[Senate Hearing 115-762]
[From the U.S. Government Publishing Office]





                                                        S. Hrg. 115-762
 
                     EXPLORING THE ``GIG ECONOMY''
                           AND THE FUTURE OF
                           RETIREMENT SAVINGS

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

                                HEARING

                               BEFORE THE

         SUBCOMMITTEE ON PRIMARY HEALTH AND RETIREMENT SECURITY

                                 OF THE

                    COMMITTEE ON HEALTH, EDUCATION,
                          LABOR, AND PENSIONS

                          UNITED STATES SENATE

                     ONE HUNDRED FIFTEENTH CONGRESS

                             SECOND SESSION

                                   ON

   EXAMINING THE ``GIG ECONOMY'' AND THE FUTURE OF RETIREMENT SAVINGS

                               __________

                            FEBRUARY 6, 2018

                               __________

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              U.S. GOVERNMENT PUBLISHING OFFICE 
  28-635 PDF                WASHINGTON : 2020        
        
        
        
          COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS

                  LAMAR ALEXANDER, Tennessee, Chairman
MICHAEL B. ENZI, Wyoming            PATTY MURRAY, Washington
RICHARD BURR, North Carolina        BERNARD SANDERS (I), Vermont
JOHNNY ISAKSON, Georgia             ROBERT P. CASEY, JR., Pennsylvania
RAND PAUL, Kentucky                 MICHAEL F. BENNET, Colorado
SUSAN M. COLLINS, Maine             TAMMY BALDWIN, Wisconsin
BILL CASSIDY, M.D., Louisiana       CHRISTOPHER S. MURPHY, Connecticut
TODD YOUNG, Indiana                 ELIZABETH WARREN, Massachusetts
ORRIN G. HATCH, Utah                TIM KAINE, Virginia
PAT ROBERTS, Kansas                 MAGGIE HASSAN, New Hampshire
LISA MURKOWSKI, Alaska              TINA SMITH, Minnesota
TIM SCOTT, South Carolina           DOUG JONES, Alabama

          
                                     
                                     
               David P. Cleary, Republican Staff Director
         Lindsey Ward Seidman, Republican Deputy Staff Director
                 Evan Schatz, Democratic Staff Director
             John Righter, Democratic Deputy Staff Director
                                 ------                                

         Subcommittee on Primary Health and Retirement Security

                   MICHAEL B. ENZI, Wyoming, Chairman
RICHARD BURR, North Carolina         BERNARD SANDERS (I), Vermont
SUSAN M. COLLINS, Maine              MICHAEL F. BENNET, Colorado
BILL CASSIDY, M.D., Louisiana        TAMMY BALDWIN, Wisconsin
TODD YOUNG, Indiana                  CHRISTOPHER S. MURPHY, Connecticut
ORRIN G. HATCH, Utah                 ELIZABETH WARREN, Massachusetts
PAT ROBERTS, Kansas                  TIM KAINE, Virginia
TIM SCOTT, South Carolina            MAGGIE HASSAN, New Hampshire
LISA MURKOWSKI, Alaska               DOUG JONES, Alabama
LAMAR ALEXANDER, Tennessee (ex       PATTY MURRAY, Washington (ex 
    officio)                             officio)
    
    
    
                            C O N T E N T S

                              ----------                              

                               STATEMENTS

                       TUESDAY, FEBRUARY 6, 2018

                                                                   Page

                           Committee Members

Enzi, Hon. Michael B., Chairman of the Subcommittee on Primary 
  Health and Retirement Security, Opening statement..............     1
Murray, Hon. Patty, a U.S. Senator from the State of Washington, 
  Opening statement..............................................    19

                               Witnesses

Olson, Camille, Representing the U.S. Chamber of Commerce, 
  Chicago, IL....................................................     4
    Prepared statement...........................................     5
Nunn, Vikki, CPA, Shareholder, Porter, Muirhead, Cornia & Howard, 
  Casper, WY.....................................................     7
    Prepared statement...........................................     9
Tisue, Troy, President, TAG Resources, LLC, Knoxville, TN........    11
    Prepared statement...........................................    12
Morrissey, Monique, Economist, Economic Policy Institute, 
  Washington, DC.................................................    14
    Prepared statement...........................................    15

                          Additional Material

Transamerica, Prepared statement.................................    35

                         Questions and Answers

Response by Camille Olson to Questions from Senator Enzi, and 
  Senator Scott..................................................    39
Response by Vikki Nunn to Questions from Senator Enzi, and 
  Senator Scott..................................................    41


                     EXPLORING THE ``GIG ECONOMY''

                           AND THE FUTURE OF

                           RETIREMENT SAVINGS

                              ----------                              


                       Tuesday, February 6, 2018

                                       U.S. Senate,
    Subcommittee on Primary Health and Retirement Security,
       Committee on Health, Education, Labor, and Pensions,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 2:30 p.m. in 
room SD-430, Dirksen Senate Office Building, Hon. Michael Enzi, 
Chairman of the Subcommittee, presiding.
    Present: Senators Enzi [presiding], Young, and Murray.

                   OPENING STATEMENT OF SENATOR ENZI

    The Chairman. I will go ahead and call to order the HELP 
Subcommittee on Primary Health and Retirement Security 
roundtable.
    I am pleased to be able to open this roundtable and this 
Subcommittee on Primary Health and Retirement Security.
    We have before us today an important issue that is 
increasingly the focus of the press, policymakers, and the 
public. We are talking about the rapid growth in what is 
commonly referred to as the ``gig economy''.
    This is not short for ``gigabyte'', but instead is a 
reference to the project-based and temporary work arrangements, 
or ``gigs,'' that many people are relying on for earnings. It 
used to be more common in the music communities to do gigs.
    It is a development in the workforce that, according to a 
recent National Public Radio report, could account for half of 
the American workforce within the decade.
    One driver of the prevalence of gigs is the growth in 
application-based platforms. For instance, a worker can engage 
in the gig economy through a ridesharing platform that connects 
them, and their personal vehicle, to a person nearby who needs 
a ride.
    As this is an ``Uber'' competitive space, I will avoid 
mentioning brand names so as not to appear to ``Lyft'' anyone 
above the other.
    [Laughter.]
    The Chairman. These platforms have proliferated well beyond 
the ridesharing to include enabling people with spare bedrooms 
to rent them out on a short term basis; or connecting people 
who may not feel comfortable swinging a hammer in their homes 
to someone with the skills to do so; or, as we have seen 
recently in the halls of Congress, connecting people willing to 
pay others to stand in line to attend a hearing. I am not sure 
whether that was utilized for today's roundtable or not.
    The consistent feature of these platforms is that they 
efficiently connect people seeking services with those willing 
to provide them. Payments are processed through the platforms 
so that exchanges are cashless. In many cases, each party to 
the transaction is able to rate the other based on their 
experience creating a system of accountability.
    A key characteristic, however, is that the service 
providers are, just like the customers, users of the platform 
and not employees. They are independent contractors. They are 
paid for services rendered, often with a service charge 
deducted, and they do not receive all the benefits required in 
traditional employment relationships.
    Too often, discussions about the gig economy in Congress 
begin and end at whether workers should be classified as 
employees or independent contractors. But for many 
participants, their freelance or contracting status is an 
attractive benefit, providing them with far greater flexibility 
in choosing a project or determining when they will work.
    Imposing a traditional employee benefits model on these 
arrangements would limit flexibility and would limit gig 
opportunities in general.
    The truth is that the nature of this phenomenon is not 
fully understood. Participants are often said to be engaged in 
the contingent workforce, or freelancing, or simply independent 
contracting. The lack of any agreed upon name underscores the 
lack of consensus that policymakers have.
    Regardless of how you view these changes in our economy, 
they are occurring. These developments in the workforce have 
been moving fast, so it is important to ensure that, as we 
consider any Federal actions to address the gig economy, we 
understand the scope of the gig economy and the motivations of 
those participating in it.
    Today, I have asked our panel to focus specifically on what 
changes in the labor market mean for retirement security. What 
retirement savings options are available to those in the gig 
economy? And, what can be done to increase access to savings 
options for those individuals?
    I suspect today's panel will confirm that retirement 
savings options for those in the gig economy are quite limited 
compared to those available to their counterparts in the 
traditional workforce. And where they do exist, they impose 
complex burdens on the individual that will ultimately 
discourage saving.
    We often hear that there is a retirement security crisis in 
the United States, and while the extent of the crisis may be 
disputed, few dispute that Americans should save more and 
earlier for retirement.
    If it is true that more and more jobs will be gig jobs 
moving forward, this is a critical and timely discussion.
    Before I introduce our panel, I would remind Members of the 
Committee and our panel that our focus today is on retirement 
security. The gig economy raises a variety of policy issues, 
more than can be covered at one roundtable.
    I assembled this panel to address retirement security. The 
roundtable is a great format for this type of discussion and 
this Subcommittee has a legacy of many fruitful and frank 
discussions in the past.
    I will mention the difference between a hearing and a 
roundtable. At a hearing, each side picks witnesses. At a 
roundtable, the witnesses are agreed on by both sides. At a 
hearing, since the witnesses are chosen by the one side or the 
other, the Members come to beat-up on the witnesses. I do not 
do those. I find it to be a lot more fruitful if we have an 
agreement on the witnesses, and the subject, and we are 
gathering information.
    I remember after the first roundtable that I did, Senator 
Ted Kennedy came to me and he said, ``It is really helpful to 
learn something about it before we do a bill.''
    That is what I keep trying to do with the roundtables, and 
as part of the roundtable process, I will be asking some 
questions, general questions, to get some additional answers. 
After I have heard the testimony, there will be others that may 
want to ask questions as well.
    But you may want to comment on something you were not 
specifically asked about. In a roundtable, what you do if you 
want to talk to something, you just place your name card up on 
end, and that way I will know you want to add something to that 
part of the discussion as well. A lot of times the discussion 
between panel Members is a lot more valuable than the 
discussion between Senators.
    I thank all of you for coming. We do have an all-star panel 
of witnesses to help with this discussion.
    First, I would like to introduce Vikki Nunn. Vikki is a CPA 
and a shareholder with Porter, Muirhead, Cornia and Howard in 
Casper, Wyoming. Her firm has recently established a practice 
focused on helping sole proprietors and contractors to 
establish retirement savings plans.
    I appreciate you making the trip. I know it is not just a 
little pop over to Washington from Casper for the afternoon. In 
fact, you cannot get here in one leg. So thank you for being 
here.
    Next, I want to welcome Troy Tisue of TAG Resources. TAG is 
a leader in providing fiduciary services for Multiple Employer 
Plans. He will be discussing their potential application in the 
gig economy.
    Camille Olson is a partner in the law firm of Seyfarth 
Shaw. She is a litigator with extensive experience within the 
gig economy and has appeared before Congress previously and 
often. Today, she is representing the U.S. Chamber of Commerce.
    Finally, Monique Morrissey is an economist with the 
Economic Policy Institute, and as an economist, she has written 
extensively on a number of topics, including labor policy and 
retirement security.
    Although, I do not expect that we will solve this problem 
today, I am convinced that we have the right people here to do 
so, and look forward to the discussion. This is collecting 
information that will be useful for us when we do write the 
bill. Hearing your observations, and any recommendations that 
you might have, will be very helpful. Even questions that you 
might have of each other can be very helpful.
    We will go left to right on the presentations, then.
    Miss Olson.

 STATEMENT OF CAMILLE OLSON, REPRESENTING THE U.S. CHAMBER OF 
                  COMMERCE, CHICAGO, ILLINOIS

    Ms. Olson. Good afternoon.
    Thank you Senator Enzi and other Members of the 
Subcommittee for the opportunity to participate in today's 
roundtable.
    Chamber members support the entrepreneurial spirit of the 
gig economy and the creation of opportunities to encourage all 
workers to save for retirement within the existing private, 
voluntary system.
    Today, 40 million independent workers hold a prominent role 
in the U.S. economy. Independent workers are a mosaic of 
consultants, freelancers, and contractors working 
independently, or with other independents, to build businesses, 
develop their careers, pursue artistic or occupational 
passions, or supplement their incomes; either occasionally on a 
part-time basis or a full-time basis with multiple gig 
companies, often at the same time.
    Some independents have access to retirement benefits 
through unrelated, preexisting relationships or individual 
Keogh or IRA accounts, while approximately one-third report a 
top challenge for them is planning for retirement. These 
independent workers need financial and retirement education, 
and access and assistance in creating, funding, and 
administering efficient retirement vehicle options.
    Developing policies and promoting a positive business 
environment, encouraging innovation, and protecting workers' 
financial futures, while also preserving flexibility, is an 
important and challenging balance for this Subcommittee to 
strike.
    A number of structural challenges currently inhibit 
independent workers from obtaining access to retiree benefits. 
They cannot be included as participants within ERISA retirement 
benefit plans. And if gig economy companies offer any type of 
non-ERISA retirement plan information, or facilitate 
administratively or financially the retention by independent 
workers of retirement benefits, that would jeopardize the legal 
status of their operational models.
    Many Federal, state, and local laws regulating the status 
of the worker relationships effectively prevent all companies 
from providing independent workers with access to all employee 
benefits without undermining the legal status of their business 
models.
    The foundation to solving the impediments to a portable 
retirement benefits system for independents includes 
consideration of the following:
    First, is increasing the availability and access to 
retirement and financial information regarding existing 
retirement vehicles.
    Second, allowing companies to provide benefit information, 
assist with the administration and facilitation of direct 
deposit of funds into retirement vehicles, and contribute to 
portable retiree benefits for the benefit of independent 
workers.
    Third, is promoting the development of flexible, portable 
retirement products and services with open platforms that allow 
for contributions from multiple organizations and participants.
    Finally, providing independent workers monetary incentives 
to save for retirement while ensuring that gig economy 
companies' facilitation of retiree benefits, and education, 
administration, and funding of retirement benefits does not 
negatively impact the legal relationships between the 
independent workers and the gig companies.
    These steps will serve to establish protected retirement 
sources for independent workers.
    On behalf of the United States Chamber of Commerce, I thank 
you for the opportunity to share some of our insights with you 
today.

    [The prepared statement of Ms. Olson follows:]
                  prepared statement of camille olson
    Good afternoon. Thank you Senator Enzi, Ranking Member Sanders and 
other Members of the Subcommittee for the opportunity to participate in 
today's Roundtable.

    I am Camille Olson, a partner in the law firm Seyfarth Shaw LLP. 
\1\ I appear today on behalf of the U.S. Chamber of Commerce; the 
Chamber represents over three million businesses and organizations. As 
the gig economy has grown, the Chamber's Employee Benefits Committee 
and Technology Engagement Center (C--TEC) have been focusing on the 
issues before us and exploring means to rationalize our regulatory and 
legal system to lessen the constraints on the growth of this vital new 
economy. \2\ Chamber members support the entrepreneurial spirit of the 
gig economy and the creation of opportunities to encourage all workers 
to save for retirement within the existing private voluntary system. 
The Chamber encourages Congress to work with this developing economic 
activity and enhance the flexibility, portability, \3\ and certainty of 
the retirement system to allow independents to obtain retirement 
security. Simply put, there should be a focus on enhancing the ability 
of the participants in this new economy to benefit from their 
entrepreneurial activities and establish a foundation for their own 
secure retirement.
---------------------------------------------------------------------------
    \1\  For over two decades, I have provided legal counsel to 
companies seeking to establish business opportunities in all 50 states 
with individuals in traditional independent contractor relationships, 
as well as to companies with independent worker relationships in the 
gig economy. Seyfarth Shaw LLP attorneys Randel K. Johnson, Richard B. 
Lapp and Lawrence Z. Lorber assisted in the preparation of this 
statement, along with case assistant Kali Froh.
    \2\  ``CTECIntelligence: Sharing Economy,'' U.S. Chamber of 
Commerce, http://ctecintelligence.com/ and http://ctecintelligence.com/
reports/ctec-share-national-report.pdf.
    \3\  Portability is important for independents so that savings can 
be accumulated in a consistent and efficient manner. Particularly for a 
workforce that is highly mobile, the importance of having one account--
versus several small accounts that could be lost or diminished by 
fees--is paramount.

