the next time there is a restatement or 
for 3 years at least, or something, so that at least we have 
some breathing room from this kind of churning of crazy 
amendments.
    Mr. Huelskamp. I will follow up on that. On the issue of 
paper versus electronic, that all has to be paper or in this 
particular instance?
    Ms. Calimafde. Well, right now the default is paper, and 
the default should today be electronic. And I don't know how 
many of you have looked at the required fee-disclosure notices 
that were handed out to employees. I mean, what a waste of 
trees. And it is just a shame because, you know, 10, 15, 20 
pages of a notice, well, there is very few employees around who 
are going to be wading through that. If it had been done 
electronically with maybe a chart right in the front that 
someone could look at, we had a chance of them looking at it.
    Mr. Huelskamp. Other comments?
    I had one other general question. Do you see from the folks 
you work with any difference, generational differences? You 
know, if you are 30 and under, 40 and under, if you aren't 
doing this, you are out of luck. I mean, is the message getting 
there yet? Where are we at for younger folks which are going to 
be having to heavily rely on this, given the incapacity for 
Washington to meet these promises they have made? Yes?
    Ms. Collinson. Okay. One thing that we found in our 
research of workers, comparing and contrasting the retirement 
outlook of different age ranges, and something that is really 
quite startling is workers in their twenties share very similar 
levels of retirement confidence as people in their fifties, 
which are presumably mathematically right about their parents' 
age. And what seems to be happening is workers are inheriting 
their parents' gloomy outlook. And part of the messaging that 
we need to work together to do is they have years, they have 
decades to plan and save, and they can change their retirement 
destiny; however, they, one, need to be shown the possibilities 
as well as have the ability to learn from their parents' 
successes as well as missteps so that we can change the course 
of history.
    As we are looking towards legislative and regulatory 
changes that can help facilitate that, the clock keeps ticking, 
and it is up to each and every one of us to take greater levels 
of ownership of our own retirement outcomes.
    Mr. Huelskamp. Thank you. I would be happy if you would 
provide a link to that summary, those attitudes. I would be 
very interested personally in looking at those.
    I yield back. I thank you, Mr. Chairman.
    Chairman Graves. Mr. Luetkemeyer.
    Mr. Luetkemeyer. Thank you, Mr. Chairman.
    Just kind of curious. You know, one of the statements that 
was made in one of the testimonies today, and I think it was 
Ms. Collinson, if I am not mistaken, with regards to people 
working past 65, there was some kind of interesting numbers 
there. It was like 59 percent people anticipate working past 
65; is that correct?
    Ms. Collinson. Of the small-company workers, yes.
    Mr. Luetkemeyer. Okay. Is this--do you have a reason for 
that? Are they just--they need the extra money? They are not 
ready to retire yet? They just enjoy working? All of the above?
    Ms. Collinson. In most cases it is because they need or 
want the income or benefits.
    Mr. Luetkemeyer. Okay. So at this point the retirement 
benefit is not something that is attractive to them, not a 
reason to retire?
    Ms. Collinson. They can't afford to retire.
    Mr. Luetkemeyer. Can't afford to retire, okay.
    It is kind of interesting from the standpoint that, you 
know, we have a retirement program sitting there, and they are 
not wanting to take advantage of it because it is not good 
enough to retire on.
    Ms. Collinson. Well, just to be clear, that is all small-
company workers regardless of whether they are offered a plan 
or not. And even those who are offered a plan, the majority of 
workers in small companies and large companies are expecting to 
work past age 65 or not retire simply because they are afraid 
they haven't saved enough. And looking at account balances, I 
referred to the $92,000 median among baby boomers of small 
companies, they need to keep working.
    Mr. Luetkemeyer. With regard to the small businesses, I 
mean, they are taking a pretty good hit over the last 3 or 4 
years. A lot of them probably can't financially afford to build 
into their business plans retirement benefits for their 
workers. I am just kind of curious, am I right in that? Is 
there a trend toward less retirement benefits for their 
workers, or are they being able to maintain that or--sir?
    Mr. Rucksdashel. Yes, I can speak to that. It goes back to 
profitability. It is not a desire to not offer it to employees. 
It is when I am being asked to match in a time when the 
business economy is slowing down, and my sales are going down, 
my margins are going down, I have got 1 or 2 percent to begin 
with. So it is no different than your question about the 
employees, why are they not taking advantage of retirement when 
they are worried about their retirement? It is because today is 
more important than tomorrow. So these workers can't--you know, 
they get to the end of the month, they don't have enough money, 
so let us put $100 or $50 away, well, that is just going to 
have to wait. It is the same thing with the employer. My 
profitability is going down, and so my contributions to my 
employees' retirement is going to have to go down.
    Mr. Luetkemeyer. So what you are saying is retirement 
benefits are great things as long as you can afford them, 
whether it is the employer or the employee?
    Mr. Rucksdashel. That is exactly right.
    Mr. Luetkemeyer. Thank you.
    I will yield back. Thank you, Mr. Chairman.
    Chairman Graves. Mr. Mulvaney.
    Mr. Mulvaney. Thank you, Mr. Chairman.
    I want to ask a little bit different line of questioning. 
Just out of curiosity--I ran, I have run several small 
businesses before I came here. Some of them did well enough, to 
your point, sir, about being able to offer these types of 
benefits to the employees. Others didn't; they weren't big 
