[Senate Hearing 114-845]
[From the U.S. Government Publishing Office]




                                                        S. Hrg. 114-845

                      CLOSING THE GAP: INNOVATIONS
                         TO PROMOTE AMERICANS'
                           FINANCIAL SECURITY

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

                                HEARING

                               BEFORE THE

                       SPECIAL COMMITTEE ON AGING

                          UNITED STATES SENATE

                    ONE HUNDRED FOURTEENTH CONGRESS


                             SECOND SESSION

                               __________

                             WASHINGTON, DC

                               __________

                             JUNE 15, 2016

                               __________

                           Serial No. 114-25

         Printed for the use of the Special Committee on Aging



               [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
               
               

        Available via the World Wide Web: http://www.govinfo.gov


                                 ______



                   U.S. GOVERNMENT PUBLISHING OFFICE
                   
48-080 PDF                  WASHINGTON : 2022








                       SPECIAL COMMITTEE ON AGING

                   SUSAN M. COLLINS, Maine, Chairman

ORRIN G. HATCH, Utah                 CLAIRE McCASKILL, Missouri
MARK KIRK, Illinois                  BILL NELSON, Florida
JEFF FLAKE, Arizona                  ROBERT P. CASEY, JR., Pennsylvania
TIM SCOTT, South Carolina            SHELDON WHITEHOUSE, Rhode Island
BOB CORKER, Tennessee                KIRSTEN E. GILLIBRAND, New York
DEAN HELLER, Nevada                  RICHARD BLUMENTHAL, Connecticut
TOM COTTON, Arkansas                 JOE DONNELLY, Indiana
DAVID PERDUE, Georgia                ELIZABETH WARREN, Massachusetts
THOM TILLIS, North Carolina          TIM KAINE, Virginia
BEN SASSE, Nebraska

                              ----------                              

                  Kevin Kelly, Majority Staff Director
                 Derron Parks, Minority Staff Director





                         C  O  N  T  E  N  T  S

                              ----------                              

                                                                   Page

Opening Statement of Senator Susan M. Collins, Chairman..........     1
Opening Statement of Senator Claire McCaskill, Ranking Member....     2

                           PANEL OF WITNESSES

Catherine Collinson, President, Transamerica Center for 
  Retirement Studies (TCRS) and Transamerica Institute, Los 
  Angeles, California............................................     4
Timothy Flacke, Executive Director, Doorways to Dreams Fund, 
  Allston, Massachusetts.........................................     5
Aron Szapiro, Associate Director, Policy Research, Morningstar, 
  Washington, D.C................................................     7
Brian K. Plum, President and Chief Executive Officer, Blue Ridge 
  Bank, Luray, Virginia..........................................     9

                                APPENDIX
                      Prepared Witness Statements

Catherine Collinson, President, Transamerica Center for 
  Retirement Studies (TCRS) and Transamerica Institute, Los 
  Angeles, California............................................    27
Timothy Flacke, Executive Director, Doorways to Dreams Fund, 
  Allston, Massachusetts.........................................    36
Aron Szapiro, Associate Director, Policy Research, Morningstar, 
  Washington, D.C................................................    45
Brian K. Plum, President and Chief Executive Officer, Blue Ridge 
  Bank, Luray, Virginia..........................................    53

 
                      CLOSING THE GAP: INNOVATIONS
                         TO PROMOTE AMERICANS'
                           FINANCIAL SECURITY

                              ----------                              


                        WEDNESDAY, JUNE 15, 2016

                                       U.S. Senate,
                                Special Committee on Aging,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 2:32 p.m., Room 
562, Dirksen Senate Office Building, Hon. Susan M. Collins, 
Chairman of the Committee, presiding.
    Present: Senators Collins, Scott, Cotton, Tillis, 
McCaskill, Casey, Gillibrand, Donnelly, and Kaine.

                 OPENING STATEMENT OF SENATOR 
                   SUSAN M. COLLINS, CHAIRMAN

    The Chairman. Good afternoon. The hearing will come to 
order.
    One of our Committee's prior hearings on retirement 
security revealed that the gap between what Americans have 
actually saved for retirement and what they will need stands at 
an astonishing $7.7 trillion.
    According to a recent Gallup poll, 60 percent of Americans 
note that their top financial concern is not having enough 
money to make ends meet after they stop working. Most believe 
that they will have a much more difficult time achieving a 
secure retirement than their parents did.
    These statistics confirm that their concern is warranted. 
More than half of those between 55 and 64 years of age have 
little or no retirement savings, and about a third have less 
than $25,000 in savings of any kind. Similarly, one in three of 
those on the cusp of retirement could not come up with $2,000 
if they needed to do so.
    It is difficult to imagine making ends meet in retirement 
with just $25,000 in savings and the typical Social Security 
benefit of about $16,000 a year, but for one in four retirees, 
this is the reality.
    There are many reasons we face such a worrisome gap, 
including rising health care costs, the need for long-term 
care, and longer life expectancies. The shift away from 
employer-based defined benefit plans, or pensions, to defined 
contribution plans, such as 401(k)'s, has also played a role.
    The importance of workplace retirement plans in improving 
Americans' retirement security is worth noting: When full-time 
workers have access to retirement plans, approximately 80 
percent of them contribute.
    In contrast, workers without access to employer-based plans 
are much more likely to lack confidence in their retirement 
security, according to the Employee Benefit Research Institute, 
or EBRI. Furthermore, EBRI has found that fewer than 10 percent 
of employees without a workplace plan contribute to a 
retirement savings account on their own.
    Given that 30 million full-time private-sector workers lack 
access to an employer-sponsored retirement plan, one important 
step that we can take to improve retirement security is to 
encourage employers to offer these plans. As we do so, we must 
address the fact that small businesses face challenges in 
offering retirement benefits to their workers because of the 
cost and complexity of these plans.
    That is why, along with the Ranking Member, Senator 
McCaskill, and Senator Bill Nelson, the former chairman of this 
Committee, I have introduced the Retirement Security Act. It 
would make it easier and less expensive for small businesses to 
establish retirement plans as well as to encourage individuals 
to save more for retirement.
    We also have to acknowledge that the ongoing shift toward 
workers taking freelance or independent contractor positions, 
often referred to as the ``on-demand'' or ``gig'' economy. 
Workers who have these jobs typically cannot participate in 
traditional employer-provided plans and must look elsewhere to 
save for retirement.
    Fortunately, innovative products and services are entering 
the marketplace that combine new technologies with behavioral 
economics to improve financial literacy and promote savings.
    Other apps use a game platform to make financial education 
entertaining. The informal encouragement people receive can 
make a big difference in their willingness to save. For 
example, Staples found that its employees were three times more 
likely to sign up for its retirement plan after playing one of 
these games.
    Today's hearing will highlight these and other innovative 
ideas to improve savings and thereby increase retirement 
security.
    I look forward to the testimony of our witnesses today and 
thank them for joining us, as well as I look forward to the 
remarks of the ranking minority member.

