[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]


              UNLOCKING SMALL BUSINESS RETIREMENT SECURITY

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

                                HEARING

                               BEFORE THE

                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED SIXTEENTH CONGRESS

                             FIRST SESSION

                               __________

                              HEARING HELD
                             MARCH 27, 2019

                               __________

[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
                               

            Small Business Committee Document Number 116-013
             Available via the GPO Website: www.govinfo.gov             
                   
                              
                                __________
                               

                    U.S. GOVERNMENT PUBLISHING OFFICE                    
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                   HOUSE COMMITTEE ON SMALL BUSINESS

                 NYDIA VELAZQUEZ, New York, Chairwoman
                         ABBY FINKENAUER, Iowa
                          JARED GOLDEN, Maine
                          ANDY KIM, New Jersey
                          JASON CROW, Colorado
                         SHARICE DAVIDS, Kansas
                          JUDY CHU, California
                           MARC VEASEY, Texas
                       DWIGHT EVANS, Pennsylvania
                        BRAD SCHNEIDER, Illinois
                      ADRIANO ESPAILLAT, New York
                       ANTONIO DELGADO, New York
                     CHRISSY HOULAHAN, Pennsylvania
                         ANGIE CRAIG, Minnesota
                   STEVE CHABOT, Ohio, Ranking Member
   AUMUA AMATA COLEMAN RADEWAGEN, American Samoa, Vice Ranking Member
                        TRENT KELLY, Mississippi
                          TROY BALDERSON, Ohio
                          KEVIN HERN, Oklahoma
                        JIM HAGEDORN, Minnesota
                        PETE STAUBER, Minnesota
                        TIM BURCHETT, Tennessee
                          ROSS SPANO, Florida
                        JOHN JOYCE, Pennsylvania

                Adam Minehardt, Majority Staff Director
     Melissa Jung, Majority Deputy Staff Director and Chief Counsel
                   Kevin Fitzpatrick, Staff Director
                           
                           
                           C O N T E N T S

                           OPENING STATEMENTS

                                                                   Page
Hon. Dwight Evans................................................     1
Hon. Steve Chabot................................................     2

                               WITNESSES

Ms. Martella A. Turner-Joseph, Founding Partner, Joseph & Turner 
  Consulting Actuaries, LLC, New York, NY, testifying on behalf 
  of the American Retirement Association.........................     4
Mr. Paul F. Davidson, Director, Product Management, Paychex, 
  Inc., Rochester, NY............................................     6
Mr. Greg Gorgone, CFO, Citizant, Inc., Chantilly, Virginia, 
  testifying on behalf of the U.S. Women's Chamber of Commerce...     7
Mr. Keith Hall, President and Chief Executive Officer, National 
  Association for the Self-Employed, Washington, DC..............     9

                                APPENDIX

Prepared Statements:
    Ms. Martella A. Turner-Joseph, Founding Partner, Joseph & 
      Turner Consulting Actuaries, LLC, New York, NY, testifying 
      on behalf of the American Retirement Association...........    24
    Mr. Paul F. Davidson, Director, Product Management, Paychex, 
      Inc., Rochester, NY........................................    31
    Mr. Greg Gorgone, CFO, Citizant, Inc., Chantilly, Virginia, 
      testifying on behalf of the U.S. Women's Chamber of 
      Commerce...................................................    41
    Mr. Keith Hall, President and Chief Executive Officer, 
      National Association for the Self-Employed, Washington, DC.    47
Questions and Answers for the Record:
    Questions from Hon. Troy Balderson to Ms. Martella A. Turner-
      Joseph and Answers from Ms. Martella A. Turner-Joseph......    52
    Questions from Hon. Troy Balderson to Mr. Greg Gorgone and 
      Answers from Mr. Greg Gorgone..............................    54
    Questions from Hon. Troy Balderson to Mr. Keith Hall and 
      Answers from Mr. Keith Hall................................    56
Additional Material for the Record:
    ACLI - The American Council of Life Insurers.................    58
    IRI - Insured Retirement Institute...........................    65
    Small Business Council of America............................    75