enough, they didn't make enough money. I ran a restaurant, for 
example; we didn't offer retirement. And I would see these 
young people especially, but also we had folks at the upper end 
of the age scale, but young people especially coming in who 
weren't saving, and I didn't offer them anything, couldn't 
afford to do it.
    How can we, as small-business people or as a small-business 
community, outside of the realm of an ordinary employer-
sponsored plan--how could we encourage younger folks to start 
participating in these plans on their own? I throw that open to 
everybody because I don't know the answer to that question. I 
am curious about it.
    I will ask the same question, by the way, while you are 
thinking about it, for older folks. We had folks come in who 
were near retirement, wanted to work just a little bit more, 
and they didn't participate either. They wanted to save a 
little bit extra, but figured, well, it is not worth it because 
I can't put enough away in a short period of time to help.
    So I am curious about both ends of the spectrum just if 
anybody has any thoughts on that. Yes, ma'am?
    Ms. Calimafde. We have one thought, which is we call it the 
KidRoth, and the idea is today for people to make Roth 
contributions, there has to be earned income, and if you took 
away the earned income requirement for people, let us say, who 
are under 21, and you allowed--so, you know, a 2-year-old is 
allowed to have a Roth, and you could have grandparents and 
parents and aunts and uncles making small contributions into 
this KidRoth for that person. And you would have some special 
rules, so you couldn't take money out of this plan until you 
are 65, let us say, or maybe you modify it somewhat, but once 
you reach 65, you could take money out of it and get only 
capital gains treatment instead of ordinary income. You know, 
just sort of ways of using the Tax Code to inspire people 
instead of buying, you know, the latest, newest toy, I am going 
to put some money into this KidRoth. So that is an idea.
    Mr. Mulvaney. Ms. Collinson?
    Ms. Collinson. Well, one thing that we can do if a 
qualified plan or retirement savings plan is not available to 
the employee is most employers now use a payroll service that 
offers direct deposit----
    Mr. Mulvaney. Correct.
    Ms. Collinson. And direct deposit into multiple accounts. 
Well, what we can do is help educate people on the need to 
save, and, better yet, save for retirement, and, when they set 
up their direct deposit instructions, to set aside a certain 
amount that goes to savings, that goes to a savings account or 
an IRA, and the balance of their paycheck to go to their 
checking account. And by virtue of that, they are automating a 
certain element of savings, setting it aside every paycheck, 
and for many people, once that money is in a savings account or 
an IRA, it is much safer from withdrawals than in a checking 
account where, for many, it is fair game. That is just a very 
simple trick to get in the habit of saving.
    Mr. Mulvaney. That is available now, and that is legal. 
What you mentioned, ma'am, is not. It was just an idea going 
forward.
    Ms. Calimafde. Right. It would require some changes to the 
laws.
    Mr. Mulvaney. What about letting the kids opt out of Social 
Security? What about letting new folks who come in say, look, I 
am going to waive my rights to Social Security, but I am going 
to take that same 6, 7 percent, I am going to put that into an 
IRA for myself, under the theory that, historically speaking at 
least, they would be better off over the long run, plus they 
can choose when they want to retire; 62, 72, 82, it doesn't 
make any difference. What do you think about that? I would 
address you by name, but I have no idea how to pronounce it, so 
I am not going to try and embarrass myself.
    Mr. Rucksdashel. That is fine.
    Mr. Mulvaney. I sit next to Mr. Luetkemeyer, and my name is 
Mr. Mulvaney. We feel your pain.
    Mr. Rucksdashel. They pronounce it Rucksdashel.
    We have seen that already. In Texas, the teachers society 
opted out years ago from Social Security. They had their own 
Texas teacher retirement. They have their retirement plan, and 
they cannot benefit from any Social Security. Of course, my 
wife is bitter about that that she gets none of my Social 
Security, but that is another issue.
    But in that particular case, if they can see--they can take 
that money that probably to a young employee today is skeptical 
that they will ever see it in Social Security. If they can see 
they are directing it, I think that is a very strong 
possibility.
    Ms. Calimafde. I would--I mean, I understand what you are 
saying, and it certainly has some merit, of course. The problem 
with it is that Social Security is a defined-benefit system, it 
is an annuity system, so you can't outlive those payments. And 
the qualified retirement plan system today is largely a 
defined-contribution system. So the two are sort of dovetailing 
quite nicely right now. I could see some people being concerned 
that if you went only to a Social Security system where it was 
based on contributions going in and not a guarantee that you 
would be getting annuity payments throughout your lifetime, 
that we would have removed a safety net for some people.
    Mr. Mulvaney. Thank you very much. Appreciate your 
participation.
    Thank you, Mr. Chairman.
    Chairman Graves. I want to thank all of our witnesses for 
being here today. Obviously saving for retirement is always 
going to be a challenge, for Americans, and with an aging 
workforce and the uncertainty in Social Security, I think it is 
more critical than ever.
    We appreciate the new data and everyone bringing in your 
ideas and thoughts, and we are going to continue to monitor 
this issue. And with that I would ask unanimous consent that 
all Members have 5 legislative days to submit statements and 
supportive materials for the record. Without objection, that is 
so ordered.
    And with that, the hearing is adjourned. Thank you.
    [Whereupon, at 2:31 p.m., the Committee was adjourned.]