                 OPENING STATEMENT OF SENATOR 
                CLAIRE McCASKILL, RANKING MEMBER

    Senator McCaskill. Good afternoon, and thank you, Chairman 
Collins. You have laid out the retirement security crisis in 
stark terms, and certainly there is growing concern about 
whether Americans are ready for retirement or even able to stop 
working once they reach their golden years. We have shifted 
from a system in which workers could passively prepare for 
retirement where their employers did the bulk of the work for 
them by putting money in a defined benefit pension plan and 
sending Social Security payments to the Government. Today's 
workers must be more active in planning for retirement. They 
must decide to put money aside and decide how much they should 
save. They have to figure out the best funds to invest in and 
to stay on top of those funds as they age.
    Yet we have not done a great job of giving workers the 
tools to learn how and where to put money aside. Many new 
employees start a job and get a stack of papers about a 401(k) 
or other benefits and toss those documents into a drawer, never 
to be seen again. We need to figure out ways to reach workers 
on their terms and help guide them to develop a habit of 
saving.
    I am a big fan of technology, and we have a few witnesses 
here today who will talk about how they are using websites and 
apps to appeal to workers in novel ways. In the same ways that 
the Fitbit is prompting people to be more active in managing 
their health, this technology can prompt more people to do the 
same for retirement security. These tools can be connected 
directly with people's accounts or can be played independently, 
aiming at changing a person's behaviors by forcing them to 
consider how to prioritize their saving and their spending, and 
these apps recognize that people are at different levels of the 
continuum. Some people are just starting out and need to get 
into the habit of putting money aside and not spending every 
dollar. Others can manage their entire financial portfolio, 
from IRAs to 401(k)'s.
    We welcome Tim Flacke from Doorways to Dreams, which has 
been instrumental in bringing one innovation to the United 
States. Prize-linked savings has been popular internationally, 
but until 2009 had not been available stateside, which is sort 
of surprising given how much Americans love lotteries, but this 
takes all of the upside of a lottery, the hope for a big prize, 
and eliminates the downside. Even those who do not win a prize 
still win because they have set aside money for an emergency or 
a rainy day or, most importantly, retirement.
    Congress recognized the appeal of these programs in 2014 
with the passage of the American Savings Promotion Act, and as 
of today, more than $150 million has been saved in the 20 
States where the legislatures have approved the program. I am 
pleased to share that just this week Missouri became the 21st 
State to authorize prize-linked savings, and I am thankful that 
a heavy majority of legislators there and Governor Nixon 
decided to give Missourians a fun way to get into the habit of 
savings.
    Roughly one in three people in my State do not even have a 
savings account, and the idea that prize-linked savings could 
play a role in shrinking that number is very encouraging. We 
obviously have a long way to go until most Americans can feel 
financially secure in retirement, and I do not want this 
hearing to underplay a very real crisis out there, but it is 
worth taking the time today to examine what is working, what is 
prompting behavioral change, and how we can get more Americans 
on the right track to a solid retirement.
    Thank you, Madam Chairman.
    The Chairman. Thank you very much.
    Now we will turn to our panel. First we will hear from 
Catherine Collinson, a retirement and market trends expert who 
serves as the president of Transamerica Institute and the 
Transamerica Center for Retirement Studies.
    Next I would like to welcome Aron Szapiro, who serves as an 
expert on retirement and pension issues at HelloWallet, a 
Washington, D.C.-based web and mobile application that promotes 
financial wellness and security.
    As Senator McCaskill has already mentioned, Tim Flacke is 
the executive director of Doorways to Dreams, or D2D, a 
national nonprofit that works to strengthen the financial 
opportunity and security of financially vulnerable consumers 
through innovation.
    Our final witness this morning will be Mr. Brian Plum, who 
is president and CEO of Blue Ridge Bank in Virginia. The bank 
offers prize-linked savings accounts which can incentivize 
savings.
    I want to thank you all for joining us, and we will start 
with you, Ms. Collinson.

          STATEMENT OF CATHERINE COLLINSON, PRESIDENT,

           TRANSAMERICA CENTER FOR RETIREMENT STUDIES

               (TCRS) AND TRANSAMERICA INSTITUTE,

                    LOS ANGELES, CALIFORNIA

    Ms. Collinson. Thank you. I am Catherine Collinson, 
president of Transamerica Institute and its Center for 
Retirement Studies, or TCRS. Transamerica Institute is a 
nonprofit, private foundation funded by contributions from 
Transamerica Corporation. TCRS' nonprofit mission is to conduct 
research and educate the public about the latest trends, 
issues, and opportunities surrounding saving and planning for a 
financially secure retirement. Thank you for this opportunity 
to share our research and survey findings.
    The retirement landscape is evolving due to increases in 
longevity and the ever increasing need for people to save and 
plan for their retirement. The pace of change calls for new 
solutions to promote retirement security. Our survey found that 
49 percent of workers agree that they are building a large 
enough retirement nest egg, but notably, only 15 percent 
strongly agree. As a result, many are planning to work longer, 
retire at an older age. However, all too often life's 
unforeseen circumstances derail the best laid plans, and many 
find themselves retiring sooner than they expected.
    My written testimony sets forth a ten-step plan for 
increasing retirement security. I will now share five of those 
recommendations.
    First, expand coverage by providing part-time workers with 
the ability to save. Our survey found that 74 percent of 
employers offer a 401(k) or similar plan, but only 38 percent 
extend eligibility to their part-time workers. Reforms are 
needed to remove impediments and encourage employers to offer 
benefits to their part-time employees, particularly vulnerable 
groups such as women and low-income workers, giving them the 
opportunity to save in the workplace.
    Second, implement personalized retirement education and 
planning tools. With two out of three workers agreeing that 
they do not know as much as they should about retirement 
investing, the need for education is clear. When asked what 
would motivate them to learn more, many said, ``Make it easier 
to understand.'' People have their own unique circumstances, be 
it an unpaid family caregiver balancing work and an aging 
parent, a recent college grad just entering the workforce, or 
an aerospace engineer who is getting ready to retire. 
Personalizing retirement education and resources, including the 
manner in which they are delivered, can engage more people.
    Case in point: Our survey found that 20-somethings are 
almost twice as likely as 60-somethings to find mobile apps for 
managing their accounts to be helpful.
    Third, reduce leakage from retirement accounts. Among 
workers who are currently participating in a plan, 23 percent 
have taken a loan and/or early withdrawal from their 401(k) or 
IRA, with top-cited reasons suggesting that they lack emergency 
savings or insurance coverage or they are struggling to pay off 
consumer debt. While access to funds can encourage plan 
participation, more education is needed in clear and simple 
terms about the risks involved. Limiting the number of 
available plan loans as well as extending the repayment period 
for terminated participants can help as well.
    Fourth, facilitate working longer and a phased transition 
into retirement. Gone are the days of the gold watch 
retirement. Fifty-eight percent of workers now plan to work 
past age 65 or do not plan to retire, and many are envisioning 
a phased transition. Unfortunately, few employers have business 
practices in place to support them. Reforms are needed to labor 
and benefits laws to help remove barriers and encourage 
employers to offer a flexible and phased retirement, enabling 
their workers to work past age 65, and fifth, promote and 
expand the saver's credit. Tax incentives can be a powerful 
motivator to save, but only if people are aware of them. Our 
survey found that only 30 percent of workers are aware of the 
saver's credit, a tax credit available to low-to moderate-
income workers who save in a qualified plan or IRA. Awareness 
is even lower among women and part-time workers. Expanding the 
saver's credit and incorporating it onto the 1040EZ form can 
enable more workers to save as well as make it easier for them 
to claim when preparing their tax returns.
    On behalf of TCRS, I would like to thank Committee Chair 
Collins and Ranking Member McCaskill and all of the Committee 
members for your commitment and leadership to increasing 
retirement security.
    The Chairman. Thank you very much for your testimony.
    Mr. Flacke.