    Online platforms facilitate flexible work commitments, creating 
greater opportunities for the employed and self-employed to increase 
their earnings potential through a partnership. Gig companies often 
provide independent workers the opportunity to optimize special skills 
and talents as well as already-owned assets such as cars, trucks, vans 
and computers by monetizing these assets so that they can provide 
---------------------------------------------------------------------------
independent services.

    Today, 40 million independent workers hold a prominent role in the 
US economy. \4\ Independent workers are a mosaic of consultants, 
freelancers, and contractors working independently or with other 
independents to build businesses, develop their careers, pursue 
artistic or occupational passions, or supplement their incomes 
(occasional, part time and full time) with multiple gig companies, 
often at the same time. \5\ It is estimated that within the next 5 
years a majority of Americans will have worked as an independent 
worker. \6\
---------------------------------------------------------------------------
    \4\  ``The State of Independence In America, Rising Confidence Amid 
A Maturing Market,'' 2017 Report MBO Partners, https://
www.mbopartners.com/uploads/files/state-of-independence-reports/
StateofIndependence-2017-Final.pdf.
    \5\  49 percent of independent workers report also having a full-
time, traditional payroll-based job. Id. at 7. Likewise, one in five 
workers with payroll-based jobs engage in other independent work. Id.
    \6\  Id.

    Companies that comprise the gig economy are diverse, with some 
companies focusing on specific areas and others encompassing a wide 
range of services. \7\ Independent workers differ greatly in terms of 
the investments they leverage, the hours they and others work to 
support their gig engagements, and in their priorities in terms of 
being compensated in fees and/or some portion of their compensation 
being provided as retirement or other benefits. Some independents have 
access to retirement benefits through unrelated pre-existing employment 
relationships \8\ or individual Keogh or IRA accounts, \9\ while 33 
percent of independents report a top challenge is planning for 
retirement. \10\ These independent workers need financial and 
retirement education, \11\ and access and assistance in creating, 
funding, and administering efficient retirement vehicle options. On the 
latter, Congress can be particularly important in creating retirement 
savings vehicles and incentives.
---------------------------------------------------------------------------
    \7\  Some gig economy companies focus on specific areas, such as 
Gigster (software engineering), Airbnb (short term accommodations), and 
Postmates (delivery service); while other companies encompass a wide 
range of services, such as Thumbtack (home, business, wellness, 
creative design), Uber and Lyft (ride sharing, food delivery), and 
Upwork (accounting, copy editing, personal fitness) as well as 
companies involved in commercial real estate, healthcare, legal 
services, customer services, logistics and management consulting.
    \8\  Recent research by Prudential found that 16 percent of gig 
economy independents have access to a retirement savings plan compared 
to 52 percent of full-time employees. ``Gig Workers in America: 
Profiles, Mindsets and Financial Wellness,'' Prudential Financial, 
http://research.prudential.com/documents/rp/Gig--Economy--
Whitepaper.pdf.
    \9\  Some independents prefer to maximize their immediate fees for 
results provided in lieu of benefits (which they may have access to 
through other personal or work relationships).
    \10\  ``The State of Independence In America, Rising Confidence 
Amid A Maturing Market,'' 2017 Report MBO Partners, https://
www.mbopartners.com/uploads/ . . . reports/StateofIndependence-2017-
Final.pdf.
    \11\  Retirement education should be encouraged and enhanced at the 
school, gig company and community levels.

    Developing policies that promote a positive business environment, 
encourage innovation, and protect workers' financial futures while also 
preserving flexibility is an important and challenging balance for this 
---------------------------------------------------------------------------
Subcommittee to strike.

    A number of structural challenges currently inhibit gig economy 
independents from obtaining access to retiree benefits. For example, 
today independents cannot be offered benefits that are governed by the 
Employee Retirement Insurance Security Act of 1974 (ERISA), 29 
U.S.C.1001 et seq. As a result, gig economy companies cannot include 
independents within ERISA plans offered to company employees, or even 
facilitate transfers into retirement plans for independents.

    As important, under the existing law and regulatory framework, gig 
economy companies cannot even offer non-ERISA information or facilitate 
administratively or financially the retention by independents of 
employee retirement benefits without jeopardizing the legal status of 
their operational models. Many Federal, state and local laws regulating 
the status of worker relationships effectively prevent those companies 
that treat workers as independents from providing those workers with 
access to even non-ERISA employee benefits without undermining the 
legal status of their business models. \12\
---------------------------------------------------------------------------
    \12\  The common law principles of agency solely determine, or 
guide the determination of, employment/independent contractor status 
under the vast majority of Federal, state and local laws. In Nationwide 
Mut. Ins. Co. v. Darden, 503 U.S. 318, 323-24 (1992) the U.S. Supreme 
Court adopted the common law test for determining who qualified as an 
employee under ERISA. The Court concluded that agency law principles 
and common understanding require the conclusion that ``the provision of 
employee benefits'' by a service recipient is a relevant indicia of 
employment. Id. at 324. The Supreme Court's guidance that providing 
employee benefits to a worker is an indicia of employment has been 
incorporated into virtually all analyses of the legal status of 
workers. E.g., ``Employer's Supplemental Tax Guide,'' Department of the 
Treasury, Internal Revenue Service Publication 15-A (2017), https://
www.irs.gov/pub/irs-pdf/p15a.pdf at 8 (explaining determination of 
worker classification considers ``[w]hether or not the business 
provides the worker with employee-type benefits, such as insurance, a 
pension plan, vacation pay, or sick pay''); ``Especially for Texas 
Employers,'' Texas Workforce Commission, http://www.twc.state.tx.us/
news/efte/efte.pdf at 33 (``[A]n employer who provides benefits such as 
vacation and sick leave, health insurance, bonuses, or severance pay 
will almost inevitably be considered the employer of the workers.'').

    The vast majority of independents do not take advantage of existing 
self-initiating and self-funded and administered retirement vehicles of 
Keoghs and IRAs available to independents due to a lack of knowledge 
and education. In short, the current legal and regulatory scheme 
effectively discourages companies who utilize independent workers from 
offering retirement benefits. Without the availability of this 
assistance, it is not surprising that many independents have not 
---------------------------------------------------------------------------
otherwise obtained access to a vehicle to save for retirement.

    The foundation to solving the impediments to a portable retirement 
benefit system for independents includes consideration of the 
following: (1) increasing the availability and access to retirement and 
financial education and information regarding existing retirement 
vehicles (including Keoghs and IRAs) available to independents; (2) 
allowing gig economy companies to provide benefit information to 
independents; (3) allowing gig economy companies to assist with the 
administration and facilitation of direct deposit of funds into 
retirement vehicles; (4) allowing gig economy companies to contribute 
to portable retiree benefits for the benefit of independents;

    (5) promoting the development of flexible, portable retirement 
products and services with open platforms that allow for contributions 
from multiple organizations and participants; (6) providing 
independents monetary incentives to save for retirement; and (7) 
ensuring that gig economy companies' facilitation of retiree benefits 
education, administration and funding for independents does not 
negatively impact the independents' legal relationships with the gig 
companies. \13\ These steps will serve to establish protected 
retirement sources for independent workers.
---------------------------------------------------------------------------
    \13\  For example, California's Labor Code allows certain companies 
to provide workers' compensation benefits to independents without 
regard to their worker classification status as an employee or 
independent contractor, expressly noting that providing such benefits 
cannot be used as indicia of employment for any purpose. Cal. Lab. Code 
4157.

    By considering flexible approaches to the availability, 
facilitation, administration and financial support of retiree benefits 
for independents engaged in the gig economy, we can support the 
financial future of these Americans, maximize our collective resources 
and further economic growth. On behalf of the United States Chamber of 
Commerce, I thank you for the opportunity to share some of our insights 
with you today.
                                 ______
                                 
    Chairman Enzi. Thank you for your testimony, and I 
appreciate those closing numerical suggestions. That will be 
very helpful.
    Ms. Nunn.

 STATEMENT OF VIKKI NUNN, CPA, SHAREHOLDER, PORTER, MUIRHEAD, 
              CORNIA, AND HOWARD, CASPER, WYOMING

    Ms. Nunn. I would like to thank Chairman Enzi, and Ranking 
Member Sanders, and the Members of the Committee for the 
opportunity to participate in today's roundtable discussion on, 
``Exploring the `Gig Economy' and the Future of Retirement 
Savings.''
    I am Vikki Nunn. I am a CPA and one of the owners of 
Porter, Muirhead, Cornia, & Howard, a CPA firm in Casper, 
Wyoming.
    As a small business owner and a consultant to small 
businesses, saving for retirement is an important topic for me. 
In fact, our firm last month purchased a small wealth 
management practice for the primary purpose of being able to 
help our clients start single participant 401(k) plans or 
Solo(k)'s.
    While Wyoming does not have the same exposure to certain 
elements of the gig economy that other locations may face, we 
have our own experience of the gig economy.
    With the hit to coal production in our state, and the 
decrease in oil and gas prices, we have witnessed many midlevel 
managers being laid off, only to be brought back as consultants 
on a project by project basis.
    These individuals, for the most part, are at the height of 
their earning years and at an age where retirement is no longer 
a concept for the distant future. Commonly, they have 
participated in their employer sponsored 401(k) plans and have 
arrived at a time when catch-up contributions would be allowed, 
only to find themselves with no access to those plans and with 
a much more volatile income stream.
    For most, a Solo(k) is a great vehicle to help them meet 
their retirement needs. It is particularly helpful since income 
may fluctuate a great deal from year to year. With a Solo(k), 
they can put more away in a high earnings year, and can end up 
funding more for retirement than their employer and personal 
contributions were providing before.
    We have noticed these very capable people can still find 
the process of finding a provider, and starting a Solo(k) plan, 
daunting.
    Most providers rely on Web-based applications, and while 
technically the plans are not subject to Title I of ERISA, much 
of the same wording is used for the plans and applications. It 
is common for the application to be 20 pages or more in length, 
and about the same number of pages explaining the plan, 
options, and administrative requirements.
    In addition, since the fee potential on these plans is 
fairly low, plan providers may not showcase the Solo(k) option 
to the same extent that they do other options, like IRA's.
    After seeing the growth in our sole proprietor client base, 
particularly the contingent service providers workforce, our 
firm decided to purchase a small wealth management business 
hoping to remove some of the obstacles for our clients by 
providing a live person onsite to help guide our clients in 
setting up and maximizing their Solo(k)'s.
    Another growing element in our client base, are the number 
of full-time employed clients that have one or more businesses 
on the side. They may work all week for the county and operate 
a food truck on the weekend.
    We are actually seeing a strong increase in young people 
who are using this as a way to grow their business with limited 
upfront capital. Most of these people can maximize their 
retirement savings through adding Solo(k)'s to their sole 
proprietorship type businesses as well.
    One unusual circumstance that we have noted is when given 
the opportunity to put up to $60,000 into retirement savings, 
many people over 50, with volatile income streams, will make 
that choice, or at least they frequently chose to put in more 
than $24,000. These are not people who are bringing in gross 
revenues of over $250,000; in fact, the norm would be closer to 
$150,000.
    It is also interesting that they may choose to fund all or 
part as a Roth Solo(k), so it is not just about tax deductions.
    For many, they are at a place where tuition costs for 
children are over, houses are paid off or close, and medical 
related costs are still manageable. With a volatile income 
stream, they also realize that there is no guarantee that they 
will be able to maximize their contribution or possibly even 
make a contribution each year.
    This has shown me that if we want to encourage savings for 
retirement, especially for a contingent workforce, 
significantly raising the catch-up limits, or removing them for 
Roth contributions, could be very effective.
    Solo(k)'s are only one answer and they are, by necessity, 
limited to businesses with no employees, other than perhaps a 
spouse. However, those are the businesses that seem to be 
expanding in our current economy.
    Another change that could help many owners of small 
businesses increase retirement savings would be to remove the 
top heavy rules for small plans. Our CPA firm has approximately 
45 employees and we are committed to being a good employer. We 
are proud to have 100 percent participation in our 401(k) plan.
    As an employer, we make a profit sharing contribution for 
each participating employee. Last year, that was 3 percent of 
their wages. We believe this helps some of our lower paid staff 
to still build retirement savings even at a young age and even 
if they only contribute $5 or $10 a month. Every year, we 
analyze our business to see if we are able to increase that to 
4 percent or 5 percent.
    Since we have nine CPAs that own our business, we would all 
also like to make full contributions for ourselves as well. In 
many years, like last year, our personal contributions ended up 
limited to approximately $12,000 each, well under the maximum 
individual contributions we would like to make.
    While there are safe harbor options available, they limit 
our ability to be responsive to the needs of our business and 
our employees, so we have chosen to continue on the path of our 
current plan, even though our personal contributions end up 
limited.
    As a last point, I would like to ask the Members of this 
Committee do everything possible to encourage the availability 
and use of Roth retirement options. As a CPA, I have always 
been a big proponent of deferring taxes and only recently have 
started to understand how important Roth retirement options 
are. My wakeup call on this issue came from working with my 
parents.
    My dad was a full-time draftsman and a part-time preacher, 
and my mom had seven children, and a small millinery business 
in California. Neither of them earned enough in their life to 
receive maximum Social Security benefits. They are very 
thankful for the benefits that they do receive and their 
benefits last year were not taxable to them.
    However, they worry each year that a distribution from my 
dad's small 401(k) savings could push their Social Security 
payments into being taxable; one specific dollar of income that 
could cost them much more in taxes. If they had been able to 
put more of their retirement into Roth options, they would 
certainly have more control over their current financial 
outcomes.
    In conclusion, thank you for the opportunity to make this 
statement. I look forward to working with this Committee to 
consider ideas that will encourage further plan sponsorship and 
participation by small businesses in particular.
    Thank you for your consideration of this statement.

    [The prepared statement of Ms. Nunn follows:]
                    prepared statement of vikki nunn
    I would like to thank Chairman Enzi and Ranking Member Sanders, and 
Members of the Committee for the opportunity to participate in today's 
roundtable discussion on Exploring the Gig Economy and the Future of 
Retirement Savings

    I am Vikki Nunn, I am a CPA and one of the owners of Porter, 
Muirhead, Cornia & Howard a CPA firm in Casper, Wyoming. As a small 
business owner and a consultant to small business owners, saving for 
retirement is an important topic for me. In fact our firm, last month, 
purchased a small wealth management practice for the primary purpose of 
being able to help our clients start single participant 401(k) plans, 
Solo(k)'s.