                            A P P E N D I X

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


   Testimony of Ray Rucksdashel, Chief Financial Officer, Quest-Tec 
                               Solutions


         The Challenge of Retirement Savings for Small Business


               Before the House Small Business Committee


                            October 2, 2013


    I would like to thank Chairman Graves, Representative 
Velazquez, and the House Small Business Committee for inviting 
me to testify today.

    My name is Ray Rucksdashel, and I have 40 years of wide-
ranging financial, operational and general management 
experience as a partner in charge of consulting. Chief 
Financial Officer and Chief Operating Officer for businesses 
from closely held companies to publicly held companies at the 
senior executive level. I have worked and consulted in a 
variety of industries including manufacturing, sales and 
distribution, mortgage banking, and financial institutions. My 
consulting experience encompasses clients across the country 
and Canada, and includes working in and consulting with 
virtually all operational areas including sales, operations, 
human resources, information technology, treasury, accounting, 
and finance.

    Currently, I am the Chief Financial Officer for Quest-Tec 
Solutions (``QTS''), located in Houston, Texas. QTS specializes 
in the development, engineering and manufacturing of products 
used primarily in the oil and gas industry, such as magnetic 
level indicators, liquid level gages and valve product lines. 
We also manufacture, steam level indicators, and liquid level 
gage accessories. QTS is a privately owned business that 
employs 38 people, primarily skilled employees in trades such 
as welders, CNC machinists, engineers, draftsmen, 
instrumentation specialists, and shop foremen. QTS is on track 
to do about $12 million in sales this year.

    I believe that the subject of today's hearing is very 
important and I am pleased and honored to testify on this 
matter on behalf of small businesses. I am here to tell the 
committee that retirement savings are not just a necessity--
they are a critical component of my company's ability to 
attract and retain skilled employees. QTS has offered a 401(k) 
from the very beginning. In fact, there was a 401(k) in place 
with the predecessor company to QTS when I joined that company 
in 1996. It has long been part of our strategy to attract and 
retain skilled employees. QTS is not alone in using this 
strategy. According to a survey conducted by Sharebuilder 
401(k), 89 percent of small business owners that offer a 401(k) 
plan state that this benefit is an important factor for 
attracting and retaining the best talent.

    So why is this benefit so critical for QTS? QTS is 
competing for employees in a marketplace where the skilled 
workers the company needs are in high demand, not only in the 
Houston area, but in other parts of the country where the oil 
and gas industry is growing, such as North Dakota and West 
Texas. Individuals with these skills will move for higher 
salaries and better employee benefits. QTS needs attraction and 
retention tools such as a 401(k) in order to compete for these 
highly skilled employees. The 401(k) plan that QTS offers is 
something we use to distinguish our company from others.

    QTS learned early on that our 401(k) benefit was easy to 
sell to prospective employees since we were matching part of 
their contributions. It not only encourages our employees to 
save for their own retirement, it gave us another benefit to 
help us edge out our competition in hiring the best prospects. 
QTS matches 50 percent of an employee's contribution, up to a 
company maximum contribution of three percent. So, if an 
employee contributes six percent, it's the same as giving him 
tax-deferred income of 3 percent of his salary.

    So why is QTS so generous with its 401(k) plan? It's 
simple. It costs the company far less to offer generous 401(k) 
benefits than it does to hire and train a new skilled employee. 
Turnover is a significant yet hidden expense that can be 
overlooked by managers. In addition, long-term employees are 
more loyal and enjoy greater satisfaction in their jobs with 
these benefits. That, in turn, leads to more productive and 
engaged employees. Moreover, offering retirement benefits to 
our employees is the right thing to do, as it allows them to 
secure their futures. We show our employees that when an 
average 45 year old contributes to their retirement plan along 
with our contribution on his behalf, by the time they reach 
retirement age, they would have saved $150,000.