 
              UNLOCKING SMALL BUSINESS RETIREMENT SECURITY

                              ----------                              


                       WEDNESDAY, MARCH 27, 2019

                  House of Representatives,
               Committee on Small Business.
                                                    Washington, DC.
    The committee met, pursuant to call, at 11:31 a.m., in Room 
2360, Rayburn House Office Building. Hon. Dwight Evans [vice 
chairman of the committee] presiding.
    Present: Representatives Finkenauer, Kim, Golden, Davids, 
Evans, Schneider, Espaillat, Delgado, Houlahan, Craig, Chabot, 
Kelly, Balderson, Hern, Hagedorn, Stauber, Spano and Joyce.
    Mr. EVANS. [Presiding] The Committee will come to order.
    I want to thank everyone for joining us this morning, and I 
want to especially thank the witnesses for being here today.
    Whether we are working for small or large businesses, a 
not-for-profit, or a sole proprietor, every American deserves 
to retire with security and peace of mind. Unfortunately, far 
too many Americans are facing a crisis: the inability to fully 
retire with dignity in a life after hard work.
    Many of today's workers are nowhere close to having enough 
saved away to ensure a quality secure retirement. In fact, half 
of all American families near retirement have $12,000 or less 
in retirement savings, and one-third have less than $5,000 
savings for retirement.
    What is more, among non-retirees in their 50s and 60s, 1 in 
8 lack any retirement savings and less than half of them think 
their retirement savings are on track, according to the latest 
Report on Economic Well-Being of U.S. Households. Even among 
young workers, saving for retirement remains a struggle or even 
an afterthought. The high cost of an education has made 
retirement readiness more difficult and for some, impossible.
    Given that there are nearly 30 million small businesses 
supporting 56 million jobs, it is imperative that small firms 
have the tools and the resources to set up retirement plans so 
business owners and their workers have financial security. 
However, when over half of all small businesses do not have a 
retirement plan set up, we know that more work needs to be 
done.
    In addition to serving as the Vice Chair of the Committee--
and I just said to the Ranking Member, no, I am not Chairwoman 
Velazquez, but she is the Chair--I serve on the Ways and Means 
Committee. Last month, we had a hearing on improving retirement 
security where I had the opportunity to talk about the vitality 
of this issue with small businesses being able to provide 
retirement benefits to their employees, and also explore some 
of the obstacles facing small businesses and providing this 
benefit.
    In my home state of Pennsylvania, we have nearly 1 million 
small businesses employing 2.5 million workers, accounting for 
46.7 percent of the workforce for the entire state. Small firms 
account for 99.6 percent of my state employers. Needless to 
say, small businesses are the drivers in our community.
    In order for these small businesses to remain competitive 
and to continue to be the economic innovative drivers they are, 
they must be able to offer substantial benefits to their 
employees. One of the barriers for the small firms is the cost 
of setting up a plan along with the cost of administering and 
maintaining the plan.
    Small firms face the ongoing fiduciary duties, such as 
reviewing investment, running discrimination tests, all while 
trying to run a business. Needless to say, the process can 
become burdensome and costly rather quickly. And if the small 
employer faces too many challenges, they may ultimately feel 
the burden of providing a retirement plan unfortunately 
outweighs the benefits. Understanding these challenges can help 
us better address the solutions to low participation rates 
among small entities. One approach may be to offer tax 
incentives to small business owners who choose to sponsor a 
plan.
    Another way is to increase plan participation to allow 
small firms to band together to offer retirement plans, which 
could lead to administration savings and reduce the fiduciary 
responsibility. And making it easier for employees to 
automatically enroll in retirement plans could encourage small 
businesses to save for their retirement.
    These and other issues merit further discussion. But what 
is absolutely clear is we must act soon to help small 
businesses, their employees and entrepreneurs plan for their 
future. For this reason, we need to make sure that retirement 
plans are attractive for small businesses as their retirement 
saving is an integral part of our Nation's future.
    And that is why we are here today. The hearing will examine 
the options for small employers, the benefits and barriers they 
face in offering plans and options for expanding coverage. It 
will allow the opportunity to discuss the current vehicles that 
many small businesses use to provide retirement benefits in 
ways which they can improve upon.
    With the proper tools, America's small firms can help to 
create financial security for themselves and their workers.
    With that, I thank each of the witnesses for joining us 
today, and I look forward to their testimony.
    I would like to yield to the Ranking Member, Mr. Chabot, 
for his opening statement.
    Mr. CHABOT. Thank you very much, Mr. Chairman. And I know 
you will do everything in your power to live up to the high 
standards set by Chairwoman Velazquez. And I am sure you are up 
to the task.
    Planning for the future, preparing for what is ahead, and 
creating a roadmap for success are cornerstones for virtually 
every small business in America. These phrases guide day-to-day 
decision making and help determine long-term strategy. They 
also mark the fundamental basics of retirement security for 
both small business owners and small business employees across 
the nation. Unfortunately, saving for retirement is not only a 
challenge for most individual Americans, it has also proven to 
be problematic for many small businesses. As a result, some of 
the Nation's smallest firms and their employees are sitting on 
the sidelines when it comes to saving for the future.
    According to the U.S. Department of Labor, 66 percent of 
all businesses provide retirement benefit options to their 
employees. Unfortunately, that means that nearly one-third of 
all private sector workers are not given an opportunity to 
participate. Acknowledging the challenges that many Americans 
have in saving for the future, President Trump signed an 
Executive Order last August to help small businesses reduce 
costs and burdens associated with retirement benefits. A key 
part of that Executive Order was the expansion of multiple 
employer plans that provide individual employers the 
opportunity to band together to offer options to their 
employees. As we await final guidance on the expansion of this 
program, I look forward to today's hearing exploring some of 
the challenges facing small businesses as they navigate the 
retirement landscape.
    Additionally, I am looking forward to hearing from our 
witnesses about what Congress can and should do in order to 
jumpstart savings. As a larger and larger segment of our 
population grows into retirement age and we are living longer, 
we must make it a priority to provide small businesses with a 
menu of retirement options for their employees.
    And again, I want to thank you, Mr. Chair, and I yield 
back.
    Mr. EVANS. I would like to thank the Ranking Member.
    I would like to explain to you the rules. I would like to 
take a minute to explain. Each witness gets 5 minutes to 
testify and members get 5 minutes for questioning. There is a 
lighting system to assist you. The green light comes on when 
you begin, and the yellow light means there is 1 minute 
remaining. The red light comes on when you are out of time, and 
we ask that you stay within the timeframe to the best of your 
ability.
    To a very good friend of mine, I would like to yield to Mr. 
Espaillat from New York to introduce our first witness.
    Mr. ESPAILLAT. Thank you, Mr. Chairman. And I want to take 
this great opportunity to introduce our first witness, Ms. 
Martella A. Joseph. Ms. Joseph is a distinguished and 
successful small business owner from my congressional district 
in Harlem. Ms. Joseph is a co-founder and partner of Joseph and 
Turner Consulting Actuaries, LLC. She is an enrolled actuary 
certified by the Joint Board of the Enrollment of Actuaries. 
Ms. Joseph has over 25 years of experience in the field of 
retirement planning consulting. She specializes in defined 
benefit plans and defined contribution plans and she provides 
consulting services in the area of planned assigned funding and 
administration for a variety of businesses, as well as self-
employed individuals. In fact, Ms. Joseph, your office is just 
six blocks away from my Harlem office, and I wanted to take 
this opportunity to welcome you to the panel.
    Mr. EVANS. Thank you. I am going to introduce the rest of 
the panel.
    Our second witness is Mr. Paul Davidson. Mr. Davidson is 
the director of project management at Paychex, Inc., where he 
started the retirement service division with nothing more than 
the belief, that savings for retirement should an employee 
benefit access to all. Thank you, Mr. Davidson, for overseeing 
the retirement plan service division at Paychex, administrating 
more than 77,401 plans with a concentration on small plan 
market, Paychex simplifies and minimizes the administrative 
burden for the employer, allowing businesses to offer employees 
state of the art retirement. Welcome, Mr. Davidson.
    Our next witness is Mr. Greg Gorgone. Right? Did I get that 
correct? Gorgone. I apologize. Mr. Gorgone oversees all 
accounting, finance, HR, recruiting, contracting functions, and 
support of Citizant's growth and strategic plans. In his role, 
he provides strategic counseling, integrated planning, due 
diligent leadership in support of business acquisition. During 
his tenure, Mr. Gorgone has overseen major recapitalization, 
refinancing efforts, and was instrumental in developing the 
company's financial management. I would like to welcome you, 
Mr. Gorgone.
    I would like to yield to our Ranking Member, Mr. Chabot, to 
introduce our final witness.
    Mr. CHABOT. Thank you, Mr. Chairman.
    I would like to introduce Keith Hall. Mr. Hall is the 
President and Chief Executive Officer of NASE, the National 
Association for the Self-Employed. With 50,000 members, NASE is 
one of the nation's leading authorities and resources for the 
country's self-employed and microbusinesses. With a membership 
consisting of both service-oriented and information-oriented 
businesses, NASE offers resources to help the nation's smallest 
firms navigate the legal, tax, health, and retirement 
challenges that they face. Prior to serving as NASE's top 
executive, Mr. Hall was the organization's Chief Operating 
Officer, Chief Financial Officer, and its National Tax Advisor. 
And we welcome you here this morning, Mr. Hall. Thank you.
    Mr. EVANS. Thank you.
    Ms. Turner-Joseph, we would like to recognize you for 5 
minutes.

  STATEMENTS OF MARTELLA A. TURNER-JOSEPH, FOUNDING PARTNER, 
 JOSEPH & TURNER CONSULTING ACTUARIES, LLC; PAUL F. DAVIDSON, 
DIRECTOR, PRODUCT MANAGEMENT PAYCHEX, INC.; GREG GORGONE, CFO, 
   CITIZANT, INC; KEITH HALL, PRESIDENT AND CHIEF EXECUTIVE 
      OFFICER, NATIONAL ASSOCIATION FOR THE SELF-EMPLOYED

             STATEMENT OF MARTELLA A. TURNER-JOSEPH

    Ms. TURNER-JOSEPH. Good morning. I would like to thank 
Chairwoman Velazquez, and Ranking Member Chabot, for the 
opportunity to speak with you about how to achieve a secure 
retirement for small business owners and their employees.
    My name is Martella Joseph, and I am an enrolled actuary. 
My husband, Eugene Joseph and I are co-founders of Joseph and 
Turner Consulting Actuaries, LLC, located in Central Harlem, 
New York City. Joseph and Turner Consulting Actuaries, LLC, 
provides actuarial, consulting, and plan administrative 
services for retirement plans covering thousands of 
participants, and we specialize in small business plans. The 
average size of our plans is roughly anywhere between 10 to 20 
plan participants.
    I am a member of the American Retirement Association and 
served on the Board of Directors for 12 years. The American 
Retirement Association represents more than 25,000 retirement 
plan professionals nationwide from actuaries like myself to 
consultants, administrators, financial advisors, attorneys, and 
accountants. Our members provide consulting and administrative 
services to millions of American, savers and retirement plan 
sponsors. Our mission is to help American workers strengthen 
their retirement security through workplace retirement plans, 
particularly for small businesses.
    For most Americans, particularly those with moderate 
income, the key to a successful retirement is having access to 
a workplace retirement plan. These plans particularly benefit 
the middle class. Studies have shown that 66 percent of active 
participants in 401(k) and other profit sharing plans have an 
adjusted gross income of less than $100,000. And of these, more 
than half have income of $50,000 or less. Most importantly, 
workers earning between $30,000 and $50,000 are 12 times more 
likely to save for retirement through payroll deduction in a 
workplace retirement plan than on their own in an IRA.
    Despite the success of the private retirement system, the 
American Retirement Association recognizes that far too many 
American workers still lack access to a workplace retirement 
plan, particularly those working for small businesses. 
Fortunately, there are easy and impactful ways that Congress 
can take action to increase the availability of workplace 
retirement plans. We strongly urge Congress to enact the 
Retirement Enhancement and Savings Act (RESA) as quickly as 
possible, along with additional legislation to drive greater 
access to workplace retirement plans, as well as enhance the 
overall experience for those currently participating in the 
system. RESA includes several provisions that when taken 
together will make a considerable, easier for small businesses 
to adopt and maintain a workplace retirement plan.
    It has been far too long since comprehensive retirement 
legislation has been enacted. Since the last such legislation, 
the Pension Protection Act of 2006, the retirement marketplace 
has continued to innovate by offering new and lower cost 
retirement-related products, financial wellness tools, and 
improved decumulation strategies. However, public policies that 
could promote more innovation in the retirement arena have not 
kept pace. The passage of RESA would certainly be a step in the 
right direction.
    In addition to RESA, we also support Chairman Richard 
Neal's legislation to further encourage businesses to offer 
their employees access to a payroll deduction savings program.
    And I see that my time is running out so I will cut this 
short by saying that Chairman Neal's Automatic Retirement Plan 
program and his Auto IRA program are two pieces of legislation 
that will be very, very helpful for small businesses to start 
retirement plans that act kind of like training wheels on a 
bike where employers can get used to implementing a workplace 
retirement saving program with no required contributions.
    I will finish by saying, again, thank you for having me 
here to discuss this topic, and I will be happy to answer any 
questions.
    Mr. EVANS. When I go back to the meeting I will make sure I 
mention that to Mr. Neal.
    Mr. Davidson?