    While Wyoming does not have the same exposure to certain elements 
of the gig economy that other locations may face, we have our own 
experience of the gig economy. With the hit to coal production in our 
state and the decrease in oil and gas prices, we have witnessed many 
mid-level managers being laid off only to be brought back as 
consultants on a project by project basis.

    These individuals for the most part, are at the height of their 
earning years and at an age where retirement is no longer a concept for 
the distant future. Commonly, they have participated in their 
employer's sponsored 401(k) plans, and have arrived at a time when 
catch-up contributions would be allowed only to find themselves with no 
access to those plans and with a much more volatile income stream. For 
most, a Solo(k) is a great vehicle to help them meet their retirement 
needs. It is particularly helpful since income may fluctuate a great 
deal from year to year. With a Solo(k), they can put more away in a 
high earnings year and can end up funding more for retirement than 
their employer and personal contributions were providing before.

    We have noticed these very capable people can still find the 
process of finding a provider and starting a Solo(k) plan daunting. 
Most providers rely on web based applications, and while technically 
the plans are not subject to Title 1 of ERISA, much of the same wording 
is used for the plans and applications. It is common for the 
application to be 20 pages or more and about the same number of pages 
explaining the plan, options and administrative requirements. In 
addition, since the fee potential on these plans is fairly low, plan 
providers may not showcase the Solo(k) option to the same extent that 
they do other options, like IRAs. After seeing the growth in our sole 
proprietor client base, particularly the contingent service providers 
workforce, our firm decided to purchase a small wealth management 
business hoping to remove some of the obstacles for our clients by 
providing a live person onsite to help guide our clients in setting up 
and maximizing their Solo(k)'s.

    Another growing element in our client base, are the number of full-
time employed clients that have one or more businesses on the side. 
They may be work all week for the County and operate a food truck on 
the weekend. We are actually seeing a strong increase in young people 
who are using this as a way to grow their business with limited upfront 
capital. Many of these people can maximize their retirement savings 
through adding Solo(k)'s to their sole proprietorship type businesses 
as well.

    One unusual circumstance that we have noted is when given the 
opportunity to put up to $60,000 into retirement savings, many people 
over 50, with volatile income streams, will make that choice, or at 
least they frequently chose to put in more than $24,000. These are not 
people who are bringing in gross revenues of over $250,000; in fact the 
norm would be closer to $150,000. It is also interesting that they may 
choose to fund all or part as a Roth Solo(k), so it is not just about 
tax deductions. For many, they are at a place where tuition costs for 
children are over, houses are paid-off or close, and medical related 
costs are still manageable. With a volatile income stream, they also 
realize that there is no guarantee that they will be able to maximize 
or possibly even make a contribution each year. This has shown me that 
if we want to encourage savings for retirement, especially for a 
contingent workforce, significantly raising the catch-up limits or 
removing them for Roth contributions could be very effective.

    Solo(k)'s are only one answer and they are by necessity limited to 
businesses with no employees, other than perhaps a spouse. However, 
those are the businesses that seem to be expanding in our current 
economy.

    Another change that could help many owners of small businesses 
increase retirement savings would be to remove the top heavy rules for 
small plans. Our CPA firm has approximately 45 employees and we are 
committed to being a good employer. We are proud to have 100 percent 
participation in our 401(k) plan. As an employer, we make a profit 
sharing contribution for each participating employee. Last year that 
was 3 percent of their wages. We believe this helps some of our lower 
paid staff to still build retirement savings even at a young age and 
even if they only contribute five or ten dollars a month. Every year we 
analyze our business to see if we are able to increase that to 4 
percent or 5 percent. Since we have nine CPAs that own our business, we 
would all like to make full contributions for ourselves as well. In 
many years, like last year, our personal contributions ended up limited 
to approximately $12,000 each, well under the maximum individual 
contribution we would like to make. While there are safe harbor options 
available, they limit our ability to be responsive to the needs of our 
business and our employees, so we have chosen to continue on the path 
of our current plan even though our personal contributions end up 
limited.

    As a last point I would like to ask the Members of this Committee 
do everything possible to encourage the availability and use of Roth 
retirement options. As a CPA, I have always been a big proponent of 
deferring taxes and only recently have started to understand how 
important Roth retirement options are. My wakeup call on this issue 
came from working with my parents. My dad was a full-time draftsman and 
a part-time preacher and my mom had seven children and a small 
millinery business in California. Neither of them earned enough in 
their life to receive maximum social security benefits. They are very 
thankful for the benefits they receive and their benefits last year 
were not taxable to them. However, they worry each year that a 
distributions from my dad's small 401(k) savings could push their 
social security payments into being taxable. A specific dollar of 
income that cost them much more in taxes. If they had been able to put 
more of their retirement into Roth options, they would certainly have 
more control over their current financial outcomes.

    In conclusion, thank you for the opportunity to make this 
statement. I look forward to working with this Committee to consider 
ideas that will encourage further plan sponsorship and participation by 
small businesses in particular. Thank you for your consideration of 
this statement.
                                 ______
                                 
    Chairman Enzi. Thank you.
    Mr. Tisue.

    STATEMENT OF TROY TISUE, PRESIDENT, TAG RESOURCES, LLC, 
                      KNOXVILLE, TENNESSEE

    Mr. Tisue. Well, I would like to thank Chairman Enzi and 
all the Members of this Committee for the opportunity to be 
here to participate in this discussion today.
    My name is Troy Tisue, and I am the President of TAG 
Resources. We are a retirement service provider out of 
Knoxville, Tennessee.
    My goal here today is to offer some insight, as a provider 
in the retirement industry, as to how the current structures 
that are out there can be used to positively impact the 
retirement accumulation of our rising population in this gig 
economy.
    One way to give this growing segment a chance at retirement 
is to give them employer-type access to a retirement savings 
plan. We can do this through Multiple Employer Plans, more 
specifically through Open Multiple Employer Plans.
    Well, TAG Resources, my firm, is uniquely equipped to 
actually testify on the structure, operation, and uses of the 
Open MEP, as well as the flexibility of this model to assist 
the contingent workers to accumulate retirement savings.
    TAG has, for many years now, been in the marketplace as the 
country's leading aggregator of plan services for both closed 
MEP's and for those employers who otherwise would benefit from 
a change that would permit Open MEP's.
    Let us talk for a second about how an Open MEP works.
    The organizer of a MEP stands in the shoes of a traditional 
employer, though without being the actual employer. That gives 
small employers professional fiduciary expertise; access to 
institutional support; a wide range of unrelated, 
nonproprietary investment fund families; institution's pricing 
of investments; and all at a cost that is very competitive to 
much larger employer plans.
    It has been our experience--and this is not theoretical--
that 40 percent of the employers that come to models like this 
are startups, meaning, they did not offer a plan before.
    Now, how can any Open MEP address specifically the gig 
industry that we are talking about? It can permit companies 
contracting with employers to sponsor a plan for those workers 
without running into tax or ERISA complications.
    The company could build a gig plan contribution into its 
contract with the worker, whether it be part of the contract 
payment or as an additional company payment, which would act 
like an additional employer contribution to a plan.
    Another option would be organizations that are unrelated to 
the contracting company, like TAG, anyone in the plan to 
service the industry. They could establish a plan for those 
contracting workers to make contributions to an independent 
Multiple Employer Plan, which is chosen by that independent 
worker and thereby addressing the portability we talked about.
    The tax and legal structure would be the same as that first 
example I gave, but the MEP would have participants from a wide 
range of employers and the independent worker would have the 
opportunity to stay in the same plan that he or she wants 
regardless of who they are contracting with. It is their plan, 
but with scale.
    These are just two examples.
    Now, permitting Open MEP's would enable the innovativeness 
of this marketplace to design MEP's providing independent 
workers both with the ERISA protections, as well as the 
institutional pricing which would not otherwise be available to 
him or her.
    There are really only two essential reforms needed for Open 
MEP's to come back: employers without any common interest to be 
able to join together in a MEP, and employers including 
independent workers in a MEP that should be protected from 
liability or noncompliance with other employers.
    The above reforms have long been advocated by both 
Republican and Democratic Members in both Houses of Congress. 
We especially want to thank the Chairman of this Subcommittee 
for leadership on MEP reform.
    Again, thank you for allowing me to be here with you today.

    [The prepared statement of Mr. Tisue follows:]
                    prepared statement of troy tisue
    TAG Resources appreciates the opportunity to provide this written 
testimony in connection with the hearing by the U.S. Senate Committee 
on Health, Education, Labor and Pensions Subcommittee on Primary Health 
and Retirement Security exploring ``Gig Economy'' retirement plan 
issues. As noted by the Brookings Institution's Retirement Security 
Project, contingent workers ``generally lack access to an employer-
sponsored retirement account that makes saving easier through 
mechanisms such as payroll deduction, employer contributions, automatic 
enrollment and automatic escalation of contributions. Without this 
access--or other alternatives--this population may face retirement with 
little more than Social Security.'' \1\
---------------------------------------------------------------------------
    \1\  Retirement Plans for Contingent Workers: Issues and Options; 
William G. Gale, Sarah E. Holmes, and David C. John; September 23, 
2016. The Retirement Security Project, The Brookings Institution

    One mechanism that holds substantial promise to help address this 
growing problem is to make ``employer-type'' retirement savings plans 
available to the contingent workforce through the ``open multiple 
employer retirement plan,'' or the ``Open MEP.'' \2\
---------------------------------------------------------------------------
    \2\  Note that ``Open MEP'' is a registered trademark of TAG.

    TAG Resources is uniquely positioned to expertly testify on the 
structure, operations and uses of the Open MEP, and that platform's 
flexible ability to be used in a number different ways to assist the 
contingent workforce in accumulating retirement savings. TAG has for 
many years been in the marketplace as the country's leading aggregator 
of plan services for both closed MEPs and for those employers who would 
---------------------------------------------------------------------------
otherwise benefit from changes which would permit Open MEPS.

    The Open MEP has a straightforward structure. The organizer of the 
MEP stands in the shoes of the traditional employer, though without 
actually being the employer. It accomplishes this through use of 
traditional fiduciary and contract authority which is assigned to the 
organizer by each participating employer. The Open MEP leverages the 
joint resources of unrelated, small employers to provide retirement 
plan expertise (including professional fiduciary protections); access 
to institutional support; access to a wide range of unrelated, non-
proprietary investment fund families; and institutional pricing of 
investments; none of which would be otherwise available to them-at 
virtually any cost. It also does this at a cost which is highly 
competitive to much larger employer plans. The success of this approach 
is demonstrated by the fact that 40 percent of the employers that 
indicated interest in participating in a TAG Open MEP--which 
unfortunately has not been able to be set up due to the legal 
constraints--were actually startups.

    This Open MEP arrangement can easily be structured to support 
contingent workers in at least two different ways, bringing the value 
of their combined resources to those workers in the same way that it 
works for startup employers. This is because the independent worker is 
a small business that can make ``employer'' and ``employee'' 
contributions on their own behalf to a retirement plan, whether or not 
they are actually legally incorporated. In this respect, the Open MEP 
can treat the independent worker exactly the same as countless other 
small businesses which could otherwise participate in an Open MEP.

    The first way is for the company contracting with independent 
worker to sponsor a plan for their contingent workers. The company 
could not allow participation by the independent or contingent workers 
in the company's own workplace retirement savings plan, because the 
company is restricted by law to cover only its own employees. An Open 
MEP solves for this. It treats each contingent worker as the co-sponsor 
of the MEP, which can then cover that worker. Operationally, the 
company could build into the contract it has with the worker a type of 
``automatic contribution'' arrangement where, as a matter of contract, 
the employer would pay a portion of the contractor's compensation 
directly into the plan. (It's important to note that the Open MEP named 
fiduciary owes its fiduciary obligations to the independent worker, not 
to the company that has contracted with the independent worker). The 
company could also, by contract, provide an additional percentage, such 
as 3 percent of the fee paid to the independent worker (i.e., $1,200), 
and contribute that directly to the worker's MEP. For tax purposes, the 
$1,200 contribution would be treated just like cash compensation from 
Company X to the worker: deductible as cash compensation for Company X 
and taxable to the worker. But the worker could then deduct the 
contribution to the MEP, just as if the worker had made the 
contribution himself or herself.

    The second way is for organizations unrelated to the contracting 
company to establish the plan, and for those contracting companies to 
actually contract with the independent worker to make contributions to 
the independently organized MEP identified by the independent worker. 
The tax and legal structure would be the same as the first example, but 
the MEP would have participants from a wide range of employers-and the 
independent worker would have the opportunity to stay in the same plan 
it wants, regardless of who he or she is contracting with.

    There are a number of other types of designs for under which the 
Open MEP structure could be used for the gig economy; these are only 
the most obvious examples. Permitting Open MEPs would enable the 
innovativeness of the marketplace to design MEPs which could 
accommodate most any sort of circumstance, while providing the 
independent worker both ERISA protections as well as institutional 
pricing which would not otherwise be available to her or him.

    There are two essential reforms which are needed to facilitate the 
use of MEPs as a practical option for independent workers to save for 
retirement. First, and foremost, employers without any ``common 
interest'' should be able to join together in a MEP. Elimination of 
this common employment interest requirement will increase the number of 
small employers that provide a retirement plan for their employees by 
joining in a MEP, including independent workers.

    Second, employers (including independent workers) in a MEP should 
be protected from liability for the non-compliant acts and omissions of 
other employers or independent workers which could result in the MEP 
being disqualified under the Internal Revenue Code (the ``One Bad 
Apple'' rule), and tax penalties being imposed on those workers. 
Typical reasons for noncompliance (jeopardizing the qualified status of 
the plan) include providing insufficient information for discrimination 
testing and other compliance purposes. Under existing bi-partisan 
proposals, the plan fiduciary could expel the non-compliant employer 
from the MEP and preserve the MEP's qualified status for the remaining 
employers in the plan.

    The above reforms have long been advocated by both Republican and 
Democrat Members in both Houses of Congress.

    We especially thank the Chairman of this Subcommittee for his 
leadership on MEP reform.

    Thank you for your time.
                                 ______
                                 
    Chairman Enzi. Thank you for the information.
    Ms. Morrissey.