    All QTS employees are eligible to participate in our 
company's 401(k) plan. I would classify 23 of QTS' employee as 
``skilled''--people who are welders, CNC machinists, engineers, 
draftsmen, instrumentation specialists, shop foremen, sales 
personnel and management. These are the employees QTS has a 
hard time finding and the company does whatever it takes to 
keep them. Of these employees, more than 60 percent (14) 
participate in our 401(k) plan.

    While our 401(k) plan is important to QTS, there are 
drawbacks for a small company like mine that wants to offer 
retirement plans to their employees. Administering these plans 
is extremely complicated. As I mentioned earlier in my 
testimony, even though I have 40 years' experience in financial 
operations in small companies, there is no way I have the time 
or expertise to understand all of the rules governing the 
operation of a 401(k). In addition, there is significant risk 
in managing a 401(k) plan, and that risk and exposure can serve 
as a deterrent for a small business to offer a 401(k) program.

    To avoid this risk and complexity, I have contracted with a 
professional employer organization (PEO) to administer my 
401(k) plan. A PEO is a company that provides payroll, human 
resource, and employee benefits solutions to small and mid-
sized companies. One of the services a PEO can provide to its 
small business clients is access to 401(k) benefits. By using a 
PEO to access 401(k) benefits, QTS no longer has the 
administrative burden associated with a 401(k), my personal 
risk associated with being a plan administrator is minimized, 
and QTS is able to offer employee benefits that are competitive 
with larger companies. And we are not the only ones: According 
to a new study by McBassi and Company, PEOs offer retirement 
plans to small businesses that would be unlikely to sponsor 
them otherwise, and their employees participate at much higher 
rates than small businesses that do not use a PEO.

    I think it is important for the committee to understand 
that, in my view, the administrative complexities of 401(k) 
plan administration are the biggest obstacles to small 
businesses offering employee retirement benefits. As a CFO, I 
understand that the deferment of income for tax purposes is the 
primary reason that 401(k) plans are complex. I understand the 
need for strong fiduciary standards to protect those who invest 
their earnings into these plans. And I understand the need for 
oversight and rules ensuring that participants understand their 
rights and are fully informed of the risk associated with 
investing their money in these plans. But these protections and 
disclosures come at a price, and that price is complexity and a 
significant administrative burden on plan administrators.

    The Government Accountability Office (GAO) found that there 
are 43 million people who work for businesses that employ 100 
or fewer people, and only 14 percent of those companies offer 
retirement benefits to their employees. This data is clear 
evidence that there are obstacles preventing small companies 
from offering retirement plans. The GAO and private surveys 
have found reasons such as complexity, legal liability, and 
cost as the obstacles to small companies offering retirement 
benefits. Because of these obstacles, many working Americans do 
not have access to retirement savings programs. The fact that I 
have to use an outside administrator speaks to the complexity 
and administrative burden of retirement plans.

    Congress should look at ways to both encourage smaller 
companies to offer retirement benefits to their employees and 
at the same time look to simplify and streamline the 
administration of such benefits. Education, outreach, and 
streamlining regulations are just a few steps that have been 
suggested to improve access to retirement programs like 
401(k)'s. I also hope that this forum helps bring to the 
attention of policymakers the challenges facing small 
businesses who want to provide these benefits to their 
employees, and begins discussions on how to make such plans 
easier for small businesses to offer to their employees.

    I would be happy to answer any questions you have.

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    The American Institute of Certified Public Accountants 
(``AICPA'') would like to thank Members of the Committee for 
the opportunity to submit this statement for the record of the 
hearing on The Challenge of Retirement Savings for Small 
Employers, held on October 2, 2013. I am Jeffrey A. Porter, 
Chair of the AICPA Tax Executive Committee. I am a sole 
practitioner at Porter & Associates, CPAs, a local firm in 
Huntington, West Virginia, which concentrates on providing tax 
planning and business advisory services for local businesses 
and high net worth individuals.

    The AICPA is the world's largest member association 
representing the accounting profession comprised of over 
394,000 members in 128 countries and a 125-year heritage of 
serving the public interest. Our members advise clients on 
federal, state and international tax matters and prepare income 
and other tax returns for millions of Americans. Our members 
provide services to individuals, not-for-profit organizations, 
small and medium-sized businesses, as well as America's largest 
businesses.

    We appreciate the Committee's efforts to promote retirement 
savings and provide small businesses an opportunity to set up 
and maintain retirement plans for their owners and employees. 
Our remarks, which are supportive of this objective, focus on 
tax and simplification issues impacting many small businesses, 
specifically: (1) the various types of retirement plan options; 
(2) consolidation and simplification of the multiple types of 
tax-favored retirement plans and the rules governing them; (3) 
top-heavy provisions; and (4) repeal of the requirement that 
benefits become fully vested upon a partial termination of a 
qualified retirement plan.