             STATEMENT OF TIMOTHY FLACKE, EXECUTIVE

               DIRECTOR, DOORWAYS TO DREAMS FUND,

                     ALLSTON, MASSACHUSETTS

    Mr. Flacke. Chairman Collins, Ranking Member McCaskill, and 
members of the Committee, thank you very much for the 
opportunity to appear before you today. As noted, I am Timothy 
Flacke. I am the executive director of Doorways to Dreams Fund, 
or D2D for short. D2D is national nonprofit that strengthens 
the financial security and opportunity of financially 
vulnerable Americans by discovering ideas, piloting solutions, 
and driving innovations to scale. I am here today to discuss 
how some of these innovative ideas and consumer-friendly 
technology can help Americans improve their financial lives and 
become more financially secure.
    Much of D2D's work has focused on addressing the savings 
crisis, which has already been described in great detail today. 
We have spent over a decade researching, exploring strategies, 
and developing solutions that motivate and support people's 
positive financial behavior. Through our work, we found three 
persistent challenges in helping consumers to build savings, 
whether for retirement or more generally.
    First, as I think we all know, people are busy and 
stressed, and capturing their attention to focus on financial 
issues and savings is very, very hard.
    Second, while good information is essential, it is rarely 
enough to motivate people to take action on their financial 
aspirations, and finally, high-quality financial solutions have 
to be paired with effective distribution strategies that 
provide broad-based access at scale, especially for financially 
vulnerable Americans.
    D2D has seen how technology can help address each of these 
challenges. Today I want to highlight a few of our ideas that 
harness the power of tech to meet consumers' needs in an 
engaging, effective, and widely accessible way.
    Most Americans are not drawn to personal finance, so to 
break through that noise that we all live with, we have to make 
these issues engaging, attractive, and exciting, and for that 
reason, D2D developed, as has been noted, a suite of online and 
mobile financial education video games which we call 
``Financial Entertainment.'' These games build financial 
capability, financial decisionmaking skills in a number of 
areas--budgeting, debt payment, and saving for retirement--and 
they do it in a way that is fun and familiar to many, many 
people.
    This is something that many of us already do. In fact, 155 
million Americans play video games, at last count, including 41 
million Americans who are age 50 or older, according to the 
AARP. That same study found that three-quarters of people 50 or 
older play games weekly, and 40 percent are playing them every 
single day.
    These players learn through an interactive, stress-
reducing, problem-solving experience that engages people to 
practice making actual financial decisions. Also as noted, 
Massachusetts-headquartered office supply company Staples saw 
the value of this approach and partnered with us to offer its 
employees a game we call ``Bite Club,'' which is designed to 
tackle the challenges of how to make your financial future 
relevant today.
    In the game, you play the role of a vampire running a ``day 
club'' who desperately needs to save for an eternal retirement, 
and while playing, employees have the opportunity to follow 
links directly to their own retirement plan provider to learn 
more and, crucially, to take action.
    D2D and Staples collaborated on several pilot tests to 
reach employees outside of work hours. In one test, over 80 
percent engaged with the game. In another, 11 percent of newly 
eligible employees took action on the 401(k) website after 
being offered the game.
    Building from these insights, D2D designed and developed 
SavingsQuest, which is a web and mobile app that rewards people 
for taking saving action. SavingsQuest applies the fun of video 
games and the popularity of fitness trackers to create 
motivation and offer instant gratification for saving. The app 
links directly to a real financial product, allowing consumers 
to make in-app savings decisions motivated by different video 
game-inspired elements. When users save even as little as a 
penny, the app rewards them with a user-customized whimsical 
dance from Dig the Pig, and during pilot tests with prepaid 
card holders, SavingsQuest users saved 25 percent more 
frequently than non-users, and about a quarter had not 
previously engaged with the savings feature on their prepaid 
card at all. By providing a unique gamified way to take action, 
strategies like this can help consumers start and build a 
savings habit, whether for emergency savings or ultimately for 
retirement.
    Finally, D2D has explored solutions that use the power of 
technology, particularly mobile technology, to provide better 
and broader access to consumers. One area of particular 
interest is modernization of the U.S. Treasury's Retail 
Securities Program. We believe that savings bonds are a 
powerful tool for many Americans to start saving. They have low 
minimum balances, no fees, complete security, and utterly 
unique giftability. These traits make bonds helpful tools for 
older Americans who hope to give the gift of savings to loved 
ones, kids and grandkids, and that action can help in building 
a national culture of savings.
    Despite these user-friendly features, since 2012 savings 
bonds have only been sold through an antiquated online system 
and are available through the tax-filing process through a tax 
form called 8888. With the tax form option now at risk, D2D has 
been supporting the Senate legislation 2478 to preserve the 
current tax-time channel and pave the way for a savings bond 
for the 21st century. We envision a system that allows 
innovators to develop mobile solutions that securely hook into 
Treasury's platform and offer this trusted product to millions 
of Americans that already rely on mobile devices for Internet 
access and to manage their finances.
    To wrap up, D2D envisions a world where the financial 
system promotes lasting social and economic prosperity for 
every family. We are deeply committed to developing innovative 
ways to help vulnerable Americans build savings and financial 
security. Technology is a critical part of this effort, and we 
applaud the members of the Committee for recognizing this 
approach as you seek ways to help Americans improve their 
financial futures.
    Thank you.
    The Chairman. Thank you very much.
    Mr. Szapiro.

              STATEMENT OF ARON SZAPIRO, ASSOCIATE

            DIRECTOR, POLICY RESEARCH, MORNINGSTAR,

                        WASHINGTON, D.C.