  STATEMENT OF MONIQUE MORRISSEY, ECONOMIST, ECONOMIC POLICY 
                   INSTITUTE, WASHINGTON, DC

    Ms. Morrissey. Thank you, Senator Enzi, and Senator Murray, 
and the Members of this Committee for inviting me to 
participate in this roundtable.
    This hearing addresses an important question: how does 
nonstandard work affect retirement security?
    Flexible work arrangements can have positive effects 
throughout the lifecycle providing work opportunities for older 
workers who lose their jobs or are transitioning to retirement. 
They can also reduce the need to tap into retirement savings 
between jobs. But more often than not, these workers have 
precarious work that is not conducive to saving for retirement.
    Narrowly defined, the gig economy is very small, just 0.5 
percent of jobs. But the nonstandard workforce is much larger. 
It includes contingent workers who have little control over 
their hours and earnings, and highly paid professionals who 
enjoy the freedom to set their own terms.
    Our main concern should be for workers who rely on income 
from nonstandard work to make ends meet and who face hardship 
in old age. But even moonlighters, who have access to benefits 
through their primary jobs, will see a sharper drop in income 
at retirement if these supplemental earnings are not factored 
into retirement savings or benefits.
    Nonstandard workers are more likely to face financial 
insecurity throughout their working lives and in retirement. 
Contingent workers earn 11 percent less per hour and 48 percent 
less per year than similar workers, and are much more likely to 
become unemployed or exit the labor force. These workers are 
two-thirds less likely than standard workers to have a work-
based retirement plan.
    Social Security's universal coverage and progressive 
benefit structure partly compensate for contingent workers' 
lower earnings and lack of access to employer benefits. But 
nonstandard workers are more likely to be paid under the table, 
underreport taxable earnings, or be classified as independent 
contractors reducing their benefits.
    While nonstandard workers may be at greater risk of 
retirement insecurity, they are not alone. By conservative 
estimates, half of Americans are at risk of being unable to 
maintain their standard of living in retirement with younger 
generations and lower income workers at greatest risk.
    Most efforts to improve retirement security for all at-risk 
workers would disproportionately help nonstandard workers. This 
is especially true for efforts to reduce our reliance on 
employer plans and address barriers faced by lower income 
workers.
    These efforts include expanding Social Security, while 
cracking down on employee misclassification and tax avoidance, 
expanding the Saver's Credit, and supporting state and local 
initiatives to offer low cost and portable benefits to workers 
who do not have access to an employer plan. I also support my 
other co-panelist's desire to loosen restrictions on Open 
MEP's, on Multiple Employer Plans.
    When we look for ways to help nonstandard workers, we 
should be careful not to make a bad situation worse by steering 
worker's savings to high cost and risky accounts or weakening 
labor standards.
    We should focus on ways to reduce costs by eliminating 
conflicts of interest in investment advice, among other things, 
pool risk, and fix upside down tax incentives.
    Expanding Social Security should be our No. 1 priority, but 
any additional employee contributions will need to be offset 
for low income workers by expanding the Earned Income Tax 
Credit or other means.
    Thank you very much, and I look forward to your questions.

    [The prepared statement of Ms. Morrissey follows:]
                prepared statement of monique morrissey
    This hearing addresses an important concern: how nonstandard work 
affects retirement security. Flexible work arrangements can have 
positive and negative effects on income across the lifecycle. They can 
provide work opportunities for older workers who lose their jobs and 
are transitioning to retirement or who are taking longer to be re-
employed than their younger counterparts. ``Gig'' jobs may also reduce 
the need to tap into retirement savings between jobs for workers of all 
ages.
    In practice, however, nonstandard work is often low-paid and 
precarious work that is not conducive to saving or accruing retirement 
benefits. The bad news is that this problem is likely to be getting 
worse. The good news is that efforts to improve retirement security for 
all workers would disproportionately help nonstandard workers.
    Narrowly defined, the ``gig economy'' is very small and is not 
growing as fast as people assume. Independent workers employed via 
online platforms represent some 0.5 percent of jobs. \1\ Nevertheless, 
companies like Uber, Lyft, Etsy, Airbnb, and TaskRabbit loom large in 
people's imaginations, especially in cities with many young 
professionals.
---------------------------------------------------------------------------
    \1\  Lawrence F. Katz and Alan B. Krueger, ``The Rise and Nature of 
Alternative Work Arrangements in the United States, 1995-2015,'' NBER 
Working Paper No. 22667, September 2016.
---------------------------------------------------------------------------
    The nonstandard workforce is much larger than the ``gig economy'' 
and includes both W-2 employees and self-employed workers. The former 
category may include part-time workers, on-call workers, and temporary 
workers (direct-hire and agency temps). The latter category may include 
business owners and full-time independent contractors (including mis-
classified employees), occasional contractors, day laborers, and on-
demand platform workers.
    These broad categories include contingent workers with little 
control over their hours and earnings as well as highly compensated 
professionals and people who prefer to work part-time. Though our main 
concern should be for workers who rely on income from nonstandard work 
to make ends meet and who face hardship in old age, even moonlighters 
who receive benefits through a primary job will see a sharper drop in 
income at retirement if their supplemental earnings are not factored 
into retirement savings or benefits.
    Distinctions between ``gig economy'' workers employed through 
online platforms and other contingent or nonstandard workers are often 
exaggerated. There have always been self-employed musicians, cab 
drivers, and house cleaners. The broad category of ``independent 
contractor'' is much larger than this small group of workers and 
appears to be growing, \2\ as many workers who in the past would have 
been W-2 employees are reclassified as independent contractors.
---------------------------------------------------------------------------
    \2\  Katz and Krueger (2016).
---------------------------------------------------------------------------
    Statistics for nonstandard workers vary, with some sources showing 
growth and some declines in various subcategories, such as on-call, 
temporary, or contract firm workers. These differences may be due to 
different definitions of contingent or nonstandard work; whether the 
share of jobs, the share of primary jobs, the share of workers, or the 
share of hours worked is being measured; and problems with survey data, 
including respondent error, non-representative samples, limited topical 
questions, and out-of-date surveys. However, most sources agree that 
independent contractors are the largest category of nonstandard 
workers, and that this category has continued to grow in the wake of 
the Great Recession. \3\
---------------------------------------------------------------------------
    \3\  Katherine G. Abraham, ``What Do We Know About Nonstandard 
Work?'' National Academy of Social Insurance Conference on Nonstandard 
Work and Social Insurance, January 30, 2018.
---------------------------------------------------------------------------
    Independent contractors are a heterogeneous group. Workers with 
college degrees are as likely to be independent contractors as workers 
with high school degrees. Hispanic and white workers are more likely to 
be independent contractors than African-American workers. \4\ These 
patterns may reflect differences in job quality or geographic 
variation. For example, Hispanic workers may be over-represented among 
mis-classified workers, while white workers may be more likely to have 
white-collar occupations that can become self-employment in the 
transition to retirement. White workers are also more likely to live in 
sparsely populated states where multiple jobholding is more common. \5\
---------------------------------------------------------------------------
    \4\  Minority (both Hispanic and black) workers and less educated 
workers are more likely to be on-call and temporary help service 
workers.
    \5\  U.S. Bureau of Labor Statistics, ``Multiple Jobholding in 
states in 2015,'' Monthly Labor Review, February 2017.
---------------------------------------------------------------------------
    Another explanation for these patterns is that employment rates 
tend to be higher among older whites and Hispanics than among older 
African Americans, and older workers are over-represented among 
independent contractors. Nearly 16 percent of 55-75-year-old workers 
are independent contractors. \6\ Older workers are as likely as, or 
less likely than, prime-age workers to be employed in other types of 
nonstandard work, such as temporary help service workers and contract 
firm employees. \7\
---------------------------------------------------------------------------
    \6\  Katz and Krueger (2016).
    \7\  Katz and Krueger (2016); U.S. Government Accountability Office 
(GAO), ``Contingent Workforce: Size, Characteristics, Earnings, and 
Benefits,'' April 20, 2015.
---------------------------------------------------------------------------
    In the gig economy, technology helps solve coordination problems, 
reduces financial transaction costs, and enforces quality standards, 
among other efficiency gains. For example, in the ride-sharing 
industry, technology helps connects passengers with nearby drivers, 
enables surge pricing to increase the supply of drivers as needed, 
centralizes payments and recordkeeping, and facilitates customer 
reviews.
    What is good for the customer (and perhaps the economy) may 
sometimes also benefit workers. Flexible scheduling can enable workers 
to piece together multiple part-time jobs or to moonlight, students to 
work around class schedules, parents to vary hours based on childcare 
availability, and seniors to transition into retirement.
    However, nonstandard workers are more likely to face financial 
insecurity, including retirement insecurity. \8\ A report by the U.S. 
General Accountability Office (GAO) found that contingent workers--the 
estimated 8 percent of workers in 2010 who lacked job security or had 
variable or unpredictable work schedules--earned 11 percent less on an 
hourly basis and 48 percent less on an annual basis than otherwise 
similar non-contingent workers. These workers, in addition to working 
reduced and fluctuating hours, were also much more likely to become 
unemployed or exit the labor force. The GAO report found that these 
contingent workers were two-thirds less likely than standard workers to 
have a work-provided retirement plan, a disadvantage that both 
reflected and compounded their financial insecurity. \9\
---------------------------------------------------------------------------
    \8\  See, for example, Shayna Strom and Mark Schmitt, ``Protecting 
Workers in a Patchwork Economy,'' The Century Foundation, April 7, 
2016; Nancy K. Cauthen, Annette Case, and Sarah Wilhelm, ``Promoting 
Security in a 21st Century Labor Market; Addressing Intermittent 
Unemployment in Nonstandard Work,'' September 2015.
    \9\  GAO (2015).
---------------------------------------------------------------------------
    Shows Modest Improvement in 2016,'' Center for Retirement Research 
at Boston College Issue in Brief Number 18-1, January 2018.
    In theory, Social Security's universal coverage and progressive 
benefit structure should partly compensate for contingent workers' 
lower earnings and lack of access to employer benefits. However, 
nonstandard workers are more likely to be to be paid under the table or 
to be classified (or mis-classified) as independent contractors. Self-
employed workers have greater incentive to underreport earnings or 
inflate expenses in tax returns, shrinking the tax base as well as 
their future Social Security benefits. \10\
---------------------------------------------------------------------------
    \10\  Elliot Schreur, ``Social Security's Disability and Retirement 
Protections for Independent Contractors,'' National Academy of Social 
Insurance, Conference on Nonstandard Work and Social Insurance, January 
30, 2018.
---------------------------------------------------------------------------
    In his 2014 book, The Fissured Workplace, David Weil described how 
contracting and outsourcing allowed companies to reduce the number of 
workers who share in employee benefits without running afoul of 
nondiscrimination rules. By avoiding legal responsibility for these 
workers, fissuring also encourages contractors, including self-employed 
workers, to underreport income and avoid contributing toward social 
insurance benefits as well as evade other worker protections.
    While nonstandard workers may be at greater risk of retirement 
insecurity, they are hardly alone. By one conservative estimate, half 
of American households are at risk of being unable to maintain their 
pre-retirement standard of living in retirement, and younger 
generations and lower-income workers are at greater risk. \11\ 
Moreover, retirement wealth has become more insecure and unequal with 
the shift from traditional defined benefit pensions to 401(k)-style 
contribution plans. \12\
---------------------------------------------------------------------------
    \11\  Alicia H. Munnell, Wenliang Hou, and Geoffrey T. 
Sanzenbacher, ``National Retirement Risk Index Shows Modest Improvement 
in 2016,'' Center for Retirement Research at Boston College Issue in 
Brief Number 18-1, January 2018.
    \12\  Monique Morrissey, ``The State of American Retirement: How 
401(k)'s Have Failed Most American Workers,'' Economic Policy Institute 
Report, March 3, 2016; Alicia H. Munnell, Wenliang Hou, Anthony Webb, 
and Yinji Li, ``How Has the Shift to 401(K) Plans Affected Retirement 
Income?,'' Center for Retirement Research at Boston College Issue in 
Brief Number 17-5, March 2017.
---------------------------------------------------------------------------
    Because few people save for retirement on their own, lack of access 
to an employer-based plan is a significant barrier for many Americans, 
especially lower-income Americans. Retirement plan participation is 
almost three times as high for individuals with incomes above 300 
percent of the poverty line as for those below this threshold, and the 
biggest factors driving this disparity are lower employment rates and 
working for an employer that does not offer a plan. \13\ Despite the 
fact that the cards are stacked against lower-income workers, who have 
less disposable income and often receive little or no help from their 
employer or the government in saving for retirement, take-up rates are 
high (78 percent) for those who have access to a 401(k) plan. \14\
---------------------------------------------------------------------------
    \13\  April Yanyuan Wu, Matthew S. Rutledge, and Jacob Penglase, 
``Why Don't Lower-Income Individuals Have Pensions?'' Center for 
Retirement Research at Boston College Issue in Brief Number 14-8, April 
2014.
    \14\  Take-up rates are likely to be somewhat lower among workers 
who currently do not have access to a plan, including many nonstandard 
workers. These workers are likely to have more barriers to 
participation, and perhaps less motivation, than workers who currently 
have access to a plan.
---------------------------------------------------------------------------
    Most efforts to improve retirement security for all at-risk workers 
would disproportionately help nonstandard workers. These include 
expanding Social Security (and cracking down on tax avoidance), 
expanding the Saver's Credit, and supporting state and local 
initiatives to offer low-cost portable benefits to workers who do not 
have access to an employer plan.
    Another option is eliminating the commonality requirement for 
employers in multiple-employer plans (MEPS). This is worth pursuing, at 
least for ``open MEPS'' sponsored by not-for-profit and government 
entities acting as fiduciaries. As Michele Varnhagen of AARP has 
testified before this Subcommittee, Congress would need to set strict 
standards to ensure that participants benefit from economies of scale 
and are offered appropriate investments. \15\
---------------------------------------------------------------------------
    \15\  Statement of Michele Varnhagen before the U.S. Senate 
Committee on Health, Education, Labor and Pensions, Subcommittee on 
Primary Health and Retirement Security, on Retirement Plan Options For 
Small Businesses, June 21, 2016.
---------------------------------------------------------------------------
    Just as most efforts to improve retirement security for at-risk 
workers would disproportionately help nonstandard workers, most efforts 
to shore up labor standards would improve the retirement security of 
nonstandard workers. This includes tightening rules and enforcement to 
prevent the misclassification of workers as independent contractors.
    There are targeted interventions and innovations that might help at 
the margins, though it would be a mistake to focus narrowly on these. 
For example, ride-sharing companies Lyft and Uber have partnered with 
financial technology firms to help their drivers save for retirement. 
This has received a fair amount of attention because these drivers are 
already, by definition, ``wired.''
    However, even if these initiatives are emulated by other companies, 
this is only likely to help a small share of these workers and an even 
smaller share of the nonstandard workforce.
    Other, more ambitious, proposals targeted at nonstandard workers, 
such as a proposal by William G. Gale, Sarah E. Holmes, and David C. 
John to create a new type of portable retirement account that could 
accept both IRA and 401(k) contributions, \16\ would require a bigger 
political lift. While it is worth considering the pros and cons of such 
an approach for supplemental voluntary savings, we already have an 
efficient and portable benefit--Social Security--which the authors note 
shares many features with their proposed accounts.
---------------------------------------------------------------------------
    \16\  William G. Gale, Sarah E. Holmes, and David C. John, 
``Retirement Plans for Contingent Workers: Issues and Options,'' 
Brookings Institution Retirement Security Project, September 23, 2016.
---------------------------------------------------------------------------
    In contemplating ways to help nonstandard workers, it is important 
not to fall into the trap of accepting these arrangements as inevitable 
and innovative when the situation might better be described as a race 
to the bottom. We should take with a grain of salt companies' claims 
that labor standards and other protections are incompatible with new 
business models. As my colleagues Ross Eisenbrey and Larry Mishel 
noted, Uber claimed it could not adhere to minimum wage laws even as 
the company set minimum hourly rates when it suited them. \17\ Even 
when labor standards do clash with new business models, it does not 
follow that these should be weakened or scrapped, since these 
companies' competitive advantage may derive from evading standards and 
taxes as much as or more so than from socially beneficial innovation.
---------------------------------------------------------------------------
    \17\  Ross Eisenbrey and Lawrence Mishel, ``Uber business model 
does not justify a new `independent worker' category,'' Economic Policy 
Institute Report, March 17, 2016.
---------------------------------------------------------------------------
    The gig economy is a microcosm of the American workplace. 
Nonstandard workers and other low-income, self-employed, and small 
business workers face greater risk of retirement insecurity. We should 
look at ways of helping these at-risk workers, but we should be careful 
to do so without making a bad situation worse. A system that relies on 
upside-down incentives to encourage voluntary savings by workers in 
high-cost and risky plans that their employers may not even offer is a 
system that is not working for most American workers. This is 
especially true for lower-income workers engaged in nonstandard work 
who are less likely to have access to a good employer plan and are more 
likely to tap into savings to smooth income fluctuations before 
retirement.
    Many of us in this room likely agree that we rely too much on 
single-employer plans and should look to expand more portable accounts 
or benefits. However, we likely differ on whether to focus on making it 
easier for workers to participate in IRAs or other voluntary accounts, 
or to require workers and employers to contribute more to Social 
Security or other mandatory or quasi-mandatory systems.
    It would appear that the risk of the first approach is doing too 
little and the risk of the second is doing too much. There are limits 
to what we can do by nudging people to save more on their own. On the 
other hand, some argue that expanding Social Security can force some 
people to over-save: low earners who need the money now to support 
their families or invest in their educations, and high earners who 
might get a better return on their contributions elsewhere.
    I believe the latter concern is largely hypothetical, especially in 
the wake of 1983 Social Security benefit cuts and the decline of 
defined benefit pensions. In any case, framing the debate as one 
between a libertarian approach on one hand and a social insurance 
approach on the other misses the fact that both systems need to be 
fixed. It is possible to do harm even in a voluntary (albeit taxpayer-
subsidized) system by steering low-income workers' savings to high-cost 
and risky accounts, especially if these workers receive little or no 
government or employer support yet face tax penalties for accessing 
funds before retirement. We should therefore focus on reducing costs 
(by eliminating conflicts of interest in investment advice, among other 
things), exploring ways to pool risks through annuitized benefits and 
other means, and fixing upside-down tax incentives.
    Expanding Social Security would address these problems. However, 
this requires additional revenue, and any additional employee 
contributions would need to be offset for low-income workers by 
expanding the Earned Income Tax Credit or other means. We also need to 
address tax avoidance by independent contractors and other self-
employed workers, which robs our public services as well as workers' 
retirement futures.
    There are no easy answers--and we need to be careful to ``first, do 
no harm.'' But the problem is serious and urgent and I believe there 
are areas of common ground.
                                 ______
                                 