    Retirement Plan Options

    The Internal Revenue Code (IRC or ``Code'') provides for 
more than a dozen tax-favored employer-sponsored retirement 
planning vehicles,\1\ each subject to different rules 
pertaining to plan documents, eligibility, contribution limits, 
tax treatment of contributions and distributions, the 
availability of loans, portability, nondiscrimination, 
reporting and disclosure. Although some consolidation of the 
rules governing these options has been introduced in recent 
years, further simplification of the confusing array of 
retirement savings options should be undertaken.
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    \1\ Currently the following plans are representative of the variety 
that may be sponsored by an employer: simplified employee pension 
(SEP), salary reduction SEP, savings incentive match plan for employees 
of small employers (SIMPLE), SIMPLE-401(k), profit sharing, money 
purchase pension, 401(k), 403(b), 457, target benefit, defined benefit, 
cash balance and the new defined benefit/401(k) combination created in 
the Pension Protection Act of 2006 (Pub. L. 109-280).

    When a small business grows and begins to explore options 
for establishing a retirement plan, the alternatives, and the 
various rules, can become overwhelming. There are too many 
options that businesses need to consider before deciding which 
plan is appropriate for them. Some plans are only available to 
employers with a certain number of employees, whereas other 
plans require mandatory contributions or create significant 
administrative burdens. Such administrative burdens include 
annual return filings, discrimination testing, and an extensive 
list of notice requirements with associated penalties for 
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failures and delays in distributing such notices to employees.

    To determine which plan is right for their business, owners 
must consider their cash flow, projected profitability, 
anticipated growth of the work force, and expectations by their 
employees and co-owners. The choices are overwhelming, and many 
are too complex or expensive for small business owners.

    Consolidation and Simplification of Retirement Plan Options

    We recommend that the multiple types of tax-favored 
retirement plans currently available and the many rules 
governing such plans be consolidated and simplified to minimize 
the cost and administrative burden for employers.

    Possible measures for simplifying the number and complexity 
of the various types of retirement plan vehicles include:

    1. Create a uniform employee contributory deferral type 
plan. Currently there are four employee contributory deferral 
type plans: 401(k), 457, 403(b), and SIMPLE plans. Having four 
variations of the same plan type causes confusion for many plan 
participants and employers. While we would like to see a more 
streamlined approach with regards to these types of plans, we 
also acknowledge that keeping a simple plan as well would 
benefit small businesses.

    2. Eliminate the nondiscrimination tests based on employee 
pre-tax and Roth deferrals for 401(k) plans. These tests 
artificially restrict the amount higher-paid employees are 
entitled to save for retirement by creating limits based on the 
amount deferred or contributed by lower-paid employees in the 
same plan. They result in placing greater restrictions on the 
ability of higher-paid employees to save for retirement than 
those placed on lower-paid employees. Although the 403(b) plan 
is of a similar design, there is no comparable test on 
deferrals for this type plan.

    There are currently two tests:

          a) The actual deferral percentage (``ADP'') test 
        which limits the amount highly compensated employees 
        can defer pre-tax or by Roth after-tax contributions by 
        reference to the amount deferred by non-highly 
        compensated employees. This test applies only to a 
        401(k) plan.

          b) The actual contribution percentage (``ACP'') test 
        similarly limits the amount of employer matching 
        contributions (which are based on employee 
        contributions) and other employee after-tax 
        contributions that highly compensated employees may 
        receive. This test is applicable for both 401(k) and 
        403(b) plans.

    An example of complexity in the rules is as follows: In the 
case of the traditional 401(k) plan, both the ADP and ACP texts 
would apply, while the same deferral and match formula in a 
403(b) plan would result in only the ACP test being applicable.

    3. Create a uniform rule regarding the determination of 
basis in distributions. Depending on the plan type, there are 
currently different methodologies to be used to determine basis 
in a distribution. For example, in a Roth individual retirement 
account (IRA), basis is considered returned first while in a 
traditional IRA or 401(k), including Roth 401(k)s, basis is 
distributed on a pro-rate basis, and distributed based on an 
algebraic formula if there are a series of payments. In 
addition, there are complicated rules concerning the 
aggregation of accounts. For example, traditional IRA accounts 
with pre-tax and after-tax (not Roth) contributions are 
aggregated separately from Roth IRA accounts. There are also 
special basis recovery rules in defined contribution plans that 
contain pre-tax, after-tax and Roth contributions.

    4. Create a uniform rule of attribution. Currently, the 
rules of attribution are governed by different Code sections 
which each have subtleties and are used for different purposes:

          a) Section 267(c) \2\ referenced and modified in 
        determining a disqualified person under prohibited 
        transaction rules.
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    \2\ Unless otherwise indicated, all ``section'' references are to 
the Internal Revenue Code of 1986, as amended (the ``Code''), and to 
the treasury regulations (the ``Regulations'' or ``Reg.'') promulgated 
pursuant to the Code.

          b) Section 318 for determination of highly 
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        compensated and key employee status.