                 STATEMENT OF PAUL F. DAVIDSON

    Mr. DAVIDSON. Congressman Evans, Ranking Member Chabot, and 
members of our Committee, good morning, and thank you for the 
opportunity to testify today.
    My name is Paul Davidson. I am the direct of product 
management at Paychex. I have worked in the small business 
retirement space for over 30 years and believe retirement 
security is a critical issue facing our country. I applaud the 
work that Congress and this Committee are doing to try to 
address the challenges many small business owners and employees 
face when it comes to saving for retirement.
    Paychex is a leading provider of payroll, benefits, human 
resources, and insurance services. Paychex serves over 650,000 
small business payroll clients and pays one out of every 12 
American private sector employees. With an average client size 
below 20, most of our customers are true ``mom and pop'' 
businesses.
    Paychex now administers more than 80,000 401(k) plans for 
small businesses. Last year alone we worked with over 14,000 
small businesses to start new retirement plans.
    While we are very proud of that accomplishment, to this 
day, over 70 percent of Paychex's small business payroll 
clients do not offer a retirement plan benefit. As the 
Committee well, knows, while the retirement crisis impacts all 
types of American employers and employees, it has a 
disproportionate impact among small businesses. According to a 
Paychex small business survey, more than half of small business 
owners do not have a formal retirement savings program at their 
business. At the same time, 69 percent of small business owners 
in our research declared zero to little financial preparedness 
for their retirement.
    Our current policies put heavy responsibility on the small 
employer if they offer a qualified plan. They can either pay an 
extra 3 percent of payroll into the plan to get assurance of a 
safe harbor, or they can leave themselves vulnerable to 
compliance testing. If they become out of compliance, which is 
easy to do with a small number of employees, they often face 
large, unexpected and unbudgeted costs.
    We believe there are a variety of policy changes that could 
be made that would significantly increase the number of small 
businesses able to offer retirement plans to their employees. 
Congress has begun taking action, and I believe many of the 
proposals are steps in the right direction. For example, the 
Retirement Enhancement and Savings Act (RESA) makes a variety 
of changes that would be helpful to small businesses, such as 
an increased tax credit. Senators Portman and Cardin also have 
been working on bipartisan legislation, and the Ways and Means 
Chairman, Richard Neal, has been a leader in this space. And, 
of course, we commend this Committee for making retirement 
security a priority and for ensuring that small businesses are 
at a critical part of the conversation and the solution. In 
addition, much of the good work that is going on in Congress in 
the space, we believe there are additional steps that could 
have an even more dramatic impact.
    When we discuss retirement plans with our small business 
customers, the obstacles to our plans really come down to three 
areas--complacency, complexity, and cost. It is important that 
we do not segregate American workers by the size of the company 
they work for. Our existing policies have achieved maximum 
penetration in the large and midsize market. Now, we need to 
focus on lowering the burden to the employer so all workers, 
even those at small companies, can save for dignified 
retirement.
    I believe you could dramatically increase the number of 
small businesses offering retirement plans if you address each 
of these head on. Here are a few things I would recommend:
    Provide a safe harbor that does not require a match. Why do 
we make the employer pay to have his employees safe?
    Allow small businesses to outsource some of the fiduciary 
responsibility to professionals. Do not make the small business 
owners become legal experts.
    Make all employees immediately eligible for the plans. 
Require automatic enrollment in the plan. This would ensure 
wide participation and alleviate the need for our complex 
compliance testing today.
    These changes would eliminate the need for top-heavy 
compliance and coverage testing when the business would know 
the cost at each payroll and would not be surprised by cost 
driven from a compliance failure. As a result of these changes, 
small businesses would be able to offer a plan that was 
simpler, less expensive, and more accessible to employees.
    In closing, most small businesses that we meet with want to 
offer an employee benefit retirement plan. However, once they 
consider the cost and the regulatory burdens, many choose not 
to move forward. Making it simpler, easier, and less expensive 
for small businesses to offer retirement savings programs for 
employees is sound public policy and the right thing to do for 
American small businesses and workers, allowing all Americans 
to save for a dignified retirement.
    I thank the Committee for their leadership on small 
business retirement issues and for the opportunity to 
participate in the discussion today.
    Mr. EVANS. Thank you, Mr. Davidson.
    Mr. Gorgone, you have 5 minutes.

                   STATEMENT OF GREG GORGONE

    Mr. GORGONE. Vice Chairman Evans, Ranking Member Chabot, 
and members of the House Small Business Committee, thank you 
for the opportunity to speak today.
    Small businesses employ approximately 47.5 percent of all 
private sector employees and face a myriad of challenges when 
it comes to offering retirement plans. In a study published by 
the PEW Charitable Trust in January 2017, they found that 71 
percent of small business owners surveyed stated that it was 
too expensive to set up a retirement plan, 63 percent stated 
they did not have the resources to administer a plan, and 50 
percent stated their employees did not want a retirement plan.
    While it is certainly true that employees of small 
businesses that do not offer retirement plans have retirement 
options available in the form of IRAs, the incentives to IRAs 
pale in comparison to a 401(k). The current maximum deferral 
for an IRA is $6,000 a year, compared to $19,000 a year for a 
401(k). Furthermore, employees working for small businesses not 
offering a 401(k) are missing out on employer contributions, 
which could be as much as 50 percent of the funds set aside for 
retirement.
    Additionally, participation in an IRA requires a level of 
self-discipline requiring employees to manually put funds into 
an IRA versus automatic payroll deductions.
    Small businesses not offering retirement plans are at a 
distinct disadvantage competing for talent. Prospective 
employees are more likely to take jobs with firms that offer 
retirement plans. The inability to attract a top-notch 
workforce stunts growth for small business.
    In an August 2017 article published by People Keep, the 
author noted that the number of workers for whom retirement 
programs is an important benefit is near 70 percent.
    My employer, Citizant, was unable to offer any form of 
retirement plan to its employees for the first 4 years of 
operation. Only when it was generating roughly $4 million of 
revenue and had 50 employees could it afford a retirement plan.
    Small businesses that offer retirement plans face the 
challenge of increasing employee participation. The most often 
cited reason for nonparticipation in retirement plan is 
financial. Employees cannot absorb the reduced household cash 
flow. Many are forced to prioritize the need for health care 
over retirement savings. This is especially true with lower 
income levels, and due to the complex rules of 401(k)s the 
nonparticipation of lower income employees negatively impacts 
the ability for higher income employees to defer the maximum 
amounts.
    Recently, we have noticed a trend amongst the more highly 
compensated employees in their 20s and 30s. Faced with a large 
student debt payment, this latter group struggles to make ends 
meet and cannot service their debt and save for retirement at 
the same time. They, too, are missing out on employer 
contributions that might be available.
    The IRS, in a 2018 private letter ruling, granted a 
taxpayer permission to modify its 401(k) to allow it to make 
contributions on behalf of an employee provided the employee 
was making student loan payments. Under this ruling, employees 
can receive retirement contributions just as if they are 
participating in the 401(k). This benefit should be provided to 
all employees of all companies, small and large.
    Other recommendations mentioned by members of the U.S. 
Women's Chamber of Commerce in a recent survey to incentivize 
and assist small businesses to offer retirement benefits 
include allow multiple small businesses to pool their resources 
to form and administer shared multi-employer 401(k) plans 
managed by experienced 401(k) plan providers; create greater 
tax incentives for small businesses to mitigate the cost of 
setting up and administering retirement plans; simplify the 
requirements and administration and legal reporting 
requirements for plans offered by small businesses; reduce the 
need for third-party administrators all together; allow self-
directed investment management through vehicles like exchange-
traded funds and promote investment vehicles that do not 
contain additional layers of fees which reduce the retirement 
savings benefits; incentivize employee savings and use of 
retirement plans by providing an easy, flexible, low-cost, low-
fee small business sponsored investment plan.
    Thank you for your support of American small businesses. I 
encourage you to help incentivize small business owners to 
provide strong, affordable retirement benefits for small 
business owners and their employees.
    Mr. EVANS. Thank you, Mr. Gorgone.
    Mr. Hall, you have 5 minutes.