    Chairman Enzi. Thank you.
    Next, we will have an opening statement by Senator Murray.

                  OPENING STATEMENT OF SENATOR MURRAY

    Senator Murray. Thank you very much, Mr. Chairman, for 
organizing this really important discussion.
    Thank you to all of our witnesses. We are really grateful 
to have your insight on the challenges that are facing workers 
and retirees.
    The hype of the gig economy has put a new face on the 
damaging trend of erosion in workers' protections and benefits. 
It is actually a trend that has been occurring for decades. We 
may be discussing new technology using new lingo, but the 
challenges are not new.
    How do we make sure all workers are well protected and 
fairly compensated?
    How do we make sure all workers have their rights and 
protections we have fought for since the New Deal?
    In a changing world, how do we address the new threats and 
provide new protections to ensure workers' safety, economic 
security, and voice?
    I am optimistic that we can look for bipartisan answers to 
these questions and work together toward solutions. Of course, 
even as we fight for workers' protections today, we have to 
also fight to secure the financial stability they will depend 
on tomorrow.
    Retirement often seems years away to people, but the 
challenges we face are urgent. We need to expand access to 
plans as almost half of the families in this country do not 
have a retirement account. In fact, one-third of private 
industry workers do not even have access to a retirement plan 
through their employer. Many employers, who offer retirement 
plans, still do not offer part-time workers the opportunity to 
participate in them.
    We also need to provide better portability in retirement 
plans since the average worker today will change jobs ten times 
before the age of 40.
    We need to provide security for the many workers who are 
concerned about the pension crisis and whether they can expect 
the promised benefits that they earned.
    We need to address the concerns of a generation uncertain 
about whether Social Security will still be there for them in 
retirement.
    We need to address the unfair disadvantages facing women as 
they plan for their future by making sure they earn equal pay 
for equal work and are not penalized in retirement for time 
they devoted to family care.
    Ultimately, we need to look at new solutions and 
protections to guarantee the promise of retirement for 
hardworking families, which is why I am working on legislation 
like the Women's Pension Protection Act, which would provide 
access to retirement plans for many low wage and part-time 
workers.
    That is why I am working on legislation to modernize, 
enhance, and protect Social Security and ensure we do have a 
strong safety net for our families, and it is why I am looking 
for new solutions too.
    One approach that I have been working on is to make the 
small business retirement marketplace that is being pioneered 
in my home State of Washington, and scale it up to a Federal 
level, and expand the offerings to marry existing and 
underutilized plan options to those who want to save for 
retirement.
    Washington State's online retirement marketplace has 
provided a new resource to make it easier for small business 
owners and sole proprietors to offer employees voluntary, 
privately managed, Individual Retirement Accounts, or IRA's. 
That is certainly something we want to do on a bigger scale to 
address some of the issues we are talking about today.
    As today's discussion continues, I am going to continue 
highlighting the lessons we learned from my home State of 
Washington, and their leadership, to address this retirement 
crisis, and continue refocusing the spotlight of the gig 
economy on the broader ongoing challenges of reversing the 
erosion of workers' protections and benefits.
    I will continue fighting to give more workers, more 
seniors, and more families the certainty of a secure financial 
future.
    Senator Enzi, I am grateful to you for doing this today and 
bringing this discussion along, and I hope we can continue to 
work in a bipartisan way to address these challenges.
    The Chairman. Well, thank you. Thank you for your comments 
and I will be real anxious to see some more details on the 
small business pension plan----
    Senator Murray. Yes.
    The Chairman ----that the Washington laboratory and state 
is working on.
    Senator Murray. The laboratory, yes.
    The Chairman. I will defer to Senator Young who, I know, 
has to be at another hearing.
    Senator Young. Well, thank you, Chairman and Ranking Member 
for holding this roundtable.
    I thank all of our panelists for being here today.
    I am especially appreciative of the specific solutions you 
put forward about how we might improve retirement security for 
those who move from job to job, or are seeking flexible 
employment arrangements, or offer those arrangements.
    Ms. Olson, I will just dive-in. You offered, I think, seven 
separate concrete ideas of things that we might consider as a 
Congress to improve on this retirement situation for gig 
workers, as it were.
    No. 5 related to open platform, portable retirement 
products.
    Can you point to an example, either domestically or 
internationally, where someone has effectively implemented this 
open platform, portable retirement system?
    Ms. Olson. It is a very good question and thanks very much.
    I do not have a specific product to provide you in response 
to the question, but the different alternatives that a number 
of our other panelists have described in terms of Open MEP's 
are, obviously, an example of that.
    Again, as we look at those, I think the attributes that we 
are looking for in terms of developing one is one that would be 
flexible.
    One that would not be mandatory in terms of what we are 
talking about in terms of the aspects of it.
    One that a gig economy company--or any company that 
provides opportunities to independent workers--would be able to 
provide information about, would be able to, perhaps, transfer 
funds to these platforms on behalf of the workers without a 
negative impact as would currently be placed under today's 
laws.
    Senator Young. Thank you, Ms. Olson.
    Mr. Tisue, Ms. Olson cited the MEP as an example of one of 
these open platforms and there are, no doubt, other variants 
out there. You have laid out a couple of things that would need 
to be done to facilitate, or that might be done, to facilitate 
these MEP's.
    This is the playbook, these two steps. Tell me what sort of 
resistance you have met with, if any, as you have shared with 
people your vision for expanding the use of MEP's in this 
country.
    Mr. Tisue. Well, thank you for the question, Senator.
    Actually, I do not believe there is a whole lot of 
resistance right now. I think we have bipartisan support. I 
think it is just at the step where we need to take action and 
make this happen.
    The commonality is one of the obstacles we have to go over, 
and that is more of an interpretation than a rule. Thereby, 
there has to be some kind of pre-existing reason for these 
groups to be together.
    If we could get rid of that, you can have the aggregation 
and the scalability.
    Senator Young. Let me explore that issue more, because I 
admit to being new to this issue. Sometimes, that is an 
advantage.
    If we start drafting legislation in our office, working 
with the Chairman, or whoever would like to be involved in 
this, and we make that well known, we will have hoards of 
individuals visiting our office saying, ``Do not touch the 
commonality standard.''
    Mr. Tisue. I do not believe so, no.
    Senator Young. Okay. I just want to make sure this is not 
one of these things I need to penetrate before embarking on 
that journey.
    Ms. Tisue. Yes, so many of the things that you have 
mentioned are existing today where the scalability happens in 
Multiple Employer Plans. So you can get populations of people, 
even on the Solo(k) level.
    We do these today for realtors, for jockeys, for physicians 
who are 1099.
    Senator Young. Okay.
    Mr. Tisue. I mean, they are able to tie together to act 
almost like one plan for the purposes of greater assets, which 
gets greater pricing for them, more services tied to the model. 
All this is opening that up.
    Senator Young. We need some legislative clarification or 
adaptation of the commonality rule.
    Mr. Tisue. Correct.
    Senator Young. They can get economy. Okay.
    Ms. Olson, back to you. No. 6 on your list was providing 
independence, monetary incentives to save for retirement. I 
will ask you the same question.
    Are there models out there, either in the states or 
internationally, where we have seen this happen, and happen in 
a way that you think merits our attention, positively or 
negatively?
    Ms. Olson. I mean, I think we have a lot of models 
currently that we have a lot of experience with in terms of 
employee models.
    Really, the issue is to allow individuals to contribute to 
these various vehicles on a tax deferred basis and to allow 
them to actually accumulate interest and other proceeds during 
the term of the life of the vehicle on a tax deferred basis. I 
mean, that is what we are really looking at and right now, that 
is critical.
    You cannot leave the issue of education and information out 
of the equation, though, because right now, many of these 
workers do not have the same access to that kind of information 
that would be readily available, perhaps, to employees in a 
workplace where it is handed out to them as part of their 
relationship.
    Senator Young. Do you have any recommendations, Ms. Olson? 
I will be asking you, Ms. Nunn, as well because I think this 
applies to your Solo(k) model.
    Any recommendations about how we might heighten awareness 
through the employer or otherwise?
    Ms. Olson. Absolutely. I believe companies, I believe the 
Federal Government could heighten awareness by campaigns and 
information regarding the existing vehicles that are available, 
and any new vehicles that become available as a result of 
various legislation.
    But even the existing ones, the information is not out 
there as to who current independents could go to, to get the 
benefits for them.
    Then, the real critical issue is if you just think of 
employees, most employees are not going to go out and devote 
and contribute money to a retirement program if they do not 
have that ease of an automatic transfer of the money. Right?
    Senator Young. Yes.
    Ms. Olson. It is that automatic transfer that really is 
such a boost to making that happen.
    Here if gig economy companies, or any company, were to do 
that for these workers that would be a strong condition of 
employment. So we have to remove that barrier so that they have 
the ability to do that.
    Senator Young. Maybe slightly more controversially, auto 
enrollment, is that something?
    Ms. Olson. Auto enrollment, I am not in favor of that for 
the following reason. Gig economy workers are very, very 
different. There is no one-size-fits-all.
    Many of these folks already have retirement programs 
through their full-time employment. Some of them are retirees 
themselves who are not interested in saving.
    Senator Young. Right.
    Ms. Olson. Also, and want the immediate maximum amount of 
cash they can receive; so flexibility and opportunity, as 
opposed to the mandatory nature, which is not even mandatory 
today for employees in America.
    Senator Young. Makes a lot of sense.
    Ms. Nunn, I will give you the final words.
    Do you have anything to add? You gave a great presentation 
on the Solo(k) and experiences your CPA firm has had in 
servicing clients in that area.
    How might we heighten awareness of, or streamline the 
process to establish a Solo(k) or other retirement vehicles?
    Ms. Nunn. Thank you very much.
    I think that the barriers are information, education, and 
then just the administrative burden that exists when you leave 
this to an individual to wade through.
    Many people are not experts in wading through paperwork 
that has been written based on Internal Revenue Code, and that 
can be tricky.
    I think that the point that Ms. Olson was making is also 
extremely important. Employers worry about crossing the 
boundary that would change someone that rightfully is 
considered contract labor back into an employee. They worry 
about that because there are all kinds of payroll taxes, and 
penalties, and liabilities that impact them the second they 
cross that line.
    Making the employer or the company relationship to their 
contract labor, truthfully, contract labor employees safer for 
the company is critically important for there to be changes in 
how we interact with those workers.
    If they were to come to our CPA firm and say, ``Do I have 
contract labor or do I have an employee?'' Many times we would 
say, ``By all reasonable tests, you have someone who is a 
contract labor person. However, we have to let you know that on 
investigation, like a Social Security Administration or by an 
IRS audit, they may or may not uphold that because their 
perspective can be different.''
    Senator Young. Sure.
    Thank you all.
    The Chairman. Thank you. Appreciate your comments.
    I am going to build on something that Senator Murray said 
here. This is a Subcommittee of the Health, Education, Labor, 
and Pensions Committee, which is a very big bite of the apple. 
She mentioned that people in the future will be changing jobs 
ten times before they are 40.
    There is another little part to that statistic, and that is 
that we are not just talking about different employers. We are 
talking about different jobs.
    Another part of the statistic is out of those ten different 
jobs, seven of them have not even been invented yet. So I think 
that some of the things with these drivers is kind of a new 
invention.
    I want to remind you that if you want to comment on 
anything, any of the questions, or something that somebody else 
says, just tip your card up and we can do that because your 
comments are what we are here for.
    I thought that might be the case.
    [Laughter.]
    The Chairman. Ms. Morrissey.
    Ms. Morrissey. I realize that this is a roundtable and we 
are trying to be friendly, but I do want to say that I do 
disagree with some co-members of the panel here about the need 
to loosen standards on who collects and also the need to, for 
example, lift the caps on contributions to various kinds of tax 
exempt or tax deferred savings.
    The kinds of workers that we have been talking about on 
this panel disproportionately are actually not the workers we 
should be worried about. We already have an upside down system 
of tax incentives.
    People here may not be aware of the fact that the tax 
incentive that you get to contribute to these plans is based on 
the taxes you would otherwise owe on the investment earnings, 
and these disproportionately accrue to higher income workers.
    We also know that these tax incentives do not really help 
people save more. They disproportionately just cause people to 
shift money that they already have into tax-deferred savings.
    You could always point to somebody here or there who needs 
to catch up, but when we look at the statistics about what 
people are actually relying on in retirement and what people 
are spending on in retirement, we find that a lot of the money 
that is in these accounts is not even being spent. It is being 
deferred, and deferred, and deferred. These function more like 
tax shelters than incentives to save.
    I think before we talk about expanding these things under 
the guise of modernizing things, we should make sure and fix 
the problem we already have, which is that these things are 
upside down.
    The Chairman. Mr. Tisue.
    Mr. Tisue. Thank you.
    I just wanted to touch on a couple of points. It is 
important, I think Ms. Olson said this, that access is a very, 
very important component because you do not have engagement 
without the awareness and that all starts where you get access 
points.
    One of the things that we can do is giving that employer 
look and feel by tying contributions to looking like matching 
scenarios in a typical, traditional workplace setting, and that 
does encourage action. That does have a pretty significant 
take, much like auto-enrollment, but without forcing it.
    Another would be what Ms. Nunn talked about, which is the 
administrative burden is quite heavy for people who do not do 
this for a living. When you get a 20 page document, it is more 
than a little bit daunting and that kind of puts things off 
until that day you do understand it, which might never come 
around. And so programs like we are describing now take away a 
lot of that day to day burden.
    Last, I just wanted to touch on a point that the Senator 
made about what kind of resistance there might be in that both 
the proposals I made about commonality and removing the bad 
apple requirement were in recess, which was passed by the 
finance in twenty, twenty-six zero. So I do not think there 
would be any resistance to this.
    The Chairman. Okay.
    Mr. Tisue. Thank you.
    The Chairman. Thanks.
    I will have a few questions too and I will begin with Ms. 
Nunn. Again, appreciating the difficulty of getting clear out 
here to present, appreciate the document that has been put into 
the record now. I know that your firm does a lot with people 
that do not want to work with all the regulations, or the 
paperwork, or the transfer of money. So I appreciate that you 
do that.
    In your testimony, you discussed your work with clients, 
assisting them as they established the Solo 401(k)'s.
    Can you summarize what these plans are? What makes them so 
complicated to maintain and also any suggestions you might have 
for making it work better?
    Ms. Nunn. Yes, thank you very much, Senator.
    It is not that they are necessarily difficult to maintain 
once they have been started. There are people who can be 
worried about starting one from the standpoint once it reaches 
a certain dollar amount, you have to file a tax form, and that 
can be daunting to people as well.
    It is the 5500-EZ that has to be filed once the balance in 
the 401(k) plan reaches $250,000. But, as you can imagine, 
many, many plans would not have to do that.
    I think the biggest issue is that people many times are not 
aware of them. We started holding trainings and sessions at our 
local community college so that we can start letting people 
know that this was available there.
    The bigger issue is that even though these plans are 
correctly exempt from Title I of ERISA, correctly exempt 
because the only retirement money going into the plan is your 
own personal money. There is not a fiduciary responsibility to 
other people.
    The wording and the process is being delivered to people as 
if they are signing up for a regular 401(k) plan where you 
would have a great deal of fiduciary responsibility for other 
peoples' money.
    Because it is based on that same platform, it makes it a 
lot more complicated than it would need to be, and I think that 
is just a fault of the industry. That part of it is not 
necessarily tied to legislation or even IRS Code.
    However, anything that can be done to simplify normal 
Americans, working Americans at any level of economic success 
or hardship to be able to be more self-reliant in their old 
age, I think, is appropriate.
    Our other panelist saying that it is not important and all 
we are doing is shifting money to tax deferred savings, I just 
want to say, yes. That is the point. Do not spend it today. 
Shift some money to tax deferred savings. That is what we are 
saying or even a Roth option, which has no tax deferral 
inherent in it, but allows it to grow tax free and be pulled 
out when you need it.
    Yes, we do see people that put money into these plans and 
they are conservative about pulling money back out, but that is 
because growing old has risks.
    You cannot just sit down and budget how it is going to be 
and what you are going to live on when you retire. You have to 
leave the money there in case, heaven forbid, something goes 
wrong. Your returns are not as high as you thought, or you have 
medical issues, or you have some other issue that changes what 
your plan would be.
    Of course, we are not going to see people put the money in 
and pull it back out on a rapid methodology. There are risks 
involved with growing old. And if we are going to be self-
sufficient during those years, we have to have the ability to 
put the money in and manage it well for our purposes.
    The Chairman. Thanks.
    Ms. Nunn. Thank you, Senator.
    The Chairman. I appreciate your differentiating between the 
401(k)'s and the Roth IRA's.
    Ms. Nunn. Yes, Roth 401(k)'s.
    The Chairman. Yes, there is a difference there.
    We do talk about preventing leakage a lot in this Committee 
from all of the different kinds of retirement savings, which is 
a problem. Leakage, of course, is them taking it out beforehand 
for other purposes other than the retirement.
    Mr. Tisue, as you might be aware, this Committee has had 
several hearings on the expansion of the Open MEP's plans. In 
your prepared testimony, you referred to a number of options 
for designing such Open MEP's plans, specifically for workers 
in the gig economy.
    Can you tell me how much financial sophistication would 
generally be needed on the part of the worker?
    Between the two options you specifically laid out, it 
sounds as though one might maximize simplicity by building a 
plan into a contract. The second would maximize portability by 
allowing organizations, such as yours, to establish the plan 
for workers to enroll themselves.
    Is there an implied tradeoff between the simplicity and the 
portability?
    That is a whole bunch of questions, and anybody can chime 
in too. Mr. Tisue.
    Mr. Tisue. Well, thank you, Senator, for the softball 
question. That is a good one for me.
    [Laughter.]
    Mr. Tisue. Yes. The inherent simplicity----
    The Chairman. Assume we do not know anything.
    Mr. Tisue. No problem.
    Multiple Employer Plans that we are describing here that 
could satisfy the need for these gig workers, when a Solo(k), 
just by its very definition like Ms. Nunn said, is very 
complicated. It is a 20 page document, at least.
    The way that we do them today on our own, it is about 2 
pages and the second half of that document is a beneficiary 
form. So it does not get any easier than that. It looks very 
similar to an enrollment form on any retirement plan that is 
offered through an employer. So again, it is very, very simple 
and that is just the nature of what the Multiple Employer Plans 
can afford.
    Everything is already built, so you are not making a whole 
lot of decisions about the structure. The structure already 
exists, it is just telling you what it is and whether you want 
to join or not.
    From a consumer standpoint, it obviously has all the 
protections you would want in there from ERISA, but it is very, 
very easy to understand.
    I would be happy to supply supplemental documentation that 
you can review to show that.
    But that is the least of their worries. It is very, very 
easy to understand and that is why I think the ``take rate'' is 
so high.
    The Chairman. If you are able to reduce the 20 page form 
down to 2 pages, would you share the two pages with us?
    Mr. Tisue. Absolutely.
    The Chairman. Okay.
    Ms. Nunn, do you have a comment?
    Ms. Nunn. Yes, thank you, Senator.
    Mr. Tisue, for the reduction to two pages, though, the 
participant--if it was a sole proprietor, a person who files a 
Schedule C--for them to participate in an Open MEP, would it be 
unusual for them to be able to put as much money into a 
retirement plan as they would be allowed by current law to put 
into a Solo(k)?
    Mr. Tisue. Well, it is actually the same set up. Really, 
the only difference is how it is communicated to them. So all 
the benefits of the Solo(k) are still there.
    Ms. Nunn. I know nothing, really, about Open MEP's, so I 
want to find this out.
    You would have multiple employers who would concur to fully 