    5. Create a uniform definition for terms to define owners. 
Currently, there are different definitions for the terms 
``highly compensated employee'' and ``key employee.'' A 
defining factor of a ``highly compensated employee'' is a five-
percent owner which is further defined as an individual with a 
direct or indirect ownership interest of more than five-
percent. The ownership rules governing a ``key employee'' 
consider the five-percent ownership rule but also consider 
persons owning one-percent with compensation of $150,000 or 
more annually.

    6. Eliminate the required minimum distribution rules. 
Participants must begin taking distributions beginning at age 
70\1/2\ or be subject to penalties. In the case of qualified 
plans, a less than five-percent owner who continues employment 
may defer taking distributions until his or her subsequent 
separation from service. Additionally, in the case of a 
traditional IRA, the participant is entitled to consolidate 
multiple accounts, subsequently taking a required minimum 
distribution from a single IRA; however, in a qualified plan 
the required minimum distribution must be taken from each plan 
individually and consolidation is not permitted.

    If full elimination of required minimum distribution rules 
is not possible, the age requirement of 70\1/2\ should be 
addressed. The rules would be better served if the 
distributions were required to begin on a specific birthday as 
opposed to the computation of the ``half-year birthday'' for 
purposes of these regulations.

    7. Create uniform rules for early withdrawal penalties. 
There are currently different rules governing penalties 
depending on whether the account is an IRA or a qualified plan. 
An example of this complexity is a distribution for higher 
education expenses; for an IRA the distribution avoids the ten-
percent excise tax, while a hardship distribution from a 
qualified plan is still subject to the excise tax. The same is 
true for qualified first-time homebuyer distributions and 
medical insurance premiums.

    Top-Heavy Provisions

    The top-heavy rules were enacted under the Tax Equity and 
Fiscal Responsibility Act of 1982 (``TEFRA''), and subsequently 
amended, to protect employees when an employer offers a 
retirement plan which primarily benefits its ``key employees.'' 
\3\ Section 416 imposes a minimum vesting period of either six-
year graded or three-year cliff and requires a minimum 
contribution of generally three percent for ``top-heavy'' 
plans. Retirement plans are considered top-heavy for a year, 
and therefore subject to the above rules, if the aggregate 
value of the key employees' accounts exceeds 60 percent of the 
aggregate value of all of the employees' accounts under the 
plan.\4\
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    \3\ Generally, a key employee is defined as an officer with 
compensation in excess of $130,000 (indexed annually), a 5%-or-more 
owner, or a 1%-or-more owner with compensation in excess of $150,000. 
IRC section 416(i)(1)(A).
    \4\ IRC section 416(g)(1)(A)(ii).

    Based on our members' experiences, the imposition of the 
top-heavy rules for retirement plans is causing some employers 
to (1) cease employer contributions to their plan, (2) 
terminate existing plans, or (3) not adopt a plan at all to 
cover their employees. This is primarily an issue with small 
and family-owned businesses sponsoring a 401(k) plan which 
consists of employee deferrals only, or employee deferrals and 
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employer matching contributions.

    Many small business retirement plans inevitably become 
subject to the top-heavy provisions for two reasons. First, 
most small businesses are owned by family members or a close 
group of individuals. Due to this type of ownership, it is 
common that the owners remain relatively static over the life 
of the business. As such, there is frequently very low or no 
turnover of its key employees. Second, in today's work 
environment, employee turnover is commonplace. It is not 
unreasonable for employees to change jobs multiple times over 
their working careers as personal goals change, their skills 
improve, or they move geographically. Due to the static 
ownership of small businesses and the increasingly transitory 
employee base, it is becoming a certainty that most retirement 
plans sponsored by small businesses will become top-heavy at 
some point during the life of the plan.

    Some small businesses can satisfy the top-heavy 
requirements. These businesses adopt provisions for their 
retirement plans to meet safe-harbor designs, such that they 
either provide for a matching contribution that rises to a 
statutory level (i.e., four percent for a 401(k) plan) or they 
provide for a non-elective contribution of at least a statutory 
rate (i.e., three percent for a 401(k) plan).

    Unfortunately, many small businesses cannot afford to meet 
the strict contribution requirements imposed by the top-heavy 
rules. Their profitability margins and financial situations are 
such that these contribution levels cannot be attained. During 
the recent economic downturn, retirement plan contributions--
specifically matching contributions--were an issue for many 
employers. Many employers which were able to satisfy the safe 
harbor requirements in the past were no longer able to continue 
making the same contributions. In too many cases, top-heavy 
rules become a financial burden by imposing an employer 
contribution for deferral only plans--where there was never 
intent for an employer contribution, or by requiring an 
additional contribution of three percent on top of the matching 
contribution the employer previously determined as being 
affordable to their budgetary and cash-flow constraints. As a 
result, the employers terminate the plan, which significantly 
diminishes the ability of their employees to save for 
retirement.