                    STATEMENT OF KEITH HALL

    Mr. HALL. Thank you, Vice Chair Evans, Ranking Member 
Chabot, members of the Committee. I also say thank you for 
holding this hearing. You can tell by just looking at me 
already that this is a topic that I am extremely interested in 
because I am getting ready for that as well.
    I wish this Committee has pushed this subject when I was 
25, rather than I am at the age that I am now. So thank you so 
much for doing this. I think this is very important.
    We represent the 30 million self-employed business owners 
in this country. We estimate that number to be about 50 million 
by 2025. To put that in perspective, and I know I am kind of 
speaking to the choir here but to put that number in 
perspective, the IRS process is about $150 million tax returns 
a year. So by 2025, one out of every three of those tax returns 
will have a small business attached to it. So helping those 
small businesses manage their own businesses help grow the 
economy is very important. And I think the retirement issue is 
becoming more critical to them.
    Now, I hate going last because I end up just saying I agree 
with everyone else, so I have a bunch of the same statistics 
that other people have talked about so I do not want to bore 
you with all those numbers again. But one additional statistic 
that I would add is that the AARP--I do not even want to tell 
you why I know about the AARP--but the AARP, they say that in 
the next 15 years that about 18 percent, one in five retirees 
will retire with more debt than savings. And that hurts my 
heart. I wish there had been someone like us, you know, 
grabbing the back of my neck when I was 25, telling me to start 
saving. And I think that is what we are here to do. To be 
honest, I struggle a little bit with what we can do because I 
do believe in my heart at some point people just have to do it. 
You have got to start putting money away for savings. I hate 
showing a problem without offering some solutions, so I do have 
three things that I know I want to concentrate on, and I would 
ask you to concentrate on them as well.
    Number one is just awareness. This hearing is a great first 
step. Getting people to be aware that you are not always going 
to have the job you have. You need to put some money aside. If 
you believe the Social Security System is going to be available 
for you when it is your time, some of the younger people in the 
room, I worry about that as well. So providing these surveys, 
the AARP survey, the Pugh Charitable Trust Survey, lots of 
people are doing surveys. The more information we can put out 
there I think the better. I think that is a critical first 
step. So thank you for this part.
    The second thing is education. And I think this is where 
this Committee, where you guys, where people like me who work 
with associations of small business people can come in to play 
and that is education. Teaching people what they need to put 
away. How they need to put it away. I think we can bring some 
pressure or encouragement, whichever word we want to use, on 
the Small Business Administration, Small Business Development 
Centers, local universities to do seminars, webinars, encourage 
them to add this topic to their important list of things that 
people need to know about. Now, awareness and education, those 
kind of all fee good but, you know, what does that mean I do on 
Thursday morning? That is a little more difficult.
    The third thing is kind of what you have heard from some 
other members here, and that is concentrate on simplifying the 
options for small business. I think everyone agrees that one of 
the big hurdles that small businesses face are the cost of 
implementing a plan. If we can help them with multiple employer 
plans, reduce the cost, you can imagine a nationwide or a 
statewide plan that small businesses could join that have joint 
investment options, joint choices, the fees could be lower. If 
they could then add their five employees to someone else's five 
employees, I think there are lots of creative people out there 
that can put together that concept to make a difference for 
retirement plan options. I think adding some of the things that 
Paul had talked about, reducing some of the Safe Harbor 
requirements, reducing some of those matching requirements so 
that that small business owner who just has five employees, 
that they want to help save for retirement but really cannot 
afford a profit sharing match or a 3 percent match, give them 
an opportunity to put the plan in place without some of those 
extra mandates. I think there are lots of options.
    So I think awareness, education, and then making it simple 
always, I think that is where we really need to put all of our 
efforts.
    And thanks again for allowing me to be here. Thanks for 
raising this issue to the top, and I appreciate what you guys 
do. So thank you.
    Mr. EVANS. Thank you, Mr. Hall.
    I know that the Chairwoman, if she was here, she would 
definitely tell you that she gives you kudos and all of you for 
what you have said. So I know that she felt very strongly about 
this hearing and the importance of this hearing.
    Mr. Gorgone, last month I met with members of the 
Pennsylvania Small Business Center. One of the concerns they 
brought to my attention was that young entrepreneurs are facing 
great difficulties starting businesses due to student loan 
debt. As a small business owner, I know you care deeply about 
your employees and want to make sure they take every step to 
ensure a quality retirement for them. However, many young 
workers are faced with the choice of saving for retirement or 
paying off student debt. Can you, and I heard in your 
testimony, highlight some of the steps Congress can take? And 
can you expand on these that will address the challenges of 
young workers? Mr. Gorgone?
    Mr. GORGONE. Thank you, Vice Chairman.
    I think the number one thing that I would like to see 
Congress do to help the person paying off student debts is just 
to give them the opportunity to participate in a 401(k) without 
them personally having to put money into it. Allow an employer 
to match the amount that they pay for their student loan as if 
it was a 401(k) contribution. Allow the employer to match that 
amount up to their internal 401(k) plan into a 401(k) for that 
employee. It gives them something which is better than nothing. 
Beyond that I think there are other areas that we can research 
and get back to you on through the Women's Chamber of Commerce. 
I do not have any other fresh ideas right now.
    Mr. EVANS. Well, I want you to hold your thought because I 
am going to go to you and to Ms. Turner-Joseph. I feel that it 
is our job to do what we can do to help small businesses be 
competitive. A large part of remaining competitive is being 
able to attract talent and the ability to offer substantial 
benefits is critical. To both of you, in terms of recruiting 
and retaining employees, do you find that having a retirement 
plan is something that employees consider when choosing where 
to work? I will start with you.
    Mr. GORGONE. I think the question to that is an absolute 
yes. We have seen it in the studies where 70 percent of the 
workforce believe retirement is an important benefit. 
Fortunately, my company does offer a retirement plan, but we 
see people making choices between how good is your retirement 
plan versus how good is somebody else I may be talking to. You 
offer a 3 percent match. They might offer a 5 percent match. So 
retirement benefits are a crucial part of the equation when 
prospective employees are making decisions of where to work.
    Mr. EVANS. Ms. Turner-Joseph?
    Ms. TURNER-JOSEPH. Thank you, Mr. Chairman.
    If I may, I would like to go back to the question that you 
asked about student loans and those who are having problems 
paying off student loans as well as saving under the retirement 
program. I think one thing that could be added, I know there is 
legislation out there pertaining to having plan participants 
get a matching contribution on their student loan and I think 
that is a wonderful move. But what you can do also to motivate 
employers to want to participate in this program is allow the 
student loans that are being matched to be considered in the 
testing for the nondiscrimination rules for the elective 
deferrals. And also have the matching contributions being 
tested in the test for matched contributions. That will be a 
big incentive for employers to want to participate in this 
program because they are providing benefits for their plan 
participants and also it is helping the plan, and I think that 
is a good exchange.
    Do I have time to answer? Okay.
    As far as whether or not employees look at retirement 
benefits when they are making decisions about employment, yes, 
the retirement program is one of the things that employers use 
to attract the best out there as far as available employees and 
the employees do look at pension benefits when they are 
comparing employers as to where to work.
    Mr. EVANS. Thank you. My time has expired. I am going to 
yield to the Ranking Member, Mr. Chabot, who is recognized for 
5 minutes.
    Mr. CHABOT. Thank you very much, Mr. Chairman.
    Mr. Hall, I will begin with you if I can. I briefly 
mentioned early on President Trump signed an executive order 
last August that aims to expand retirement benefit options to 
small businesses, and in your written testimony you mentioned 
it several times. And since you gave your written testimony I 
do not think you went into it here. But if you could share with 
us why you believe that that expansion, the multiple employer 