    Mr. Szapiro. Chairman Collins, Ranking Member McCaskill, 
and members of the Committee, thank you very much for inviting 
me here today to give the perspective of HelloWallet and our 
parent company, Morningstar, on technological innovations and 
how they can help improve retirement security.
    As part of Morningstar's mission to help ordinary 
investors, we offer products that provide automated guidance to 
American workers to help them make the most of their finances, 
and we have learned a lot about the power of technology to 
improve people's retirement security from these products. In 
particular, I will draw on the lessons we have learned in 
developing HelloWallet as well as our Retirement Manager 
applications
    To best use their retirement workplace benefits, employees 
often must make complex financial decisions in the context of 
other obligations and goals. In many cases, workers do not have 
sufficient tools to make these choices; luckily, new technology 
can play a vital role in helping them make the most of their 
benefits.
    A few decades ago, as has been discussed, most workers did 
not need such financial technology. Employers offered defined 
benefit plans, and workers did not really have to make any 
decisions. In the old system, employees did not have to decide 
how much to contribute to their retirement plan, how to invest 
those contributions, or how to convert their savings into 
lifetime income, but today, as workers are mostly in defined 
contribution plans, they carry risk and responsibility for key 
decisions regarding contribution levels, asset allocation, and 
withdrawal strategies. Technology can help employees manage 
these responsibilities in ways that were not possible even a 
few years ago.
    I think financial technology offers three key strengths for 
conveying critical information about retirement plans and 
improving employees' retirement security.
    First, technology offers immediate feedback to help people 
plan for retirement. Americans have grown increasingly 
comfortable with smartphones, tablets, and, of course, 
computers, and they are more accustomed to managing their 
finances online, so the immediate feedback they can get from an 
app is much more useful today than it has ever been before. For 
example, by using electronic retirement planning tools, as 
workers adjust their retirement contributions, they can 
instantly see how these changes would translate into an 
increase (or decrease) in likely future retirement income. They 
can then modify their retirement deferrals to meet their goals 
just with the click of a button. The feedback is targeted to 
the individual, as it can be personalized for a person's age, 
goals, and income. Technology even makes it possible to run 
extremely sophisticated retirement simulations, which test the 
robustness of a user's plan under a variety of market 
conditions in just a few seconds.
    The second advantage of technology is that it allows for 
rapid behavioral testing so researchers can learn which 
approaches encourage more saving. Due to the low cost of 
providing cloud-based software applications, it is now a lot 
easier than it has ever been to run experiments to see which 
approaches to presenting information resonate and which ones do 
not.
    By using this technology, our behavioral researchers have 
repeatedly found that even minor details in the decisionmaking 
environment can halve, or in some cases double, actual follow-
through rates. For example, we tested several calls to action 
in our HelloWallet app to encourage our users to review their 
retirement plans, and to our surprise, we learned that a 
simple, ``Are you saving enough for retirement?'' worked a lot 
better than other approaches. It encouraged the most people to 
click on a link for retirement guidance and then adjust their 
elections.
    Indeed, through extensive testing and observation, we have 
been able to increase users' retirement deferrals 12 percent 
within 1 year of using HelloWallet, and we have been able to 
increase their total savings deferrals 29 percent in the same 
time period.
    The third advantage that technology can offer is it can 
aggregate a user's accounts to provide a comprehensive, 
holistic picture of their finances. If you look at an 
employee's 401(k) balance in isolation, it will likely result 
in a false assessment of their readiness. For example, a worker 
might have a high retirement balance, but if that work lacks 
sufficient emergency savings, she may well end up using these 
retirement assets to cope with an unexpected expense. Workers 
with other pressing financial goals--such as sending a child to 
college or purchasing a home--may be very tempted to spend from 
their retirement account for nonretirement purposes. Indeed, 
this leakage may drain as much as one-fourth of assets from 
retirement accounts. New technology makes it inexpensive to 
aggregate accounts, and new applications can compute the 
numbers to provide users with holistic guidance, which helps 
them prepare for emergencies and other expenses, preserving 
their retirement savings for their intended purpose--
retirement.
    Another complication is that retirement assets are often 
spread across many different accounts, such as individual 
retirement accounts or a previous employer's 401(k). This 
fragmentation makes it critical to look across all of a 
worker's accounts to gain the fullest picture of their 
retirement savings. If you fail to do that, then it is very 
difficult to recommend the right asset allocation strategy or 
the right contribution levels. Technology provides a low-cost 
way to aggregate data that can help workers with multiple 
accounts form a good plan for achieving success in retirement.
    Of course, when helping workers reach their retirement 
goals, technology is just one part of the solution. Hybrid 
approaches, where software helps people understand their 
options and stay on track, may well be augmented with human 
advisers for more complex problems. However, new technology has 
an important role to play. I have shared some of the results we 
have seen with our products in my written statement.
    Again, thank you very much for the opportunity to testify 
here today, and I look forward to questions.
    The Chairman. Thank you for your testimony.
    At this time I am going to call very briefly on Senator 
Kaine who wanted to welcome Mr. Plum since he is a constituent 
of his.
    Senator Kaine. Thank you, Madam Chair and Ranking Member 
McCaskill, and welcome, Mr. Plum.
    Let me introduce my constituent, Virginian Brian Plum, who 
is the president and CEO of Blue Ridge Bank and its parent 
company, Blue Ridge Bank Shares, which is a position he assumed 
in December 2015, and we are pleased to have Brian here today 
because he is going to talk a good bit about some of the 
innovative strategies Blue Ridge Bank uses to help seniors with 
retirement security.
    Welcome. I am so glad you are here.