    Prior to the top-heavy provisions, some employers 
terminated employees prior to vesting in order to use the 
forfeited dollars to reduce their contributions to the plan for 
current and future years. However, at the time these rules were 
passed, vesting schedules were 10-year cliff and 15-year 
graded. Employer plans are now subject to minimum vesting 
periods of either three-year cliff or six-year graded. The 
Pension Protection Act of 2006 changed the non-top-heavy 
defined contribution vesting schedule to generally coincide 
with the top-heavy schedule for contributions made after 
December 31, 2006. As a result, many defined contribution plans 
are unaffected by the top-heavy vesting requirements.

    We recognize that the top-heavy rules were enacted to 
address the concern that employers will ``churn'' their 
employee base prior to the participants becoming fully vested. 
However, based on our members' experiences, smaller employers 
suffering from these top-heavy rules employ moderate matching 
formulas--less than those offered in safe-harbor 401(k) 
designs. Their actual cost of hiring and training employees is 
much greater than any benefit they might gain from this 
practice.

    Although employees who find themselves not covered under an 
employer-sponsored 401(k) plan could contribute to an 
individual retirement account, the AICPA thinks that an 
employer-provided retirement plan is a better option for 
employees. First, the employees can contribute a higher amount 
to a 401(k) plan--up to $17,500 for 2013 (or $23,000 for 
individuals age 50 or older) for pre-tax contributions compared 
to the contribution limit for IRAs of $5,500 (or $6,500 for 
individuals age 50 or older).\5\ Next, 401(k) plans generally 
offer access to more competitive investment alternatives than 
are accessible to an IRA investor. Finally, if an employer-
sponsored plan the employer often pays at least a portion of 
the fees and the employee is part of a larger group that is 
likely to be charged a lower fee.
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    \5\ IR 2012-77, Oct. 18, 2012.

    The AICPA supports the protection of employees and their 
ability to save for retirement. However, the top-heavy rules 
have become unnecessary due to the enactment of other 
provisions which protect the interests of employees. For 
example, section 401(k) plans are generally subject to special 
discrimination rules (the average deferral percentage test and 
average contribution percentage test, commonly referred to as 
the ADP/ACP testing) designed to prevent highly compensated 
employees \6\ from receiving too much in contributions as 
compared to other employees.\7\ These plans are also subject to 
general nondiscrimination rules designed to prevent qualified 
plans from covering too many highly compensated employees as 
compared to non-highly compensated employees.\8\ As a result, 
the non-key employees are protected from employer 
discrimination regardless of whether the minimum contribution 
requirements for top-heavy plans are in effect.
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    \6\ A highly compensated participant is, in general, a more-than-5% 
owner in the current or preceding plan year or any employee who in the 
prior year earned in excess of $110,000 (indexed annually). IRC 
sections 401(k)(5) and 414(q).
    \7\ IRC section 401(k)(3) and m(2).
    \8\ IRC section 410(b).

    The AICPA recommends an exception from the top-heavy rules 
for certain defined contribution plans. We think that 
retirement plans which provide for employee deferrals only and 
plans which provide for employee deferrals and matching 
contributions should not be subject to the strict minimum 
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contribution requirements as other top-heavy plans.

    Vesting Upon Partial Plan Termination

    Section 411(d)(3) requires qualified retirement plans to 
provide for immediate 100% vesting upon a partial plan 
termination. In general, a partial plan termination may be 
deemed to have occurred when significant reductions in the 
workforce occur in a plan sponsor's business.

    This section was added to the Code as part of the enactment 
of the Employee Retirement Income Security Act of 1974 
(``ERISA''). At that time, most qualified retirement plans were 
primarily or entirely employer-funded, and permitted vesting 
schedules were much longer than schedules that exist today. In 
the 1970s work environment, the vesting rule was necessary to 
protect the workers' retirement balances. However, the funding 
of retirement plans has changed significantly over the last 
forty years. In the present 401(k) environment, most, and 
sometimes all, retirement benefits are funded by employees' own 
contributions which are by law immediately 100% vested and not 
affected by the vesting rules. In addition, the maximum 
permitted vesting schedules have been greatly shortened. As a 
result, to the extent there are employer contributions in a 
retirement plan most workers are partially or even fully vested 
by the time an issue of partial termination arises.

    The immediate vesting rule unfairly punishes small 
businesses. It is not uncommon for all employers to face a 
certain amount of turnover in their employee population. 
Employees can change jobs multiple times over their working 
careers as personal goals change, their skills improve, or they 
move geographically. For some employers, their employee base is 
sufficiently large that their experience closely follows the 
statistical performance of the labor pool as a whole. However, 
for small businesses, normal turnover can inadvertently create 
problems with the partial termination rules.

    Furthermore, employers have not been given a clear and 
specific definition of what constitutes a partial plan 
termination. Employers must instead attempt to apply a series 
of narrow IRS rulings to their own situation, often by 
retaining outside counsel. The resulting uncertainty and 
expense creates an additional administrative burden when small 
businesses may lack the time and resources to resolve such a 
legally ambiguous situation.