plans could actually make a difference if it were implemented.
    Mr. HALL. Thank you for the question.
    The main reason I believe that it could certainly make a 
difference is because of the cost of entering into the field of 
play. I think many small businesses, and I think T. Rowe Price 
actually in their survey mentioned that less than half of self-
employed people currently are saving for retirement. And if a 
self-employed person has four employees, they are not saving 
for employment. They are probably not offering a plan for their 
employees either. And mostly the reason they are not is because 
it is expensive to have a plan. It is complicated to have a 
plan. They have to worry about testing. They have to worry 
about compensation limits, safe harbors, and it just gets 
expensive. And I think the multiple employer plan has an 
opportunity to reduce that cost. I am certainly not creative 
enough to figure out the plan but the thing I believe I would 
love to see is a plan sponsored by a state, by T. Rowe Price, 
maybe joint partnerships, some plan. And there is a nice model 
out there with association group health plans from the past 
that a small employer who has got five employees can just say I 
want to be part of this 401(k) plan and sign up. Costs are 
reduced. They have got lawyers in place. They have got testers 
in place. They have got actuaries. They have got CPAs. Their 
employees can just sign a piece of paper and say start 
withholding 4 percent of my pay, send it to Paychex. They get 
reduced tax for it and they are starting saving for their 
retirement. And now the small business owner has adopted a 
plan, they are saving for themselves, they are helping their 
employees save, which I think is what we are trying to get 
accomplished here. And if the MEPs can reduce that cost, then 
by definition it has already made a tremendous difference.
    Mr. CHABOT. Okay. Thank you very much.
    Ms. Turner-Joseph, if I could go to you next. What would 
you say is the number one retirement issue that small 
businesses come to you with, and what do you tell them when 
they come to you with that problem?
    Ms. TURNER-JOSEPH. The number one issue that employers 
present to me is the fear of sponsoring a plan and the 
responsibility that comes with sponsoring a plan. Because of 
the job that I do, I am able to alleviate that fear for them 
most of our clients are small and we do a lot of handholding. 
So, we walk them through what they have to do, what 
responsibility we are able to take off their shoulders and do 
it for them. And once we have completed the job, we sit them 
down and explain to them what is being done. So, education and 
understanding the process is half the problem. And having 
someone with them, which I consider myself with them, to walk 
them through the process and let them realize that I have got 
their back, so to speak, it makes it a lot easier.
    Mr. CHABOT. Thank you very much.
    Mr. Gorgone, let me go to you next, if I can.
    As was mentioned here by somebody before, Americans tend to 
oftentimes now--in the past maybe they graduated or whatever, 
worked for this company and worked with them or maybe two 
companies their entire life. Nowadays, people tend to move 
around and work for various companies and entities, and 
oftentimes, they have got a retirement plan there or they have 
set up an IRA and then their spouse has an IRA and then maybe 
when ROTH IRAs came they are thinking about the tax 
consequences. They have got all these different things. And 
what would you recommend or what are people doing nowadays when 
they have all these different things to figure out, you know, 
well, I am 65 or I am going to be 70, and if I do not start 
taking certain stuff by then there are penalties. You know, 
what do you recommend people do, and is there anything we can 
do to simplify this whole process for them?
    Mr. GORGONE. I think one of the things I would recommend 
that people do is as they change jobs throughout their careers 
they continue to move their retirement with them. When you have 
8, 9, 10 different retirement plans, tough to keep track of 
what you have got and where it is and how much it is.
    Mr. CHABOT. Can they combine them into one entity at this 
point?
    Mr. GORGONE. You can roll them over from one employer to 
another.
    Mr. CHABOT. Even the IRAs and things which they have set up 
individually or not?
    Mr. GORGONE. I would have to defer to a tax expert to 
answer that question, but I believe an IRA can be rolled over.
    Mr. CHABOT. I see some nodding of heads, both in the 
audience and here. So I am going to----
    Mr. GORGONE. So the key to the second part of your question 
is knowing how much they have available to them and then 
planning the rest of their lifetime, how much money, how long 
is that going to last them to start taking out the withdrawals 
at the appropriate times in their retirement age, but the key 
is knowing how much you have got and having it in one place 
goes a long way to getting there.
    Mr. CHABOT. As Mr. Hall mentioned before, as I get older 
these issues I am raising are becoming less theoretical and 
more personal.
    So anyway, I yield back, Mr. Chairman. Thank you.
    Mr. EVANS. Thank you, Mr. Chabot.
    The next person is the Chairwoman of the Subcommittee on 
Rural Development, Agriculture, and Trade and Entrepreneurship, 
Ms. Finkenauer.
    Mr. FINKENAUER. Thank you very much, Mr. Chair. And thank 
you to our Ranking Member and our great guests here today.
    This is an incredibly important topic, and I know Mr. 
Chabot talked about how this is personal for him, and I have 
got to tell you, as a young woman who got elected to Congress 
at 29 and now I am 30, I have a lot of friends that I grew up 
with in Iowa where this is very personal to them as well.
    The idea and the discussion around retirement right now, 
especially when talking about young folks and student loan debt 
is one of, I believe, one of the biggest challenges we are 
going to have here in the next 20 years. And I am somebody, 
again, who is sitting there with, you know, about $20,000 of 
student loans left. I am not alone. In Iowa, a lot of us were 
first generation college graduates so our parents worked really 
hard, helped get us to college but could not pay for it all so, 
again, sitting there with the debt on top of it and I have got 
friends that, you know, graduated from college and then took a 
job possibly at a nonprofit where they are making about $35,000 
a year. Incredible, amazing, fulfilling work, but again, the 
wages in my state in particular, are some of the lowest in the 
country. Our minimum wage is still $7.25. So you look at Iowa 
in particular and the young folks that I have been talking to, 
friends, family, and the idea of, okay, well, now we need you 
to put more into retirement when they are just trying to figure 
out how they are going to pay their rent, it is a huge issue. 
And so thank you for the work that you have done on this.
    And one of the things that I keep trying to talk to, you 
know, again, folks in Iowa, but also here about how we deal 
with some of the challenges that young folks are facing and 
also in states like Iowa where we are trying to keep folks in 
my state and also bring them back home is creating 
opportunities for young people to then start businesses and 
create jobs in some of our smaller communities. But, again, one 
of the biggest hurdles is always going to be how are you going 
to save for retirement on top of it if you do not have an 
employer match?
    So do you have any ideas? I know Ms. Turner and Mr. 
Gorgone, I know obviously student loan debt, this is something 
you guys have looked into a great deal, and Mr. Hall and Mr. 
Davidson as well, but what can we be doing to better help our 
small businesses and our entrepreneurs make sure that they can 
start their businesses and then at the same time not have to 
worry about their future right away? I know one of the things 
that has been talked about before, possibly a safe harbor for 
very small businesses to have 401(k)s, to have lower startup 
costs, or what are your thoughts on that? Ms. Turner? Oh, it is 
Ms. Turner-Joseph, I apologize. I just saw the top part of your 
name.
    Ms. TURNER-JOSEPH. One of the things that can be done, and 
I am happy that you brought up not-for-profit because that is a 
group of employers that do not have a lot of money. They want 
to set up something for the employees to be able to save for 
retirement and the way the rules are set right now, it is not 
an easy task. Chairman Neal's bills create the Auto IRA and the 
Auto 401(k) plan. Those plans are plans that are structured 
such that a not-for-profit or other lean employer can sponsor a 
401(k) plan. No employer contributions will be needed, and some 
of the rules will be relaxed so that employees can make elected 
deferrals under the plan without the employer having to go 
through all of the testing that other employers have to go 
through.
    I think something like that is excellent, especially for 
not-for-profits who will not be able to make employer 
contributions. It gives the employees a chance to save. And it 
is also excellent for businesses who are a little timid about 
getting into the retirement plan market. This is something like 
training wheels for bicycles. We can go slowly and allow the 
employees to make elected deferrals. And as time passes and the 
business grows, then the business can make employer 
contributions.
    Mr. FINKENAUER. Mr. Gorgone or Mr. Hall or Mr. Davidson?
    Mr. GORGONE. I would just like to add to what Ms. Turner-