             STATEMENT OF BRIAN K. PLUM, PRESIDENT

         AND CHIEF EXECUTIVE OFFICER, BLUE RIDGE BANK,

                        LURAY, VIRGINIA

    Mr. Plum. Thank you very much, Senator. I appreciate it.
    Good afternoon, Chairman Collins, Ranking Member McCaskill, 
and distinguished Members of the Committee. It is a tremendous 
honor and privilege to provide my thoughts and perspectives to 
this Committee, and it is my hope that something in my 
testimony offers meaningful insight into what we can do to 
address a severe and critical issue in our Nation.
    My name is Brian Plum. I am President and Chief Executive 
Officer of Blue Ridge Bank, headquartered in Luray, Virginia.
    Blue Ridge Bank was organized in 1893 and has been proudly 
serving its communities for 123 years. We are a small community 
bank and we take seriously our charge and responsibility of 
improving the lives of everyone in the communities we serve. 
Our bank does well when our communities do well, and we believe 
we can play a meaningful role in producing desirable financial 
outcomes.
    In that spirit, we were the first bank in the Nation to 
launch a prize-linked savings account. These accounts were 
authorized at the Federal level by the American Savings 
Promotion Act, signed into law by the President in December 
2014. Since we are a Virginia-chartered financial institution, 
we also had to wait until the Commonwealth of Virginia took 
action, and we launched our product on July 1st, 2015, the 
first date legally permissible for us to do so.
    The name we adopted for the account is ``Jackpot Savings'' 
and it consists of offering monthly prizes and a larger annual 
grand prize. Each month we randomly select four winners--one 
$200 winner and four $50 winners. In 2015 we offered a $5,000 
grand prize, and in 2016 the grand prize is $10,000. Each 
increase of $25 in an account generates a prize entry, so the 
more money any one person deposits into his or her account, the 
more likely he or she is to win.
    It is important to note that these customers really give up 
nothing. We offer the same rate on the product as the 
traditional savings product, so we are not subsidizing the 
prize costs by reducing the interest rate. Virginia Code 
requires prize-linked accounts to offer similar rates to other 
savings accounts, whereas my understanding is that not all 
states do. The prize funds are part of our marketing budget, 
and I think that is a key point, as it illustrates the real 
goal of this account is to make winners of everyone by 
increasing savings and not to reward some customers by reducing 
payments to others in the form of lower interest rates.
    The only real tradeoff is that since this account is meant 
to strongly encourage savings, we do have tighter rules for 
withdrawals. We limit customers to one penalty-free withdrawal 
per month and each additional withdrawal incurs a penalty. This 
penalty is not meant to be punitive, but to discourage 
withdrawals unless they are absolutely necessary.
    The stories of people being motivated to open a Jackpot 
Savings account are wide and varied: recent high school 
graduates, parents with young children, people approaching 
retirement, and even people that have already retired. In fact, 
our 2015 grand prize winner was a retiree living on fixed 
income, so Jackpot Savings turned out to not just be a tool for 
retirement, but one during retirement.
    One of my favorite stories is of a customer who was 
motivated to open a savings account after reading about the 
product. She had been planning a vacation for a long time and 
wanted to pay for it with savings instead of utilizing credit. 
Not only has she made significant progress toward her goal, but 
she was also one of our monthly prize winners.
    Jackpot Savings also created another opportunity to expand 
our efforts in savings. We are partnering with Long Game, a 
technology company startup focused on improving financial 
literacy and increasing personal savings through gamification. 
This partnership provides a tremendous tool to fundamentally 
improve the lives of consumers, and I suspect we are only at 
the very beginning of that trend.
    However, to fully capitalize on the potential, we need to 
ensure that regulatory treatments offer accommodation and 
practicality to encourage financial literacy innovation while 
preserving a focus on safety and soundness of the banking 
system.
    Community banks like Blue Ridge Bank can be a nimble and 
able partner for so many looking to offer financial literacy 
solutions. I commend this Committee for looking at this issue. 
The Associated Press-NORC Center for Public Affairs Research 
released a survey just a few weeks ago showing two-thirds of 
Americans lack $1,000 in savings to cover emergency expenses. 
This is appalling, and none of us should be willing to accept 
that so few people have any meaningful savings.
    We should be particularly motivated to work together as we 
think about the implications of deficient savings for an aging 
demographic in a society where defined-benefit plans become 
rarer each day. A crisis in emergency savings today is an 
unimaginable retirement savings problem tomorrow.
    Blue Ridge Bank and I stand ready and willing to commit 
more time, energy, and insight for this Committee and staff to 
make progress on this critically important issue. Thank you so 
much for this opportunity.
    The Chairman. Thank you very much, Mr. Plum.
    Ms. Collinson, we know that 80 percent of employees who 
have a workplace retirement plan available to them will 
contribute to that. We also know that many small businesses 
that would like to offer a retirement plan find that it is too 
costly and complex to do so. What do you think of the idea of 
allowing small businesses to join multiple-employer plans, even 
if there is no nexus on the type of business? In other words, 
the fact that you are a grocery store versus a clothing shop, 
you could still join together. Do you think that that would 
help deal with the administrative burden, cost, and complexity 
that discourages a lot of small businesses from offering plans?
    Ms. Collinson. Our employer survey actually inquired about 
the topic among small businesses owners, especially those that 
feel like they are too small to sponsor a plan or cannot afford 
to sponsor a plan, and even though they are unwilling to 
sponsor their own plan, some say they would consider joining a 
multiple-employer plan, or MEP, so the potential is there.
    However, as we know, reforms are needed to create an open 
MEP so that small businesses that do not have a common nexus 
can join together and be part of a plan.
    The Chairman. Several of you have referred to what I would 
call leakage, and by that I mean that people put away money for 
retirement but they end up having an emergency and feel that 
they have to borrow from or take from their plan, and indeed, 
Mr. Plum, I have even more dire statistics. A recent survey by 
the Federal Reserve found that almost half of Americans did not 
have enough money to cover a $400 emergency expense, so that is 
a real issue, but another problem, which Mr. Szapiro alluded to 
also, is that sometimes people cash out their 401(k) plans when 
they change jobs and they do not reimburse--they do not roll it 
over. They just spend it or use it for expenses, or as Mr. 
Szapiro mentioned, they may use it to help finance a college 
education for their child or to buy a new home.
    I actually did something far worse in my youth. When I was 
a young Senate aid for a Maine senator and had worked long 
enough to vest in the Civil Service Retirement System but was 
then going back home to Maine to accept a job in the Governor's 
cabinet, and believe it or not, I withdrew my entire Civil 
Service Retirement System money and bought a car, and I cannot 
think of a more ill-advised financial decision, but I was so 
afraid of having debt that I thought a car loan would be a 
terrible thing to have, and so, instead, I raided my retirement 
account.
    I cannot help but think if I had had one person say to me, 
have you thought about how stupid this decision is and what the 
implications are going to be later, it would have stopped me, 
or if I had played one of the financial games that you have 
described, so I would like, starting with Mr. Szapiro, to ask 
you about the problem of leakage, and what can we do to 
convince people that it is not worth doing what I did. I would 
have been much better off getting a car loan and having that 
money grow over time for my retirement, especially since I 
ended up going back into the Federal Government.
    Mr. Szapiro. Well, I think there is two things that come to 
mind that are most obvious.
    The first, that we have had a lot of success with, is 
showing people what their current savings will mean in terms of 
future income, so when you just show people a lump sum, it is 
very hard for them to translate that into retirement income, 
even if they are at retirement, much less if retirement is 20, 