fund the maximum, the employer type portion.
    Mr. Tisue. It is actually a little bit simpler than that.
    Ms. Nunn. Okay.
    Mr. Tisue. Let us say the four of us here decide that we 
are individual workers in this contingent workforce.
    Ms. Nunn. Yes.
    Mr. Tisue. I want to do a Solo(k). You all want to do a 
Solo(k). The things that are locked down that make this very 
simple, would be, for instance, an investment menu.
    There would be a core family, let us say, of 25 mutual 
funds that are represented by a whole contingent of different 
mutual fund families, all at institutional pricing, as opposed 
to a Solo(k). As we know, typically, they are one provider. You 
are going to have access to, say, Fidelity or Vanguard, for 
pricing purposes. So we would have that.
    Then I can do what I want in terms of my contribution 
amounts. You could do what you want. She could do what she 
wants. So it is really your own plan. We just all have the same 
structure that we join, which makes it more efficient.
    Ms. Nunn. Yes, I think that sounds perfect. You should, 
really, quickly get going on that.
    [Laughter.]
    The Chairman. I think that was helpful.
    Is there a top heavy requirement, then, if there are four 
people like that working together?
    Mr. Tisue. No, because we are individuals; individuals in 
our own plan. We are just joined together for purposes of 
pricing, so to speak.
    The Chairman. Good, thanks.
    Ms. Olson, as an attorney with significant experience in 
the gig economy, what are the features that the gig economy 
companies are looking for in their retirement savings options 
that they can offer to their participants? Is there any 
assistance from the gig economy companies currently able to 
offer their participants without creating labor classification 
concerns?
    Ms. Olson. Thanks very much for your question.
    It is not an issue of loosening the standards on workers. I 
mentioned it in my testimony or my statement, but the U.S. 
Supreme Court has said, with respect to the receipt of employee 
benefits by any worker, that is an indicia of employment. That 
is the Darden Case [``Nationwide Mutual Insurance v. Darden''].
    That definition by our U.S. Supreme Court has gone through 
all the state and local statues--whether it is unemployment 
compensation, workers' compensation, whether it is ERISA or 
really any of the issues, the Internal Revenue Code--that 
relate to the status of the worker.
    One of the biggest prohibitions and impediments to gig 
companies and any company wanting to provide information, 
facilitation of the transfer of funds, or even a co-payment 
with respect to moneys into a retirement fund for these workers 
is if they do that, the Supreme Court has said, ``That is a 
strong indicia, they are your employee.''
    Without loosening the standards of who is an employer, who 
is an independent contractor, what California did, and we can 
look to a state that has looked at this issue, who wanted to 
cover non-employee workers of certain industries under its 
workers' compensation laws without hurting their status.
    What California said is, ``We are going to allow companies 
that use certain independent contractors to treat them as 
employees for workers' compensation purposes, to provide them 
workers' compensation benefits without allowing that fact to be 
relevant to their classification as an employee or an 
independent contractor.'' Take it out of the equation, but let 
the companies provide those workers with that benefit.
    If you say to me, ``What is the biggest impediment?'' It is 
the companies that have the resources, that have the ability 
because of the administration of the fees to these workers, to 
probably be in the best situation to provide information, 
administration of benefits, transfer of funds even if they 
desire, like some employers do, a co-pay, if it did not hurt 
the legal status for all other purposes, if it was just 
neutral.
    Let the companies do that and support a retirement system 
for these workers with it being a neutral factor for everything 
else. Not positive or negative, just take it out of the 
equation. That would be unbelievably helpful.
    The Chairman. Thanks.
    Ms. Morrissey, I think you had a comment.
    Ms. Morrissey. I do realize that we could have the entire 
panel just be discussing this issue of worker classification or 
employee classification, but since it was raised by other 
panelists, I would like to just take the minority view on this 
panel.
    We need to strengthen, and not loosen, distinctions between 
employees and independent contractors, and raise more of those 
mis-classified independent contractors to be employees.
    The fact that providing benefits to them will endanger 
their classification as independent contractors, to me says 
that they should be employees in the first place. If you want 
to provide employee benefits to workers, they should be 
employees.
    I do not have any sympathy for companies that want to have 
it both ways. That wants to have somebody that looks, and 
feels, and sounds in every other way like an employee.
    I also want to state that when I was researching for today, 
EPI, the Economic Policy Institute, my employer, has been doing 
this work for 20 years. There was a book about 
misclassification of workers. I could not actually find it on 
my shelf because it was so long ago.
    I think that sometimes this gets forgotten because of the 
focus on the gig employee, the gig economy, and some modern 
tweaks to it, but this has always been an issue about 
maintaining standards of who is an employee and who is not. I 
think we do not want to go down that road.
    I think the first rule of trying to provide better benefits 
for nonstandard workers is to first do no harm. I think 
something like that could definitely do some harm.
    The Chairman. Do you think that would depend on the size of 
the business, though? We are talking a lot about these just 
being one individual with their own business.
    Ms. Morrissey. Well, if they are truly a self-employed 
worker and participating in something like Mr. Tisue was 
talking about.
    I actually see Michelle Varnhagen in the audience here 
today, and I know she has testified before this Subcommittee, I 
know a lot of that is the ``devil is in the details'' there. If 
we have enough protection, I am all in favor of that. I think 
it is great. I do not think things need to be attached to 
particular employers.
    I think it is true that we need to have more portable 
benefits and we need to provide different options.
    But when people are supposedly independent contractors, 
often we look at them, and they work at one employer who sets 
every standard, who controls every aspect of their working 
life.
    You might think something like a driver for Uber or Lyft is 
a modern day invention. Yes, they are working through an online 
application, but there have always been cab drivers who are 
self-employed.
    In fact, this very morning, I took the train, and to get to 
the train, I took a car share service, not a car share service. 
In New York City, that has been around forever. It is decades 
old.
    These are not as new as people think and I do not think 
that there is any reason, there was not any reason 20 years ago 
and there is no reason now to reclassify them.
    That said, I do sympathize with the workers that you are 
both talking about in that, I think, are very common in the 
states, in Wyoming and other sparsely populated states where 
there are people who have multiple jobs and they need a 
convenient way to save.
    I am all in favor of exploring new ways to do that, but not 
by muddying the distinction between employees and independent 
contractors.
    The Chairman. Of course, one of the things we are trying to 
do is figure out a way to get more people to have retirement 
savings. This new economy has stifled, in one way, that if they 
have to provide all of the services of a normal business, which 
everybody used to do.
    When I was in the shoe business, we had to do our 
accounting and all sorts of things. I am an accountant, so that 
was not a big deal, but some people do not go into business 
because they do not have the kind of support on the other 
things that they might need.
    But they can have a retirement plan if they can contract 
for all of the services that it takes for that. I used to have 
to help some clients with doing some of the reporting that they 
had to do and that is particularly the top heavy rules that 
they had, which do not really apply if there is just one 
person. Yes, it is top heavy. It is the only ``heavy''.
    I am just trying to figure out how to make it possible for 
these people to do the kind of a business they want and to be 
able to contract for services so that they can have a pension.
    I think we still have an issue, and I will ask people to 
comment on this too, and that is how do we advertize these 
options more?
    I will go ahead and let you respond first and then I will 
throw it out for that more general question.
    Ms. Morrissey. I do not want to take up too much time, but 
I think one of the things that has been lost in this discussion 
too is that we need to do a better job of making the plans that 
we already have better.
    I think it is often said that the assumption is that people 
do not have access to plans, that they are ill informed, and we 
just need to provide better information and easier access.
    But I think more often than not people have rational 
reasons to be nervous about what they do have access to. There 
are some problems with 401(k)'s. There are big problems with a 
lot of IRA's. I think we need to make those plans more secure 
and lower cost, more appealing. There is also broader economic 
things that we need to do that I know are beyond the discussion 
here.
    But it is asking a lot of workers who have seen their wages 
stagnate and have very volatile earnings to set aside money on 
their own and have to make all these retirement decisions.
    I am all in favor of making things simple, but there should 
be standards about costs, and about risks, and about 
investments that we all agree on that are better than the 
standards that we have now. Otherwise, I would really worry 
about funneling more funds into ill-suited investments, 
expensive and risky investments. I do not think that is the 
solution.
    I think we need to fix the accounts that we have now and at 
the same time, also make it easier, through behavioral and 
other ways, to encourage people to save.
    I think, also, the emphasis on convenience is very 
important because we did mention tax incentives. But what 
people have found--and in general economists have spent a lot 
of time talking about--is that convenience and simplicity 
matter more, really, than tax incentives.
    I agree to making things simple, but we need standards at 
the same time.
    The Chairman. Thank you.
    Does anyone have any comments on how we can get more people 
to participate in either the Solo or the MEP's that exist at 
the present time?
    You do not have door to door salesmen going around on these 
things.
    Mr. Tisue. There are certainly a lot of ways to create the 
awareness, not the least of which is you go straight to the 
source on where the folks are being contracted. That is one 
easy way.
    You take an example of some of the cable companies. The 
installers are out there all day long and all of us have waited 
on them.
    But it is just a matter of finding places like that where 
you know there is going to be an excess of a lot of people 
working through that. They all get paychecks and there is a lot 
of easy ways to communicate through that. Making them aware is 
the first step.
    If we could tie that to some level--it is not employer 
contribution because they are not employers--but that kind of 
feel of what they are used to from a traditional setting where 
if there is a way to incent them with the paycheck for their 
service, to give some kind of incentive that could be used by 
that contract worker to fund even more into their own 
retirement account.
    There are a lot of ways we can create awareness. That is 
one.
    The Chairman. Ms. Morrissey, did you want to comment on 
that? You had your card up.
    Ms. Morrissey. That was up from before. Thank you.
    Ms. Olson. Senator Enzi, if I could just comment.
    The Chairman. Yes.
    Ms. Olson. What I would say is it would not be a bad idea 
to have more general information about the opportunities that 
are available with respect to the existing retirement vehicle 
options and to have those available.
    Not necessarily tied to any particular company that might 
be offering a particular benefit, but might just be general 
information regarding these being available on government 
Websites.
    Also available, so that they could even be handed out, not 
as a document that anybody who hands out is endorsing, but just 
generic government information regarding, ``This is a lot of 
information for independent contractors relating to information 
that you can use in terms of the structure of your business.''
    It does not impinge on, one way or another, if they are an 
employer or an independent contractor. It is just the 
information that the individual could have. That would be very 
helpful.
    The Chairman. We have talked a lot about making the plans a 
little bit simpler, and we had some suggestions in your 
testimony for that.
    Does anybody want to expound on those a little bit more, 
how we can make it simpler? One way is to go from 20 pages down 
to two, and I am looking forward to seeing that document.
    Ms. Olson. The one comment I would make is the real ease of 
use is the automatic transfer of the money. That is what really 
makes it happen.
    Without getting into the issues, removing impediments to 
allowing that to happen for a gig economy, and other non-
employee workers, really will make those investments in 
retirement vehicles work, if we can eliminate the legal 
impediments to that.
    The Chairman. Ms. Morrissey.
    Ms. Morrissey. Well, there has been a lot of research done 
on how people are intimidated by having to make investment 
decisions that choose between multiple mutual funds, and also 
how a lot of the mutual funds on offer are of a higher cost 
than others that they could have. The more funds that you are 
offered, the worse it is.
    I think the states are actually providing some limited 
model for how to reduce options and make them better. Now, it 
depends on the state and it depends on what they are doing. The 
defaults that some of the states are looking at are more 
appropriate investment vehicles for many savers. I think that 
matters a lot.
    I also just want to make the point that the simplest and 
most obvious way to save for retirement is through Social 
Security. And so, it is important that workers are fully paying 
into Social Security, that they are not underreporting their 
taxable earnings. Also, I am obviously strongly in favor of 
expanding Social Security.
    Social Security takes all of those decisions out. You do 
not have to make those decisions. You have a secure benefit. 
You do not have to think about it.
    Even if we do not go with expanding Social Security, I 
would also like to point out that, and again I do not think 
this is going to be that popular on the panel, but with the ACA 
there was some standardization of benefits.
    I think that we need to always keep in mind that people, if 
they need professional expertise, it is because they do not 
have it themselves. They are not a good judge of it. They are 
not a good judge of the financial advice they are receiving.
    We need fiduciary standards. We need to really look at the 
investment options that people are being offered. We need to 
make sure that they are low risk, appropriate, and that they 
are low cost.
    I think that the states are experimenting with some ways of 
defaulting or limiting options to make sure that these are 
appropriate.
    The Chairman. Ms. Nunn.
    Ms. Nunn. Well, I realize this may not be specifically on 
topic, but my real job, besides running our company, is that I 
am an auditor and I audit employee benefit plans, 401(k) plans.
    I just wanted to say within the last 5 years, the 
Department of Labor has made it very clear to auditors that we 
are to be reviewing the activities of the trustees of these 
401(k) plans inclusive of their quarterly meetings to review 
the costs of the different investment options, the performance 
of the different investment options, the availability to 
participants of advice on investments.
    I think our world is moving back in that direction and that 
has to be documented and all communicated for them to pass 
their audit.
    While I would say pension plans, the example of a union 
pension plan, might have been more closed, perhaps the current 
401(k) environment or 403(b) environment is subject to much 
oversight on the fiduciary activities of the trustees of those 
plans. I think people take it seriously in general.
    The Chairman. Our Committee has spent a lot of time on 
fiduciary responsibility and I have quite a bit of difficulty 
with that because I am from a very rural state.
    I am the least populated state in the Nation and all of the 
services that might be available in Washington, DC. or even 
Denver are not available in most of the towns in Wyoming.
    When we start limiting the ways that people can get advice 
or give advice, it becomes very difficult for people in my 
state to get any advice. So there is always a conflict with 
that at the same time.
    Another question for Ms. Olson or anybody else on the 
panel.
    Some professions, such as teaching, offer full time with 
benefits but allow for extended time off.
    How might a one-size-fits-all policy of requiring 
traditional employer provided benefits discourage participation 
in the gig economy with these teachers?
    Ms. Olson. Thanks for your question, Senator Enzi.
    It is true that it is not unusual in multiple months that 
teachers have off that they actually use some or all of that 
time to make additional moneys.
    If, in fact, participation in retirement plans that would 
use a portion of the otherwise compensation they would receive 
in terms of direct, immediate pay for the service they provide, 
but part of that would be drained or moved over to another type 
of benefit. That would, in the economic model, reduce the 
interest of those individuals in becoming gig economy workers.
    It is not just the teacher example. The teacher example is 
a very good one.
    It is not uncommon that individuals that do have time off 
during certain periods--whether it is the weekends, whether it 
is a certain time of year, like teachers during the summer, or 
whether it is for a short, defined period of time where 
somebody wants to save for a particular activity, for a 
vacation, or event that requiring those workers to not receive 
the full maximum amount of immediate pay that they have for 
those--where they have retirement benefits, perhaps, covered by 
other full-time, part-time, or other employment would be a 
negative because it does take away from them the maximum amount 
that they can earn. It may also be a resource that they just do 
not need because of other available resources.
    That is why I have described the issue of flexibility and 
voluntariness in terms of these plans as being important. So 
that actually the gig economy workers who are more 
entrepreneurial--and just about any worker that we see in terms 
of the economy, whether gig economy, contractors, where they 
are independent contractors even in other fields--the issue is 
these are workers who are choosing to pursue a specific 
addition usually or very unique business opportunity. One that 
they may grow in significant ways into something that is beyond 
them or as just relates to their own resources and assets in 
terms of their time as well as their own assets.
    But it is critical that we give them flexibility to get the 
benefit from that particular work that they are looking for to 
ensure that we have this opportunity available for them. And to 
ensure that we are able to grow this economy in the way that we 
see the consumer demand exists for.
    The Chairman. Thank you.
    A final question here for my practitioners, Mr. Tisue and 
Ms. Nunn.
    If the people wanting to do this decide that they would 
like to do a Solo(k) or an Open MEP's, how much time would it 
take to set up the plan and what kind of compliance would they 
have during the year?
    Mr. Tisue. What time is it today? We could have it set up 
in about 10 minutes. It really would not take any time at all 
if the Open MEP were able to be used today.
    For those that are inside of a nexus that would allow that 
to happen, we sign those up right now. So the structure is 
alive and well.
    One thing Ms. Morrissey touched on, and I wanted to add is 
she is absolutely right. In a standard Solo(k), the application 
might include 75 mutual funds from a given family that someone 
has to go through and choose.
    There is something called choice fatigue that exists in 
this industry where every fund after ten, your brain just shuts 
down, and you ultimately either make the wrong choice or you do 
not make one at all.
    One of the things that Multiple Employer Plans, especially 
ones like ours, we have an investment manager, a fiduciary, on 
those plans that pare down those menus to address that.
    Where you might see some retirement plans out there that 
might have as many as 50 to 60 funds, ours typically have 
around 20 that include the target dates that span. That 
probably might be ten funds.
    It is important to do that. But they are ready now.
    The Chairman. Okay. And during that first year, what kind 
of reporting do they have to make? Do you handle all of that?
    Mr. Tisue. We handle that for them.
    The Chairman. Yes, I thought so.
    Ms. Nunn.
    Ms. Nunn. I would agree. It takes about 10 minutes for 
someone who knows what they are doing to set up a Solo(k). If 
Open MEP's were available, I think we would also encourage 
people to look at that, it is just they are not available 
today.
    But for the Solo(k)'s, we help them get set up. We have a 
money manager in place so they have about 10 to 15 choices, and 
we encourage them to rebalance, so that they stay with their 
given risk. They can choose that or not. But that they stay 
with their given risk profile.
    All of that eliminates some of the fatigue that can happen 
when you are presented with just too many choices.
    In addition, once they need any type of tax filing, we do 
that for them as well, since we have found that to be an 
obstacle.
    The Chairman. Thank you.
    Do any of you have questions for anybody on the panel?
    I want to thank you for your participation, and the great 
answers, and I will see that this all gets reported to the 
other Senators, probably in the form of some legislation which 
then, you can all comment on too.
    I appreciate you traveling here and being willing to 
participate in this. I do think it has been productive. I do 
think it needs far more investigation yet and discussion.
    There is going to be a publication coming out from the 
Bureau of Labor Statistics, ``Contingent Worker Supplement,'' 
that is a report that has not been compiled since 2005. There 
have been a lot of requests by Senators for that to be updated. 
I am sure that this debate will fall on familiar, philosophical 
lines.
    But it does have to take into account the desires of 
participants in this new segment of the economy which, I do not 
think, has even touched on its inventiveness yet. I think it is 
going to be a big area for the seven that have not been 
invented yet to come up.
    Uber is new to Wyoming right now even though it has been 
around other places for a while, but these things catch on 
pretty fast because of the kind of communication that we have 
these days.
    I will ask that the hearing record stay open for 10 days to 
accommodate additional questions that other Senators might have 
for the witnesses.
    If there is no further business to come before the 
Subcommittee, it is adjourned.