Joseph said about the auto enroll. There is a little bit of Big 
Brother connotation with those words. But at Citizant, we were 
at about 56 percent participation across our workforce last 
year. We implemented a new 401(k) plan at the beginning of this 
year. We implemented an auto enroll giving people the 
opportunity to opt out if they wanted to, and our participation 
went from 56 to 90 percent. And about 60 percent of our 
workforce, okay, maybe 40 percent of our workforce makes less 
than $35,000. So, and those folk were not participating in the 
plan. So us taking the action to enroll them in the plan and 
giving them--we have a 3 percent match--giving them the free 
money that is found with employer match, those people stayed in 
the plan and have not opted out.
    Mr. FINKENAUER. Thank you. And I believe I ran out of time, 
so I yield back and I am very grateful.
    Mr. EVANS. Mr. Hall?
    Mr. HALL. I was just going to add----
    Mr. FINKENAUER. Thank you.
    Mr. HALL.--it still comes back to cost. I think the thing 
we can help most with the smaller businesses, if any of these 
ideas we come up with, whether it is reducing safe harbors, 
what the multiple employer plans would look like from a cost 
standpoint, that is where we can make a difference for them. 
Because I think the right advice that someone at my age would 
give to someone at your age is do not concentrate so much on 
how much you have to do this year or doing the max this year. 
Do not worry so much about how much. Just do something. Get 
this started. Let it be part of your habit for you as the 
business owner and for your employees. Just get started. Lowest 
cost level, get started, then grow with it.
    Mr. DAVIDSON. If we are going over then I do have a couple 
points.
    Mr. EVANS. I have to thank the lady. Thank you.
    Mr. DAVIDSON. Thank you. So I think there are three points. 
Two around the individual participants, and that is, as was 
discussed earlier, to help them, to allow the student loan 
payments to be matched in the 401(k). That helps everybody. But 
there is another set of the population. As we know, I think the 
statistic is 40 percent of Americans do not have $400 in 
savings. So since the 401(k) has been our most successful 
saving scheme ever in our history, why do we not allow 
employees to have more access to that? So why do we not have a 
rule that they can take out 10 percent or 25 percent for 
immediate needs?
    And then the third part of the question is to the 
employers, how to make it easier for them. I second what Mr. 
Hall said. It is about relieving them from the responsibility 
and offering a plan, just make it easier for them to open it up 
so all the employees can save. And I think those three things 
could make a dramatic difference.
    Mr. FINKENAUER. Thank you all. I really appreciate it. 
Thank you.
    Mr. EVANS. The gentleman from the great state of Minnesota, 
Mr. Hagedorn.
    Mr. HAGEDORN. The great state of Minnesota. You are 
correct. Thank you, sir. I appreciate the Chairman's 
indulgence. Ranking Member, staff, everyone. Thanks to the 
witnesses.
    I think our ranking republican member is on to something, 
and the concept of portable benefits. Why are we always putting 
the onus on small business and others to create some corporate-
type structure or benefits when we have a lot of people mobile 
in the workforce moving from job to job, not always staying 
with one company at a time? Obviously, corporations that have a 
lot of money to put things together, big businesses can offer 
incentives that sometimes smaller businesses cannot. Hard to 
compete with that. But perhaps if we had more, the concept of 
portable benefits where you take your retirement program with 
you, into your job easily invested by the small business 
wherever they land, health benefits, everything. I think that 
is what we need to move to or look to, especially for folks in 
the small business community. Does anyone have any thoughts to 
that? Are there regulatory impediments to that? Tax changes 
that need to be made? I will open it up to Mr. Hall and then we 
will go down this way.
    Mr. HALL. Well, I think it is a unique time for employment. 
The thing that I get worried about when I think about changing 
generations, as people have moved around more, the people that 
we are struggling with now, those that say 18 percent of the 
retirees in the next 15 years are going to have more income 
than debt, a lot of those people were the ones that had a job 
for 30 years or 40 years. If those people did not meet the need 
then, we need to make sure we are encouraging young people now, 
even if they are moving from job to job. And the ability to 
maintain a ROTH IRA, a traditional IRA, roll those into another 
plan, all those things are available today. So I do not see the 
impediment to those. What I still want the conversation to be 
about is getting more people aware of their future and 
recognizing that they need to start doing something now. And 
then the support for small business is giving some of them the 
options without burdening all the cost, as your point is, to 
not burden small business with the cost for everyone else, but 
allow them to put a plan in place with minimal cost.
    Mr. HAGEDORN. Anyone else?
    Mr. GORGONE. I think one of the challenges that we would 
face is employees moving from a large organization that has 
really great benefits to a smaller organization that helps 
start up a small business. The idea of those benefits being 
portable would create some sort of challenge for the small 
business to continue to honor a commitment from a benefit that 
the individual had, unless I am misunderstanding you.
    Mr. HAGEDORN. Yeah. I am talking about people having more 
individual benefits. It could be a company or some sort of plan 
put together for individuals to basically latch on to and then 
they take that from job to job. I am not talking about taking 
benefits from some company and moving them over to another.
    Mr. GORGONE. The one thing I would do there is 
significantly increase the income deferrals of IRAs.
    Mr. EVANS. I agree with that.
    Mr. GORGONE. Make an IRA equivalent to a 401(k). The 
employee can do it on their own. There is no employer match, 
but that is okay if you are going to do a 401(k) with a safe 
harbor of no match. There is no harm or foul. It is the same 
plan. But it at least gives the individual the opportunity to 
save at the same levels of a 401(k).
    Mr. DAVIDSON. I agree with your point. I think there is one 
clarification I make. What we see is people with large 
balances, they make sure it gets rolled over. They do not 
forget their $100,000. The ones that have a smaller balance, 
those are the ones that need help, and unfortunately, our 
financial system today, there is not a lot of people chasing 
around to try to get a $10,000 or $15,000 contribution. And 
that is right when the balance is beginning to grow and it can 
begin compounding. So I think the easier we can make it for 
those small balances to move would make a big difference.
    Ms. TURNER-JOSEPH. The pieces that are needed to have 
portability are already in place. Unfortunately, plan 
participants have to be proactive when they leave an employer 
to make sure that they take their account balances with them. 
Now, under the law you cannot just roll any IRA amount into a 
qualified plan. The easiest IRA amount to roll into a qualified 
plan is if you use a conduit IRA, which is an IRA that is set 
up specifically to take in pension assets. Some plans take 
ordinary IRAs, but most plans do not. So, if you want the 
opportunity to move that from one plan to the other, then the 
plan participants have to be educated that when we quit, we 
move the monies to a conduit IRA. And a conduit IRA, you can 
comingle 10 different plan assets and it does not matter. And 
then you can move that back into a qualified plan if you want 
to have your money travel with you. So, it is there. Plan 
participants just have to be educated as to how to use it. And 
unfortunately, sometimes that is lacking.
    Mr. HAGEDORN. Very good. I see my time is up. I would agree 
with you though. Some of these amounts that you can maybe 
deposit into accounts each year, some of the tax implications, 
and I do not use this word lightly, need to be liberalized as 
far as I am concerned.
    Mr. EVANS. Right in the Midwest, the great state of Kansas, 
Ms. Davids.
    Ms. DAVIDS. Thank you, Chairman Evans. And thank you to 
everyone who came here to testify today. I appreciate it.
    So the first thing I want to start off--actually, I really 
appreciate the last conversation that we were just having. I 
would love to hear a little bit more. Mr. Hall, you had 
actually mentioned earlier educating folks and then we ended 
with Ms. Turner-Joseph just talking about that a few minutes 
ago. Can you talk a little bit about what educating, when you 
think about it, what it looks like? And I am going to, somehow 
the two of you have things that are both very pertinent to what 
I am curious about here. In the graphs that you provided, Ms. 
Turner-Joseph, on participation and in 401(k) plans, it looks 
like if you aggregated the under $50,000 and then the under 
$100,000 plan participants, it looks like there is a pretty 
decent amount of participation. It is 34 percent and 32 
percent, respectively, and then it drops off significantly as 
folks' income, annual income increases. So I am curious, when 
we think about what educating folks looks like, Mr. Hall, is it 
just plan participation? Is it some of what got brought up last 