30, 40 years away. We have a lot of success with showing people 
what it means to have $20,000 saved up now, how it will grow, 
and how that will translate into income, and how that compares 
to their current income, so that is a technique that we found, 
and there is actually a lot of behavioral research on this. 
When people have relatively small lump sums, in any context, 
they are likely to treat them as income. If they are relatively 
large, they are much more likely to think of it as long-term 
wealth, so I think it is a particularly acute problem with 
small account balances, and the second thing is any policies 
that encourage more automatically in moving money from one 
401(k) to the next I think would be very helpful as well. That 
is where a lot of leakage is in the system, is at the point of 
shifting jobs.
    The Chairman. Thank you.
    I am going to ask the rest of you to respond for the record 
since we have a number of Members here.
    The Chairman. Senator McCaskill.
    Senator McCaskill. Okay, so I think you guys are on to 
something with the gaming. I hate to confess on a record of the 
U.S. Senate that I relax with some of those mindless things 
with some frequency.
    I am curious about--I just went on and pulled down 
HelloWallet while we were sitting here. Tell me what the 
sponsor codes mean, Mr. Szapiro. Is that how--Szapiro? Tell 
me--I mean, because I cannot get to it because I do not have a 
sponsor code, so how is this--how is this business model set 
up?
    Mr. Szapiro. Sure, so the business model is that we 
distribute through employers. Employers buy licenses to 
distribute to their employees to help them manage their 
benefits in the context of their other financial goals.
    Senator McCaskill. What does it cost a business to----
    Mr. Szapiro. The licenses vary. I mean, they are each 
individually negotiated contracts, so I mean, I cannot give you 
a single number but they are not very----
    Senator McCaskill. Can you give me a ballpark? Let's say I 
have a business. Let's say I have a car dealership and I have 
two outlets and I have a grand total of 75 full-time employees. 
Would it be $10 per license or $200 per license?
    Mr. Szapiro. It would be much less than $200 per license. 
Of course, we are mostly working with very large companies 
because we are just not--you know, we are a pretty small 
company and we are not charging very much for the licenses, so 
we are trying to sell to large companies where we can sell, you 
know, many thousands of licenses at a time.
    There is a business-to-consumer way to get to it. It is a 
little--it is sort of up in the corner, so you can subscribe to 
it as well as an individual, you know, for an annual fee.
    Senator McCaskill. Well, it would not let me sign in 
without a sponsor code.
    Mr. Szapiro. Right, you have to set up a new account and--
--
    Senator McCaskill. Well, I tried to create an account. It 
would not let me create an account without a sponsor code. I 
just tried. I promise you.
    Mr. Szapiro. I will look into that as soon as I get back to 
the office.
    Senator McCaskill. Okay.
    Mr. Szapiro. We do have--I mean, about 10 percent of our 
users are direct business-to-consumer, so we have some of that, 
and then we also have----
    Senator McCaskill. Well, what I am trying to do is figure 
out a way to get this to the small businesses and get it to 
people that maybe might get there without having it--having it 
come through--I mean, what we have talked about today is--it is 
like everybody has been sleepwalking. You know, somehow this 
will all turn out, you know, because it did for their parents 
and their grandparents, because they had pensions and Social 
Security, but now, you know, you have got to actively do this, 
so for yours, Mr. Flacke, I tried to go to SavingsQuest and I 
cannot find SavingsQuest as an app, so where is it?
    Mr. Flacke. It is available in the App Store, but we will 
followup and----
    Senator McCaskill. Not when you search for it.
    Mr. Flacke. Well, like----
    Senator McCaskill. Not even for iPad only or for iPhone 
only. SavingsQuest is--you cannot find it.
    Mr. Flacke. Well, like my colleague here, we will go back 
to the office and make sure we solve that.
    Senator McCaskill. I am trying to help your business here.
    Mr. Flacke. I will just say that it is still in 
development, so it is not in its final form, so that may have 
something to do----
    Senator McCaskill. Oh okay, and when it will be available, 
can anybody use it whether or not they--the license has been 
purchased by the business where they work?
    Mr. Flacke. Yes, we do not have the same business model 
that HelloWallet does, and as a mission-driven not-for-profit--
--
    Senator McCaskill. What will your business model be?
    Mr. Flacke. Yes, as a mission-driven not-for-profit, our 
primary goal is to influence the key actors that are in a 
position to--as you so well pointed out, to really reach 
millions and millions of people in a sustainable way, so that 
is where the work with, for example, Staples comes into play. 
Our role was to approach them and say: We have a new idea. We 
have a different way of thinking about getting the attention, 
you know, of your workers, and then we built a partnership to 
do that. We believe----
    Senator McCaskill. Yes, I want to go on Bite Club. I want 
to try it.
    Mr. Flacke. Yes.
    Senator McCaskill. I cannot because I do not work at 
Staples, so I guess the point I am trying to make is that this 
has to hit mainstream, and I think that people might be 
surprised what kind of appetite there is for it mainstream.
    I have a question for you, Mr. Flacke. Is there anything 
that you all have done in terms of optimizing those savings 
moments? The one I think of most frequently, you know, I have 
had to educate my children, who think that the tax refund is 
like a bonus they are getting, or something. I keep explaining 
to them that that is their money that they are getting back and 
that maybe they should not be withholding so much. If they were 
saving through the year, it would be better for them to be 
using that money than the IRS holding that money, and I tried 
to explain that to them and they said, well, then we would not 
get that check. We would not get that check, and I am going, 
yes, but it is your money, and so I have tried to instill in 
them that if they are going to do it that way, they have to 
save some of it.
    What research have you done, or have any of the rest of you 
done, about the savings moment of tax refunds, because that is 
when everybody else out there is trying to get you to buy 
something. I mean, they are doing the sales on cars and they 
are doing the sales on mattresses and appliances, because 
everybody knows there is this check that is coming between the 
end of January and the beginning of April that is going to up 
the buying power of thousands--millions and millions of 
households, so talk to me about that.
    Mr. Flacke. Well, I think we absolutely agree that that is 
the single-most powerful potential saving moment, especially 
for sort of regular working folks----
    Senator McCaskill. Right.
    Mr. Flacke [continuing]. who get very large refunds.
    I guess I would say that the thing that is good news is 
that the government has done a lot to lay the foundation to 
take advantage of that moment. The IRS--and many people are not 
aware of this--will send your refund electronically to up to 
three different destinations, so that allows us to make a 
single decision when we file our return and say, my refund is 
going to be $1,000 or $2,000; I am going to take 25 percent of 
it and send it directly to my IRA--or, you know, as I mentioned 
in my testimony, for people who do not have IRAs, a U.S. 
Savings Bond, which is a very good starting savings product, in 
our view, so I think the next step--you know, good, we have the 
foundation. The next step is to make people really aware of 
this. The most extreme version of that is this culture of 
savings that we refer to, but I think having laid these pipes 
in place, there is an opportunity for the IRS--for the Free 
File program, which is the free tax preparation available 
through industry, to clearly emphasize, front and center, 
exactly the message that you just described.
    Senator McCaskill. Right.
    Mr. Flacke. This is your moment. Let's make the most of it.
    Senator McCaskill. Okay, I will look forward to getting 
those apps so I can play those games.
    Mr. Szapiro. If there is a second, I wrote a paper on this 
that came out earlier this year. We were actually able to use 
HelloWallet data, because we have our users' credit cards and 
their checking account data, to see what happened when Treasury 
310 tax refund hit their accounts, and only about a third of 
our members saved their refund. Most of them spent it, and 25 
percent of them used it to pay down credit card debt, so I 
mean, we are----
    Senator McCaskill. That is not a terrible thing to do.