                          ADDITIONAL MATERIAL

                                       Transamerica
                                                   February 6, 2016

    Transamerica appreciates the opportunity to provide this 
written testimony in connection with the hearing by the U.S. 
Senate Committee on Health, Education, Labor, and Pensions 
Subcommittee on Primary Health and Retirement Security 
exploring ``Gig Economy'' retirement plan issues.

    Transamerica is focused on helping customers achieve a 
lifetime of financial security. Transamerica products and 
services help people protect against financial risk, build 
financial security and create successful retirements. 
Transamerica designs customized retirement plan solutions for 
both for profit and non-profit businesses nationwide. 
Transamerica provides services for over 29,000 plans that 
collectively include over 7 million participants and represent 
over $476 billion in plan assets as of December 31, 2017. 
Multiple employer plans comprise 306 of these plans adopted by 
over 12,400 employers with 770,000 participants and $21.9 
billion in assets as of December 31, 2016.

                           Executive Summary

    The independent workforce has grown significantly in the 
last few decades. While there are many positive reasons 
associated with being an independent worker, a glaring downside 
is lack of access to workplace benefits, including the ability 
to save by payroll deduction into an employer sponsored 
retirement plan. Multiple employer plans (``MEPs'') provide an 
opportunity for expanding retirement plan coverage among 
independent workers.

    Multiple employer plans (``MEPs'') are a recognized cost-
effective retirement plan solution for small businesses. MEPs 
provide a way for small businesses with a common interest to 
achieve economies of scale by joining together in a retirement 
savings plan structure in which the administrative burden and 
liability of operating the plan are delegated to plan services 
professionals.

    Once reform of MEPs to remove the ``common interest'' 
requirement for employers to join in a MEP (``open MEPs'') is 
enacted, employers, including sole proprietors, from various 
industry and trades can efficiently save for retirement by 
joining in an ``open MEP.'' Sole proprietors include 
independent workers, who by choice or circumstance, are not 
tied to a traditional employment arrangement, and who may earn 
their income from multiple sources.

      The Increase in Alternative or Independent Work Arrangements

    Anyone who engages in social media, reads the news or 
participates in a ride sharing service has recognized the rise 
of workers in the nontraditional workforce. They are sometimes 
referred to self-employed, free-lancers, independent 
contractors or workers in the shared, on-demand or gig economy 
(collectively referred to as ``independent workers.'') 
According to one study, independent workers have risen by 9.4 
million over the last decade. \1\ These workers include not 
only recent graduates but also workers displaced by 
unemployment and workers who have retired from traditional 
employment. According to the Aegon Retirement Readiness Survey 
2016: Retirement Preparations in a New Age of Self-Employment, 
94 percent of those surveyed cite positive reasons for becoming 
self-employed. \2\
---------------------------------------------------------------------------
    \1\  Katz, Lawrence F., and Alan B. Kreger. The Rise and Nature of 
Alternative Work Arrangements in the United States, 1995-2015. Rep. 
Princeton University, 29 Mar. 2016. Web.
    \2\  The Aegon Retirement Readiness Survey 2016: Retirement 
Preparations in a New Age of Self-Employment https://www.aegon.com/
contentassets/989fa61f841d42b6957e39cf3183dba3/united-states-self-
employed-retirement.pdf also notes 56 percent of self-employed workers 
surveyed in the U.S. indicate that they expect to retire after age 65 
or never, and have a median personal income of $46,000.

    Independent workers are effectively a small business, e.g., 
a sole proprietorship with no workers aside from the ``owner.'' 
According to the U.S. Small Business Administration, the number 
of small businesses in the United States has increased 49 
percent since 1982. Since 1990, as big business eliminated 4 
million jobs, small businesses added 8 million new jobs. Small 
businesses (fewer than 500 employees) represent 99.9 percent of 
the total firms and 48 percent of the private sector workforce 
in the United States. \3\
---------------------------------------------------------------------------
    \3\  U.S. Small Business Administration, Frequently Asked 
Questions, June 2016 https://www.sba.gov/sites/default/files/advocacy/
SB-FAQ-2016--WEB.pdf

    Expanding retirement plan coverage among independent 
workers and other small businesses is critical to enhancing 
Americans' retirement security.

                           Need for Benefits

    The rise in the number of independent workers has begged 
the question of how these workers can efficiently access 
benefits traditionally provided in the workplace or through 
membership in a union or trade guild. Benefits most commonly 
offered in the workplace include retirement, life insurance, 
disability and healthcare. These benefits are often pre-
selected by the employer and offered on a group basis, with 
group (or discounted) pricing.