time about making sure that people continue to take their plans 
with them as we see more of a robust kind of mobile economy?
    Mr. HALL. Well, I think there are two pieces of education 
in this conversation. The one that I believe is important is a 
broader education concept mainly for people who are not 
involved in retirement savings now. Most of the surveys we have 
talked about, look at from either side of the discussion, most 
of them point to about half of the people are not saving for 
retirement today. And then whether they are saving the right 
amount, whether they are going to have the right amount, those 
are all complicated discussions. But when I think of education, 
I think of social media. I think of this hearing. I think of 
news outlets, the Small Business Administration, just a matter 
of focus on retirement as a concept so that the normal small 
business owner in Iowa or Kansas is aware that they are going 
to be 65 one day. And I think, I know it was when I was 30, but 
when you are 30, you do not think you are ever going to be 65. 
And then you are 65 before you realize it. And I think just the 
awareness of the plan, the structure, what is going to happen, 
how things change, so that you then start looking at options. 
And I will defer, but there is also a second piece of 
education, and that is for people that are involved in a plan, 
recognizing that this is available to you, you need to maximize 
your contribution because the company is going to match it for 
you. And then when you do leave, it is portable. You can roll 
it over. So there is education for those that are involved 
already, and then the bigger role, we need everyone involved in 
putting money away for their own future.
    Ms. DAVIDS. And then the follow up I have to that is what 
about educating--so I am thinking about both the employees of 
small businesses and also the small business owners themselves. 
You mentioned Small Business Development Centers I think when 
you were doing your testimony. How are you looking at getting 
the small businesses educated as not just saving for retirement 
for themselves, but also using that to attract top talent 
because we know that small businesses are some of the folks who 
are worried about things, like pay and how they are going to 
attract top talent to their companies?
    Mr. HALL. And I think it is a big problem. Because I think, 
again, you go through the numbers. About one in three tax 
returns are going to have a small business attached to them. 
That still leaves two-thirds of the people that work for 
someone else. But of that two-thirds, half of those people work 
for a small business. I mean, it is the same people, right, but 
all those work for small business. And I believe with 
technology, as the world is getting smaller, as people are 
working from home, I think we are going to find that the 
average size employee number, the average size of a business is 
going to fall. I think we are going to have companies that can 
do global operations, global fulfillment, global servicing with 
five people, none of them who live in the same state. And those 
are the types of companies that have difficulty in finding a 
plan because now they have got just a few number of people. The 
highly compensated testing is difficult because they just have 
a few. Safe Harbor is difficult. So now it becomes more 
expensive. So now how do we do that plan and maintain low cost?
    Ms. DAVIDS. Thank you. Thank you, Mr. Chair.
    Mr. GOLDEN. Thank you very much. I will now recognize 
myself for 5 minutes. This is my first action as Chair of this 
hearing.
    I wanted to ask Mr. Davidson, I think you touched upon a 
little bit talking about retirement enhancement saving 
provision and startup credit, which was designed to help small 
employers to set up retirement plans for their workers, 
currently capped at $500. I wanted to ask, how much does $500 
pay for, and how common is it for an employer to dismiss it 
thinking that it is just not worth it to their business or to 
their employee?
    Mr. DAVIDSON. That is a great question. Thank you. And I 
would hate to ever say that $500 is meaningless. But you are 
right. I think it is discounted when they are trying to decide 
whether to start up a plan or not just because the cost and the 
long-term commitment you are making goes way beyond the $500. 
So while I certainly encourage any types of tax credits to help 
employers start a new plan I favor, but I think it has to be 
met with lowering the obligations that they have ongoing to 
make it really viable for the small employer.
    Mr. GOLDEN. Understood. Thank you.
    Just out of curiosity, what level of tax credit would it 
take for them to think? I mean, what would you have to raise 
that cap to for someone to instinctually think, well, that 
sounds like a good deal?
    Mr. DAVIDSON. From what we do, our lowest price is $85 a 
month. And it can go up to, depending on what your functions 
and features are, $150 a month. So does that put it in 
perspective the $500 for you? Yeah. So I think if you could 
raise that it would probably get more people's attention.
    Mr. GOLDEN. Thank you.
    For anyone on the panel, and if there is time, each one of 
you could take it or you can just pick and choose amongst 
yourselves. Simple 401(k) SEP and other types of plans have 
strict and often complex rules depending on certain factors 
like the employee count or contribution limit. For example, 
simple 401(k) is only available to small companies with less 
than 100 employees. So I wanted to give you all an opportunity 
to talk about whether or not there are any changes that could 
be made to these types of plans to modernize and update them 
for workforces today.
    Mr. DAVIDSON. I guess I will start. There are a couple 
points I would like to make. One, there are different types of 
retirement plans. SEP, so forth. But I think we talked about 
recruiting earlier. The 401(k) has a brand, for lack of a 
better word. And while people may not understand the 
intricacies of it, everybody knows it is a good thing and they 
should have it. So when you are doing your recruiting and you 
have your posting out on Indeed and you say you have a SEP or 
something, it marks you as a second level firm. I do not think 
it helps you in that. So I think rightly or wrongly, I think 
some of the different plans are not viewed as favorably.
    And to me, the ideal plan would be keep it as the 401(k) 
but alleviate the fact that the employer has so much 
responsibility and cost. Make it easier so the employer wants 
to offer it to his employee. Make it easier for him to offer it 
to his employer so everybody gets a chance to save. And that to 
me would be the ideal situation.
    Ms. TURNER-JOSEPH. I agree with Mr. Davidson that 401(k) is 
a brand. And if you are looking to expand coverage, you 
probably want to use that brand. Folks know about it, and so 
keep it there. What I would love to see is some changes that 
would allow small businesses to sponsor a 401(k) plan without 
some of the burdens that come with the legislation in terms of 
keeping the plan in compliance. If we could, for example, I 
keep going back to it because it is one of the things that in 
my work, I have met employers who would love to do a 401(k). 
They just cannot afford to do employer contributions. So, if 
something would be there, and it is in bills, we just need to 
get it passed, where an employer can sponsor deferral only 
401(k), as a starter I think that would be very helpful.
    Mr. HALL. I totally agree. Again, going last, you have to 
just say I agree. But I think there are plenty of options out 
there. I think we talk occasionally about increasing limits. I 
think increasing the IRA limit, I would be in favor of that 
also. But I do not think increasing the limits is where the 
real problem is. It is getting people in. Doing the lowest 
contributions is where we need to start.
    Mr. GOLDEN. All right. Thank you very much. I will yield 
back 5 seconds.
    And I will go ahead and recognize the gentleman from New 
Jersey, Congressman Kim, Chairman of the Subcommittee on 
Economic Growth, Tax, and Capital Access.
    Mr. KIM. Great. Thank you so much for coming. This has been 
incredibly helpful for me to understand. My district in New 
Jersey, Burlington County and Ocean County, a lot of retirement 
communities there, especially along other Jersey Shore. This 
comes up a lot, and it is also very much a small business 
district. A lot of small businesses from the Delaware River to 
the Jersey Shore. So a lot of what you are talking about really 
resonates with me. And it has been helpful. I mean, I think, 
when I think through it, you know, Mr. Hall, I thought your 
comments there just, you know, really simplified just trying to 
build that habit of getting people to really just start up, 
even if it is at a lower amount but just build that habit. And 
I think what you said about awareness, education, and 
simplifying was really helpful on that front.
    And Mr. Davidson, I think I would like to just build off of 
some of the points you just made, both you and Ms. Turner-
Joseph. I would love to hear a little bit more about some of 
those burdens about the 401(k). You know, Ms. Turner-Joseph, 
you were talking about the employer contributions but if you 
can kind of just enlighten me with just some of the other 
issues that are out there if they were to try to set up.
    Ms. TURNER-JOSEPH. Some of the issues that small businesses 
have in terms of setting up the plan apart from the 
contribution is the actual cost of maintaining the plan. There 
are various nondiscrimination tests that have to be done with a 