    Mr. Szapiro. It is not a terrible thing to do with it, but 
it probably would have been better if they had just not accrued 
the debt in the first place, so I mean, we are seeing what you 
just described, in our data.
    Senator McCaskill. Thank you.
    The Chairman. Senator Tillis.
    Senator Tillis. Thank you, Madam Chair.
    Mr. Flacke, is it RamoGames that is the one that--or is it 
something other than that? Say, I did a Google for SavingsQuest 
and I found some money games out there. I was not sure if it 
was yours or not, but----
    Mr. Flacke. I am not familiar with RamoGames or that image 
on your screen, so----
    Senator Tillis. I need to make sure because I will share it 
with Senator McCaskill when I get it. More importantly----
    Senator McCaskill. We are on the app quest.
    Senator Tillis. More importantly, I will share it with my 
daughter, who--she is 27 years old. She just passed her 
certification for being a registered nurse in North Carolina, 
and I was just having a discussion with her the day before 
yesterday about how she has managed an independent lifestyle to 
this point. She is about to get a two-or three-time multiple in 
her income. Now is the time to, of course, benefit some but 
make sure you have got a good, solid savings foundation right 
now, and it really speaks to kind of my one-on-one tutoring for 
financial literacy, and we have to do a lot more of it.
    Mr. Plum, I was speaker of the house in North Carolina. In 
2011, we passed the same sort of legislation that Virginia did 
for the program that you have implemented, and it has resulted 
in about $5.4 million more in savings that they have directly 
attributed to this authorization, so I think it makes a lot of 
sense.
    In your oral testimony and in your written testimony you 
made the comment about partnering with Long Game, and also the 
regulatory treatments offering accommodations. Can you maybe 
get more specific about that, and relevance to either Federal 
or State policy?
    Mr. Plum. Certainly, Senator, and first off, I would like 
to say, since there is a lot of eagerness about exploring the 
account options, you can open our account online at mybrb.com. 
Feel free to do that while we are sitting here, as well.
    From a regulatory standpoint, I think there are a couple of 
key topics. From a partnership perspective, you know, there is 
the issue of when a bank partners with a financial literacy 
provider who is looking to use gamification, looking to bring 
the money in, the issue exists of whether those are brokered or 
non-brokered deposits, and you know, I understand this is not 
the Banking Committee so we probably do not want to get into 
that deeply, but certainly happy to talk about it, but that 
would affect the interest level of banks in pursuing 
partnerships like that because the treatment, as it is 
brokered, would obviously carry negative regulatory 
connotations and also financially, from an assessment 
standpoint, and then also, I think another regulatory element 
of that would also be there is a tremendous level of scrutiny 
right now on any vendor-type relationship, and rightfully so. I 
mean, there have been significant data breaches that have been 
attributable to third-party vendors, so I think there is 
probably an unnecessary and perhaps even an unhealthy amount of 
fear in the marketplace about partnering with others, because, 
quite frankly, you know, what we would be able to do with a 
partner in this arena is going to dwarf what we can do by 
ourselves, and that is really the potential that we see in 
talking to Long Game, and other banks and credit unions are 
going to see that very same dynamic.
    Senator Tillis. Thank you.
    One question. It may seem off-topic. It may be, so you are 
perfectly entitled to say ``not relevant.'' To what extent does 
the Department of Labor fiduciary rule threaten getting 
information that people need to--particularly people with 
lower--you know, those who have some amount of net worth will 
have a private investment banker or someone else. It does not 
affect them really because they are already in that sort of 
relationship, but for the strata of people that we are talking 
about, who may not be financially literate, do you all see any 
either positive or negative impact of the proposed Department 
of Labor fiduciary rule?
    We will start with Ms. Collinson.
    Ms. Collinson. It is a massive rule. It is going to take 
time to assess its impact, both on retirement--on the landscape 
as well as how it affects the delivery of investment advice and 
recommendations to Americans, and we do not have a formal 
position because we have not been able to do a full assessment.
    Senator Tillis. Okay. Anyone else wishing to opine on that?
    Ms. Collinson, you mention in your opening comments about 
reforms. Certain sorts of reforms may be beneficial to the area 
that we are focused on today. Do you have specific 
recommendations either at a Federal or State level that you 
think are some of the most meaningful reforms that we should 
focus on?
    Ms. Collinson. One area that I opened with is extending 
eligibility to part-time workers and up to corporate retirement 
plans, and there are a few things that can be done through 
reforms that may remove disincentives and encourage employers 
to extend that eligibility to their part-timers.
    One is excluding part-time employees from nondiscrimination 
testing. Two is having a provision that they can exclude part-
time employees from a matching contribution, and then the last 
is easing service requirements so it is easier to do the 
administration to identify long-term part-time employees as 
meeting service requirements as being part of the plan, and of 
course, tax incentives can also help.
    Senator Tillis. Yes. Thank you.
    Mr. Flacke, if you can send a link to these games so that 
we can download them, I think--I mean, honestly, they are very 
helpful, particularly for young people but really the entire 
age spectrum, so I would be very interested in getting them, 
and maybe Senator McCaskill and I can compare scores.
    Mr. Flacke. We will certainly do that.
    Senator Tillis. Thank you.
    Mr. Flacke. Thanks.
    The Chairman. Thank you very much.
    Senator Kaine.
    Senator Kaine. Thank you, Madam Chair, and thanks to the 
witnesses--very, very interesting testimony.
    Mr. Plum, I am going to direct my questions to you. First 
just a couple of facts. The Commonwealth of Virginia is 29th 
out of 50 states in the percentage of residents who have a 
savings account. We are at 69.8 percent is our State 
percentage, and there are some real disparities in that number. 
African-American families--about 52.1 percent of African-
Americans have savings accounts in Virginia; 53.2 percent of 
Hispanic families do. It is nearly three-quarters for Caucasian 
and Asian-American households, so you see some significant 
disparities.
    I just think it is a simple concept and it makes so much 
sense. I did not really know that much about these prize-based 
savings programs until I was reading the testimony about this, 
and it just seems obvious and, in fact, so obvious that in 
articles that I have read there is a suggestion that if too 
many states do what Virginia has done or North Carolina has 
done and allow it, State lotteries are going to start to get 
mad because people are going to be saving money rather than 
buying lottery tickets. Now, that is a problem I hope we see. 
That would be a wonderful problem to have to deal with, but 
talk a little bit about, in the time you have done this--so you 
have been almost at it for about a year and your bank has 
already gotten some significant attention for going into this. 
What have you seen with respect to seniors in particular? 
Obviously saving at any point in life is going to be helpful 
for retirement savings. The earlier you start, the better, but 
is this a product that seniors have been interested in and 
excited about partaking in?
    Mr. Plum. Senator, you know, I do not have the stats on 
that and do not know them off the top of my head, but as I had 
in my testimony, you know, we are seeing everybody across the 
spectrum--I mean, there is the excitement of it, and there also 
is--you know, since we were the first bank in the country to do 
it, there is also that element of, you know, you guys are doing 
what again? You know, and so there is an educational piece.
    I think we have started to see the interest level pick up, 
and we have seen--you know, again, of the customers that we 
have had open the accounts, I would say a significant portion--
I do not know what that number would be--are people who are, 
you know, 10 years either close to retirement or, as indicated 
in the testimony, even some people in retirement, partly 
because if you look at the prize money that we are giving away 
and if you look at where interest rates are in today's 
environment, you know, part of it is, you know what, I am going 