    The workplace retirement savings system has succeeded in 
serving as the preferred method of saving for retirement for 
millions of workers. With the benefits of saving in an 
employer-sponsored plan governed by the Employee Retirement 
Income Security Act, as amended (``ERISA'') (e.g., investment 
education, the potential for employer contributions, and 
fiduciary oversight), combined with the convenience of 
automatic payroll deduction, Americans are far more likely to 
save for retirement through participating in a workplace-
sponsored retirement plan than through alternate savings 
structures. According to research from nonprofit Transamerica 
Center for Retirement Studies (TCRS), 89 percent of workers who 
are offered a 401(k) or similar plan are saving for retirement, 
either through the plan and/or outside of work, compared to 
just 49 percent of workers are not offered such a plan. \4\
---------------------------------------------------------------------------
    \4\  Transamerica Center for Retirement Studies (``TCRS''), 18th 
Annual Retirement Survey of American workers, 2017. TCRS is a division 
of Transamerica Institute (``The Institute'') a nonprofit, private 
foundation. The Institute is funded by contributions from Transamerica 
Life Insurance Company and its affiliates may receive funds from 
unaffiliated third parties. For full survey methodologies, see 
www.transamericacenter.org

    Policymakers, academics and business have increasingly 
studied not only the independent worker, but also the impact of 
the rise of an independent workforce lacking efficient access 
to retirement savings plans on government programs and the 
economy. \5\
---------------------------------------------------------------------------
    \5\  See The Aspen Institute Future of Work Initiative: Portable 
Benefits in the 21st Century--Shaping a New System of Benefits for 
Independent Workers by David Rolf, Shelby Clard, and Corrie Watterson 
Byrant (2016) Also, see S. 1251/ H.R. Senator Warner (D-VA) in the 
Senate and by Rep. DelBene (D-WA) in the House that would provide a 
$20M fund for the Dept. of Labor to use for grants to states and 
localities that develop workable programs providing portable benefits 
to gig economy workers. Following is a link to Warner's press release: 
https://www.warner.senate.gov/public/index.cfm/
pressreleases'ID=73DA2EF1-FD4E-4397-9B7C-D24B1843A29A and to the bill 
(S. 1251/ H.R. 2685): https://www.Congress.gov/115/bills/s1251/BILLS-
115s1251is.pdf
---------------------------------------------------------------------------

 Open MEPs: a Solution to Providing Retirement Benefits to Independent 
                                Workers

    Open MEPs can provide the benefits of workplace retirement 
plans to the independent worker.

    While the rapid increase in the independent workforce is 
new, the legal structure is not. Independent workers are 
generally sole proprietors or unincorporated entities. \6\ A 
sole proprietor, as well as any independent worker who has 
structured his or her business as a partnership, limited 
liability company or corporation, can set up a qualified 
retirement savings plans through which he or she can save for 
retirement on a pre-tax basis.
---------------------------------------------------------------------------
    \6\  https://www.irs.gov/businesses/small-businesses/small-
businesses-self-employed/sole-proprietorships

    Independent workers, however, are not likely to establish a 
retirement plan for themselves as they generally lack the 
expertise and funds to establish a plan and do not want to 
assume the administrative burden or fiduciary liability of 
---------------------------------------------------------------------------
operating the plan.

    Under an open MEP many independent workers across various 
industries and work arrangements can simply join the MEP and 
thereby establish a workplace retirement savings arrangement 
for themselves, and join their arrangement with others in a 
single plan to achieve economies of scale and avoid the 
administrative burden and liability in running the plan. Under 
a MEP, a named plan fiduciary assumes responsibility for 
operating the MEP in compliance with ERISA, including selecting 
the investment funds for the plan, and a common record keeper 
and plan administrator manage the contributions from various 
sources within the MEP. The result is an effectively managed 
plan, the costs of which are shared by the various employers 
participating in the MEP.

           Mechanics of Covering Independent Workers In a MEP

    Independent workers can participate in a MEP in two 
different ways. First, they can participate the same way that 
any small business participates. As noted, the independent 
worker is effectively a small business that can make 
``employer'' contributions on behalf of the independent worker. 
And the MEP can allow the worker himself or herself to make his 
or her own contributions to the MEP, such as 401(k) 
contributions. In the case of an independent worker, employer 
contributions and employee contributions effectively come from 
the same source--the independent worker--so the only difference 
is how the contributions are designated. In this respect, 
however, the independent worker is treated exactly the same as 
countless other small businesses across the country.

    The second way that independent workers can participate in 
a MEP is through the facilitation of a business that engages 
their services. Assume, for example, that Company X engages the 
services of an independent worker on an ongoing basis. Company 
X cannot cover the worker under its own retirement plan because 
the worker is not an employee of Company X. However, Company X 
could ``make contributions'' to the MEP on behalf of the worker 
in the following manner. For example, assume that the worker 
earns $40,000 in a year from Company X. Company X could do one 
of two things.

         LFirst, Company X could provide an additional 
        percentage, such as 3 percent (i.e., $1,200), and, with 
        the worker's consent, contribute that directly to the 
        worker's MEP. For tax purposes, the $1,200 contribution 
        would be treated just like cash compensation from 
        Company X to the worker: deductible as cash 
        compensation for Company X and taxable to the worker. 
        But the worker could then deduct the contribution to 
        the MEP, just as if the worker had made the 
        contribution himself.

         LSecond, if Company X wants to encourage 
        workers to also contribute for themselves, Company X 
        could base the amount of its contribution to the MEP on 
        the amount the worker contributed for himself through 
        ``payroll deduction'' from the amount due to the worker 
        from Company X. In this case, Company X's contribution 
        would be just like a matching contribution. So Company 
        X could, for example, say that it will match 50 percent 
        of all contributions made by the worker to the MEP, up 
        to 6 percent of the worker's compensation from Company 
        X. So in the above example, if the worker contributes 
        $2,400, Company X will kick in $1,200. Or if the worker 
        contributes $1,000, Company X will contribute $500.

    The structures described above can be designed to function 
in a manner that is exactly the same as any retirement plan 
maintained by a small business. Thus, with or without the 
assistance of the entity hiring the worker, a MEP can provide a 
simple and efficient means for independent workers to 
accumulate retirement savings.

Reforms Needed to Facilitate the Ability of Independent Workers to Join 
                                 a MEP

    Two essential and widely supported reforms are needed to 
facilitate the adoption of MEPs. First, compliant employers in 
a MEP should be protected from liability for the non-compliant 
acts and omissions of other employers in the MEP and the 
resulting disqualification of the entire plan under the 
Internal Revenue Code (the ``One Bad Apple'' rule). Typical 
reasons for non-compliance (jeopardizing the qualified status 
of the plan) include providing insufficient information for 
discrimination testing and other compliance purposes. Under 
existing bi-partisan proposals, the plan fiduciary could expel 
the non-compliant employer from the MEP and preserve the MEP's 
qualified status for the remaining employers in the plan.

    Second, employers without any ``common interest'' should be 
able to join together in a MEP (an ``Open MEP''). Current law 
requires a ``common interest'' or a nexus among employers 
(e.g., working together on other business endeavors) to join in 
a MEP. Elimination of the common interest requirement will 
increase the number of small employers that provide a 
retirement plan for their employees by joining in a MEP, 
including independent workers.

    Transamerica thanks the Chairman of this Subcommittee for 
his continued leadership on reforms to drive coverage, 
including open MEPs. The MEP reforms noted above have long been 
advocated by both Republican and Democrat Members in both 
Houses of Congress. In the 114th Congress, the Senate Finance 
Committee approved in a 26-0 vote the Retirement Enhancement 
Savings Act (``RESA'') containing provisions to permit open 
MEPs and to address the one bad apple rule. It is time to enact 
these MEP reforms, as well as the other provisions of RESA.

                               Conclusion

    Transamerica commends Chairman Enzi and other Members of 
this Subcommittee for their consideration of gig economy 
workers and future of retirement savings. We appreciate the 
opportunity to present our views on the particular challenges 
faced by independent workers in saving for retirement, and the 
open MEP solution.
                                ------                                


                         QUESTIONS AND ANSWERS

 Response by Camille Olson to Questions from Chairman Enzi and Senator 
                                 Scott

    Question 1. As a former financial advisor, I know how 
important portability is in the retirement savings 
conversation--especially as the ``gig economy'' expands. Roth 
IRA and solo 401(k)'s are a great fit for those workers. That 
said, there's an information gap that we need to bridge. A 
recent Intuit report found 44 percent of independent contracts 
aren't saving for retirement at all right now. That's a 
disaster waiting to happen. What can we do to ensure more ``gig 
economy'' workers know about the retirement savings options 
already available to them?

    Answer 1. We believe that providing straightforward 
information and easy access to that information could 
effectively address this issue. The Federal Government can 
become a valuable resource to workers taking advantage of the 
entrepreneurial opportunities and flexibility of the gig 
economy but who are left to solely navigate their own personal 
financial affairs, including saving for retirement, without the 
assistance of a third party such as a full-time employer. We 
recommend that you consider a government-sponsored website that 
provides American workers--not only those in the gig economy, 
but all workers who, for various reasons, want to educate 
themselves on retirement planning--with information regarding 
available vehicles and products for retirement savings, 
particularly those portable options you mention. The 
information provided should be available electronically and 
should be in layman's terms so that it is easy for a worker 
without a financial services or similar background (or without 
the assistance of an employer's human resource department) to 
understand.

    Separately, the Federal Government could publish a short, 
one-page form, containing important information for independent 
workers, including a link to the above-mentioned website 
regarding retirement savings, short summaries of each of the 
options, and lists of other resources for obtaining additional 
information. Another possibility is to include a link to the 
webpage on IRS Form W-9, which is the form independent workers 
use to provide their taxpayer identification number to the 
businesses with which they contract.

    In addition, the companies who contract with these workers 
should be provided the freedom to provide information and 
assistance with respect to retirement savings and planning 
without jeopardizing their operational models. Today those 
companies cannot do so without risk of being found to have 
misclassified these workers because courts and regulators may 
view this conduct as evidence of control and employment status. 
Legislation that removes those barriers--specifically, that 
allows companies to assist in the education, facilitation, and 
administration of retirement savings options for their non-
employee workers without that assistance being held against 
them as an indicia of employment for any Federal, state or 
local purpose--could pave the way for businesses with the 
resources to provide the information and assistance without 
penalty.

    We agree that there is an information gap and believe that 
simplifying the information and making it available to workers 
in a variety of places will improve the retirement savings 
rates for all independent workers in the new economy.

    Question 2. The private sector is coming to the table with 
solutions. Uber, for example, allows drivers to open IRA or 
Roth IRA accounts for free through the Uber app itself. That's 
encouraging at a time when the average South Carolinian only 
has 1 year's salary saved for his or her retirement. How can 
policymakers encourage these kinds of innovations in the 
market--or at the very least not stand in the way?

    Answer 2. The companies that contract with independent 
workers have opportunities to provide information, ready 
access, and additional assistance to help these workers save 
for retirement. The companies have the opportunity to provide 
information directly to these workers, facilitate direct 
transfer of earned fees to retirement vehicles, and may have 
opportunities to facilitate access to this information and 
these services via the apps they already use via their 
provision of services or results to the gig company. However, 
as mentioned above, what could be construed as the facilitation 
or provision of retirement benefits to a worker and therefore 
an indicia of an employer-employee relationship under existing 
law is a major impediment to a company's ability to provide 
retirement information or services to independent workers.

    Legislation that removes the legal barriers--i.e., allows 
companies to assist non-employee workers with saving for 
retirement without creating an adverse inference of 
employment--is key to supporting companies' efforts to make it 
easier for workers to save for retirement. As an example, see 
the California Labor Code's Workers' Compensation and Insurance 
section, which allows companies in certain industries to 
include certain independent contractors in their Workers' 
Compensation program without it otherwise being an indicia of 
an employment relationship:

    Where any employer has made an election pursuant to this 
chapter to include under the compensation provisions of this 
division an independent contractor engaged in vending, selling, 
offering for sale, or delivering directly to the public any 
newspaper, magazine, or periodical, the status of such person 
as an independent contractor for all other purposes shall not 
be affected by such election. \1\
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    \1\  Cal. Lab. Code 4157.

    This language could be instructive to Federal policymakers 
when drafting legislation that provides a similar solution for 
gig economy companies that wish to provide retirement savings 
education and related services to their non-employee workers.
                                ------                                


Response by Vikki Nunn to Questions from Chairman Enzi, and Senator Tom 
                                 Scott

    Question 1. What can we do to ensure more ``gig economy'' 
workers know about the retirement savings options already 
available to them?

    Answer 1. Getting the word out just on the necessity for 
retirement savings would be the first challenge. Saving money 
can be seen as a luxury or an impossibility by many. In 
addition, as our economy is changing, so are the entertainment 
habits of most Americans. Where radio Public Service 
Announcements or even television ads for different brokerage 
firms may have delivered the message about financial 
responsibility and saving for retirement in the past, the 
decrease in radio and network television audiences make it much 
harder to reach large audiences with one message.

    While this message is most important for young workers 
since nothing replaces the time for building retirement 
savings, saving in general is not seen as cool. In the long-
term, encouraging classes in personal finance and even basic 
economics as part of required curriculum could help. In 
addition, the Federal programs used by states to fund business 
development loans and grants could include a compliance 
requirement mandating recipients complete course work on the 
importance of retirement savings. The SBA could have something 
similar and completion of the course might improve application 
standing.

    Out of the current tools available to get the message out, 
the most effective way is to continue to use tax provisions 
that help encourage people to save as they can. This may mean 
lifting the limits on Roth contributions. With gig workers 
having volatile income streams it would also help to raise 
limits in any given year for deferred tax savings. 
Unfortunately for most workers, saving for retirement does not 
become a high priority until later in their work lives. 
Expanding the catch-up provisions to allow for more funds to be 
saved as earnings are higher would also help. Any change or 
even discussion of changes to the tax provisions also provides 
an army of analysts, pundits, reporters and tax preparers that 
can provide news and information on the different strategies 
available. Legislative focus does give the issue more presence 
in our society in general.

    Question 2. How can policymakers encourage these kinds of 
innovations in the market--or at the very least not stand in 
the way?

    Answer 2. The innovation you describe with the Uber app is 
being provided in a way that does not trigger a 
reclassification of the contract workers to employee status. 
While traditional employees have the benefits of mandated 
enrollment meetings and automatic payroll deductions, 
organizations with gig workers have to be very careful to not 
take an action that reclassifies a contract worker into an 
employee. This worry limits communication on many levels. Since 
Uber has a model that is reliant on contract workers, they have 
more formalized orientation and support communication for their 
workers. They are also large enough to litigate if an examiner 
determined that their workers should be reclassified. 
Clarifying and reexamining the employee/contract worker 
guidance would help lessen the risk for employers in providing 
overt recommendations and support to their contract workers. 
Adding the ability for organizations to withhold contractor 
designated retirement contributions from the payments made to 
the contract workers, without that incurring a risk that the 
worker would be reclassified to an employee, would certainly 
help.

    In addition, continuing to encourage free competitive 
market places where organizations can provide options to 
workers that set them apart from other organizations has to 
help. Employers and organizations relying on gig workers are 
competing for the energy of one workforce. Helping members of 
that workforce understand their options and supporting their 
efforts to provide for their futures has to be a competitive 
advantage.

    [Whereupon, at 3:50 p.m., the hearing was adjourned.]

                                   