plan. There are rules that the plan has to meet in terms of 
filing paperwork. And you know, to do most of that they are not 
experts themselves, the employers, and so they need help from 
outside experts which is why they hire people like myself to 
assist in maintaining the plan and doing all of the 
recordkeeping, and other work required for properly maintaining 
a plan. So that cost is something that an employer who is just 
starting out may want to shy away from.
    Mr. KIM. No, that is helpful.
    Mr. Davidson?
    Mr. DAVIDSON. Yeah. I think of it in two ways. For the 
small employer there are kind of two choices today. You can 
either go the Safe Harbor, which is basically 3 percent of your 
payroll, which can be a big cost just so your employees can 
save. The other side you go without making a mandatory 
contribution but you are subjected to annual compliance 
testing. And when you are a small employer, one employee 
leaving can throw you out of compliance and all of a sudden you 
can be hit with a big bill, which is unbudgeted, unexpected. 
And many small businesses do not want to take that risk. They 
were planning on that money for a new truck or a new oven or 
hiring a new employee and all of a sudden they get a surprise 
bill from us. It is not a welcome happenstance.
    So if we can take that requirement away, and I would say 
the other part is the fiduciary responsibility. If we allow 
them to outsource the fiduciary responsibility, my experience 
is most employers want their employees to save. They want their 
employees to do well. They just, when they weigh the cost, it 
is the cost of the new truck or sending their daughter to 
college, and sometimes retirement plans fall second. So if we 
can alleviate that I think we can see the vast majority of 
American workers saving.
    Mr. KIM. That is helpful.
    Mr. Davidson, I want to return to something you said 
earlier in response to a question. You had cited this statistic 
that I often use which is that 40 percent of Americans cannot 
handle a $400 emergency.
    Mr. DAVIDSON. Right.
    Mr. KIM. And something that you said in response to that 
was about allowing employee access to the 401(k) without 
penalty. Can you give me a little bit more detail on how that 
would help alleviate some of the concerns with people who are 
living with that fragility in life?
    Mr. DAVIDSON. Sure. So in my perfect world, I would like to 
see it easier for the employer to offer a plan, but he offers 
it, or she offers it with automatic enrollment. In other words, 
everybody, first day, we sign them up for 3 percent 
contribution in. Now, they have an option. We give them 60 
days, or 90 days, or however long that they can get out of it, 
but you try to start them immediately on that and you get them 
in the habit of doing the savings. And then, the American 
public has different needs. I think a lot of them will not 
touch it until retirement, and that is what you want. Some may 
need it to pay their college loans back, or those who really 
cannot get to work tomorrow because the car needs new tires. 
And if we can get all those people saving and we could have 
some kind of a rule that you could take 25 percent out of your 
plan every 3 years or something, I think those that are at the 
lowest incomes would be more likely to let that 3 percent grow 
knowing it could help them. And it would also alleviate them 
having to go find the money to get those new tires to get the 
car to work tomorrow.
    Mr. KIM. Yeah. No, I appreciate that. Thank you so much for 
helping enlighten me. And I look forward to staying in touch 
and figuring out how we can implement some of these.
    I will yield back the balance of my time.
    Mr. GOLDEN. With that I would ask if Mr. Kim has an 
interest in asking an additional round. Because it would be 
that time. If you had more questions you can go ahead and ask 
them.
    Mr. KIM. Well, I guess just my last question I guess would 
be, you know, with where we were just going off of with the 
401s, you know, I would like to get just sort of the thoughts 
of the other two participants, Mr. Gorgone and Mr. Hall. You 
know, if they share some of those same recommendations, if 
there are any concerns or thoughts? I mean, I am intrigued by 
what Mr. Davidson said about allowing employees to access the 
401(k), but obviously, I will also have some concerns about 
people going into that too much. You know, so I know there has 
got to be sort of a balance there. But I am intrigued by just 
sort of the assessments of the other two.
    Mr. HALL. Well, I do agree with it. I think, again, it is 
an interesting time. I would say before I knew that there were 
three states right now that are already doing it I would say 
you cannot make people save. They need to want to save. They 
need to know the need to save. Now, I am very interested to see 
how those states work because that might be something to 
consider because, you know, if my mom were standing here she 
would tell me she knows what is good for me and would tell me 
what to do and I would probably do what she said. But at some 
point it still comes back to education. I think people need to 
be aware. I think anybody who is a Harry Potter fan, I think 
Albus Dumbledore said it is unreasonable to expect a young man 
to know what it is like to be an old man, but it is 
unforgiveable for an old man to forget what it is like to be a 
young man. And I think when you are young, I remember not 
thinking I needed to worry about that topic. So I agree with 
the concern on over saving. I certainly do not want them to put 
away 3 percent of their newly earned savings and then not be 
able to buy bread. That is not fun. But at some level there 
should be, or I would encourage involvement via automatic 
enrollment at some level to start building that habit because I 
think that is critical.
    Mr. KIM. No, I appreciate that.
    Mr. Gorgone, do you have any thoughts here? Any other 
wisdom from children's books?
    Mr. GORGONE. I think one of the challenges with having 
people enroll in a 401(k) is in their mind they are putting 
money away and I can never touch it. It is like I do not have 
it. And in case of an emergency, well, I need access to those 
funds. There are features of 401(k)s that allow people to take 
loans against the 401(k) and pay themselves interest rather 
than paying somebody else interest. I think the more 
fundamental problem though is not the fear of not being able to 
have the funds available, because if that were the only issue, 
more than 40 percent of the people would have $400 in savings. 
And they would have other mechanisms by which they have saved 
that money that made it available to them. I think when we look 
across the board, the cost of student loans, the cost of health 
care, the cost of housing, the cost of a lot of things that we 
need in our day-to-day lives are a lot more expensive today 
than they were yesterday. And my dad has always said you can 
only spend a dollar one way, and you have got to be careful how 
you spend it. So given a choice between health insurance or 
housing or student loans or retirement and I am 30 years old, 
guess which one loses.
    Mr. KIM. And no, that is right. And look, this is something 
that is really at the core of what I am trying to do here in 
Congress. I just spoke at a press conference yesterday talking 
about how when asked by a journalist how I will measure my 
success here in Congress, I told them it would about the 40 
percent of Americans that cannot handle a $400 emergency and 
trying to drop the number of Americans that are constantly at 
that precipice of fragility. I am trying to figure out how we 
can help them save, how we can help them understand that they 
do not have to make these important tradeoffs between student 
debt, health care, retirement, and other aspects. So look, you 
know, we are not going to be able to solve these all right 
here, right now in this hearing, but I hope to be able to 
continue to draw upon your expertise, your experience, as we 
try to think of what tools we can that we will be able to 
comprehensively address that issue. So thank you so much again 
for your time.
    I yield back my time.
    Mr. GOLDEN. Thank you very much.
    Well, I would like to thank all the witnesses for taking 
time out of your schedules to join us here today to talk about 
an important issue. Retirement security is one of the most 
important issues facing Americans today. Retirement benefits 
not only provide future financial security for business owners 
and employees, but also allow entrepreneurs the ability to 
attract and retain talented individuals as their businesses 
grow. It is clear from this hearing that improvements to the 
retirement system must be made to meet the needs of business 
owners, their employees and entrepreneurs. I know by having 
scheduled and called for this hearing, the Chairwoman thinks 
this is a real priority, and she and the Ranking Member look 
forward to working with members on both sides of the aisle in 
this Committee to address this important issue.
    And with that, I would ask unanimous consent that members 
have 5 legislative days to submit statements and supporting 
materials for the record.
    Without objection, so ordered.
    And if there is no further business to come before the 
Committee, we are adjourned. Thank you.
    [Whereupon, at 12:49 p.m., the Committee was adjourned.]
    [Questions submitted to Mr. Paul F. Davidson from Hon. Troy 
Balderson were not submitted in a timely manner.]
                           
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