to go ahead and roll the dice on winning the prize, because if 
I get that I am going to get an effective interest rate above 
what I get out of my savings account now.
    Senator Kaine. One of the things I was interested in 
reading some of the press about your bank is you have also been 
pretty forward-leaning in, you know, encouraging other banks to 
do this, encouraging other states to open this up. It could be 
really scaled up if larger banks could do this. Was it hard 
getting the Commonwealth of Virginia, as a state-chartered 
bank, to open the way for this particular innovation?
    Mr. Plum. Yes, so in the wake of the Federal legislation, 
you know, it was a slam dunk with the General Assembly. You 
know, and it is one of those things, Senator, that I am still 
perplexed that we are the only bank that I am aware of in the 
country--and I am pretty sure that we are the only bank in 
Virginia--because it is an account class that really does offer 
an opportunity for us to do something that is great for our 
business model, but do something that does that and also 
addresses what is an incredible gap in the country, and so the 
potential to do something is incredible, and you know, and I 
always kind of feel like since we are the only ones out there 
doing it--you do not mind being the first one out there, but if 
you are too far out there maybe it is because you are running 
off a cliff, you know, and that is why nobody is following you, 
so it is just--you know, it is something I have been excited 
about. I first read about it in the summer of 2014, and you 
know, it is something that just really clicked with me and I 
thought would make a lot of sense, and I think we are going to 
see--as banks and credit unions have success with it, I think 
we are going to see more people come online, but it is a 
conservative industry, as you know, and I think sometimes 
people want to see others go before they follow behind.
    Senator Kaine. You make an interesting point there. You 
know, this is in the Banking Committee's jurisdiction, not this 
Committee, but in what sense should banks be treated like 
credit unions? In what sense should they not be? That is a 
standard feature of people coming to our offices every year 
talking to us about this, but I understand these prize-based 
savings programs were programs that credit unions have been 
able to do for some time, and this act that was signed in 2014 
allowed banks to do----
    Mr. Plum. Right.
    Senator Kaine [continuing]. programs similar to the way 
that credit unions--so you may be a leader on the bank side but 
you are not running too far ahead.
    Mr. Plum. Right.
    Senator Kaine. There is a track record on these kinds of 
programs that they have been successful and they have met the 
needs of folks who have been credit union account holders for 
some time.
    Mr. Plum. As previously mentioned, you look at the 
statistics out of Europe. You know, it is amazing how effective 
a tool it has been, and as a nation and as a lot of individual 
states they have just lagged in implementing what is somewhat 
an obvious solution.
    Senator Kaine. Well, I think--I will just finish and just 
add that Senator McCaskill used the phrase that we have been 
kind of sleepwalking--sleepwalking as a Nation, you know, in 
terms of this retirement security crisis, and the good news is 
it is all driven by good news, which is we are living longer. 
That is great. You know, I think sometimes we are in such angst 
about these problems, but it is a problem created by something 
that is positive, which is we are living longer but that does 
mean we really have to reorient our thinking and we have to 
have new kinds of programs to make sure that people change 
their habits and, you know, start to take account of that new 
demographic reality as we look at programs like this, and 
anything that gives simple incentives for people to do the 
right thing, we really ought to be paying attention to it and 
seeing how it works and maybe applying the lesson to other 
strategies as well, so I really appreciate you coming, and 
appreciate all the witnesses' testimony today.
    The Chairman. Thank you very much.
    Senator Cotton.
    Senator Cotton. Thank you.
    Pleased to hear all the conversation about the American 
Savings Promotion Act, which I authored along with Derek Kilmer 
in the House of Representatives to correct this very disparity 
between credit unions and banks, so when individuals opened a 
saving account they could also have the possibility of winning 
a prize, a financial prize as opposed to, say, a toaster, which 
is what I always remember as a teenager in Dardanelle, Arkansas 
being offered when I opened a savings account.
    Ms. Collinson, since the passage almost 2 years ago of the 
American Savings Promotion Act, what kind of progress have we 
seen in the financial services sector of taking advantage of 
the new opportunities that that bill allows?
    Ms. Collinson. I will be honest; we have not studied that 
in our research. What I can say is that what we are seeing in 
our research is still too little progress is being made toward 
promoting and advancing retirement security, and for a number 
of reasons.
    I have talked about part-time workers. There is still 
opportunities to expand coverage among small business 
especially, and people are still recovering from the recession, 
so as we look at all these things together, there is more that 
we can do, and we will make that a focus of our research.
    Senator Cotton. Thank you.
    Mr. Plum, do you have any thoughts on the kind of progress 
that has been made in this sector?
    Mr. Plum. You know, again, Senator, I think that there is 
an awareness issue within the industry, you know, for people 
like me that just happened to stumble across something in 2014. 
You know, I was able to latch on to it, and also it gets back 
to the idea of convincing people in the industry to do it, and 
I think as banks and credit unions are successful with products 
in this arena, that is when we are going to see more activity 
come online. It is just maybe not happened as quickly as I know 
you all would like to see, and certainly I would like to see as 
well.
    Senator Cotton. Any other ideas for steps that Congress 
might need to take in this space or, for that matter, ideas 
about whether any of the regulatory agencies are impeding 
progress and Congress might be able to encourage them to move a 
bit faster?
    Mr. Plum. As I referenced earlier, I mean, I think that 
whole issue of how deposits that might be accumulated through 
joint-venture arrangements and partnerships, I think that is 
something that certainly deserves some inspection and 
consideration, and just, it is a rule of regulation. It tends 
to follow what is happening, I think, in the private sector, so 
I feel like here the private sector is probably out a little 
bit ahead of some of the perspectives on that.
    Again, I think for a lot of the providers, they are going 
to want to have that bank partnership, and frankly, from a 
public policy standpoint, I would think that we would want them 
to have that banking partnership as well, because then funds 
are in an insured environment as opposed to somebody offering 
an app that says, yes, we will allow you to build balances over 
time and we will give you prizes, but it is not going to be 
within the banking system.
    Senator Cotton. Okay. Thank you both.
    I yield back the balance of my time.
    The Chairman. Thank you very much, Senator, and 
congratulations on writing that law that is leading to 
increased savings.
    Senator Cotton. Thank you.
    The Chairman. I want to thank our witnesses today for being 
with us. This is part of a series of hearings that the 
Committee is holding to examine ways that we can strengthen the 
retirement security of Americans.
    I believe that we are, as Senator Kaine stated, facing a 
real crisis where more and more Americans will find that they 
are outliving their retirement savings and Social Security will 
not be adequate for them to have a comfortable, secure 
retirement, so part of the reason for these hearings is to 
heighten public awareness as well as to encourage more savings.
    The second goal of these hearings is for us to identify 
public policy changes that are needed. In this regard, I thank 
you on both counts for enhancing our understanding.
    The hearing record will remain open until the close of 
business on June 22nd. I want to thank the staff for their 
work, and I particularly want to thank our witnesses for their 
contributions today. Thank you.
    This hearing is now adjourned.
    [Whereupon, at 3:36 p.m., the Committee was adjourned.]



      
      
      
      
      
      
      
      
      
      
      
      
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                                APPENDIX

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                      Prepared Witness Statements

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