    We recommend an amendment to section 411(d)(3) to provide 
for an exception for ``small plans''--under 25 participants--
such that the partial termination rules do not apply.

                               * * * * *

    We appreciate the Committee's efforts to promote retirement 
savings and are available to provide additional input on ways 
Congress can make further improvements in this area in general 
and with respect to small businesses.

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    FSR SUPPORTS RETIREMENT SECURITY:

    FSR shares Congress' and the Obama Administration's goal of 
increasing opportunities for Americans to save and plan for 
their retirement. It is our belief that providing these 
opportunities is important because savings increase domestic 
investment, encourage economic growth, and result in higher 
wages, financial freedom, and a better standard of living. FSR 
supports access to a wide-range of retirement products and 
vehicles to help employers, especially small employers, and 
employees plan for their retirement, including traditional 
pensions, 401(k), IRA, and similar retirement savings accounts. 
The financial services industry, which manages close to 20 
trillion in retirement savings,\1\ has played a key role in 
helping to increase the number of Americans who plan and save 
for their retirement. Although the U.S. retirement market is 
projected to grow to nearly $22 trillion by 2016,\2\ more must 
be done to ensure the retirement security of every American.
---------------------------------------------------------------------------
    \1\ FSR Research, http://www.fsroundtable.org/fsr/pdfs/2013/
StrengtheningTheUSRetirementSavingsSystem-September.25.2013.pdf
    \2\ Margarida Correria, U.S. Retirement Market Projected to Hit $22 
Trillion by 2016, BANK INV. CONSULTANT, Jan. 30, 2012, http://
www.bankinvestmentconsultant.com/news/cerulli-predicts-retirment-
market-will-exceed-22-trillion-by-2016-2677132-1.html.

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    TAX INCENTIVES HELP SMALL BUSINESSES OFFER PLANS:

    The key to whether or not an employer, especially small 
employer, offers a plan in the first place is the availability 
of tax incentives. For instance, if a small business owner 
wants to use a tax-favored vehicle to save for his own 
retirement, the Tax Code requires that he provide a plan for 
his employees. It is critical to note that unlike other tax 
incentives, income contributed to 401(k) and traditional IRA 
accounts is not a permanent tax deduction or exclusion, it is 
only a deferral of taxes. When a distribution is made to a plan 
participant, all amounts (the original income that was deferred 
plus the investment gains on amounts deferred) are subject to 
ordinary income tax.

    One thing we have learned over the last 30 years is that 
once the right incentives are in place, retirement savings will 
increase. The median salary deferral to a 401(k) plan is 7%. 
The median account balance for Baby Boomers rose 33% to $99,320 
in 2012. Gen Xers (people born between 1965 and 1978) increased 
their median savings by 30% to $41,821. According to American 
Society of Pension Professionals and Actuaries (ASPPA), only 5 
percent of employees save if their employer does not offer a 
retirement plan.\3\ Thus, we know the keys to increasing 
retirement savings are:
---------------------------------------------------------------------------
    \3\ Id. at 2.

          a. Providing incentives to businesses to provide 
---------------------------------------------------------------------------
        plans to their employees; and

          b. Providing incentives to employees to take 
        advantage of the plans offered to them.

    REGULATIONS MAY DETER RETIREMENT SAVINGS:

    Small business owners rely on investment education and 
guidance from retirement professionals in choosing a plan 
investment menu to offer to their employees. If this education 
and guidance is effectively prohibited by the upcoming 
Department of Labor (DOL) fiduciary duty proposal small 
business owners will have to either a) select their own 
investments without the help of a retirement professional and 
assume fiduciary responsibility; or b) find and pay a third 
party expert to do that selection, which may be cost 
prohibitive. Thus, if DOL moves forward with its re-proposal, 
it is critical that the Administration ensures that the DOL and 
the Securities & Exchange Commission work together on the 
substance and the timing of their respective rulemakings, or 
risk confusing and overlapping regulations on small businesses 
and retirement professionals. FSR believes governmental 
policies preserve consumer choices--including the consumers' 
choice to select the retirement services product that fits 
their needs, and work with their preferred financial services 
provider.

    CONCLUSION:

    In closing, FSR urges Congress to build on the successes of 
the current retirement savings system. As a country we need to 
promote policies to encourage more retirement savings--not 
less. FSR supports maintaining the current tax incentives, 
which provide appropriate incentives for employers to offer 
plans and for employees to participate in the plans that are 
offered. The current system is working--the number of people 
saving via DB or DC plans is higher than at any time in 
history. Thus, there is no need to dismantle and rebuild the 
retirement system. FSR believes increasing retirement savings 
should be a national priority and is committed to working with 
Congress and the Administration on policies that promote 
retirement savings, and enable the financial services industry 
to better meet the long-term retirement needs of hard-working 
Americans.

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