[Senate Hearing 117-132]
[From the U.S. Government Publishing Office]





                                                        S. Hrg. 117-132
 
                      A FINANCIALLY SECURE FUTURE:
                     BUILDING A STRONGER RETIREMENT
                        SYSTEM FOR ALL AMERICANS

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

                                HEARING

                               BEFORE THE

                       SPECIAL COMMITTEE ON AGING

                          UNITED STATES SENATE

                    ONE HUNDRED SEVENTEENTH CONGRESS


                             FIRST SESSION

                               __________

                             WASHINGTON, DC

                               __________

                            OCTOBER 28, 2021

                               __________

                           Serial No. 117-09

         Printed for the use of the Special Committee on Aging
         
         
         
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]         
 
 
         


        Available via the World Wide Web: http://www.govinfo.gov
        
        
        
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             U.S. GOVERNMENT PUBLISHING OFFICE 
46-488 PDF            WASHINGTON : 2022        
        
        
        
                       SPECIAL COMMITTEE ON AGING

                  ROBERT P. CASEY, JR., Pennsylvania, 

KIRSTEN E. GILLIBRAND, New York      TIM SCOTT, South Carolina
RICHARD BLUMENTHAL, Connecticut      SUSAN M. COLLINS, Maine
ELIZABETH WARREN, Massachusetts      RICHARD BURR, North Carolina
JACKY ROSEN, Nevada                  MARCO RUBIO, Florida
MARK KELLY, Arizona                  MIKE BRAUN, Indiana
RAPHAEL WARNOCK, Georgia             RICK SCOTT, Florida
                                     MIKE LEE, Utah
                              ----------                              
                 Stacy Sanders, Majority Staff Director
                 Neri Martinez, Minority Staff Director
                 
                         C  O  N  T  E  N  T  S

                              ----------                              

                                                                   Page

Opening Statement of Senator Robert P. Casey, Jr., Chairman......     1
Opening Statement of Senator Tim Scott, Ranking Member...........     2

                           PANEL OF WITNESSES

John Scott, Ph.D., Project Director, Retirement Savings Project, 
  The Pew Charitable Trusts, Washington, D.C.....................     5
Shai Akabas, Director of Economic Policy, Bipartisan Policy 
  Center, Washington, D.C........................................     7
Nari Rhee, Ph.D., Director of Retirement Security Program, 
  University of California at Berkeley Center for Labor Research 
  and Education, Berkeley, California............................     9
J. Spencer Williams, Founder, President and CEO of Retirement 
  Clearinghouse, Greenville, South Carolina......................    11

                                APPENDIX
                      Prepared Witness Statements

John Scott, Ph.D., Project Director, Retirement Savings Project, 
  The Pew Charitable Trusts, Washington, D.C.....................    29
Shai Akabas, Director of Economic Policy, Bipartisan Policy 
  Center, Washington, D.C........................................    41
Nari Rhee, Ph.D., Director of Retirement Security Program, 
  University of California at Berkeley Center for Labor Research 
  and Education, Berkeley, California............................    59
J. Spencer Williams, Founder, President and CEO of Retirement 
  Clearinghouse, Greenville, South Carolina......................    69

                        Questions for the Record

John Scott, Ph.D., Project Director, Retirement Savings Project, 
  The Pew Charitable Trusts, Washington, D.C.....................    73
Shai Akabas, Director of Economic Policy, Bipartisan Policy 
  Center, Washington, D.C........................................    74
Nari Rhee, Ph.D., Director of Retirement Security Program, 
  University of California at Berkeley Center for Labor Research 
  and Education, Berkeley, California............................    79

                  Additional Statements for the Record

American Counsil of Life Insurers Statement for the Record.......    85
American Benefits Council Statement for the Record...............    92
AARP Statement for the Record....................................   104
ERISA Industry Committee Statement for the Record................   117
Insured Retirement Institute Statement for the Record............   119


                      A FINANCIALLY SECURE FUTURE:

                     BUILDING A STRONGER RETIREMENT

                        SYSTEM FOR ALL AMERICANS

                              ----------                              


                       THURSDAY, OCTOBER 28, 2021

                                       U.S. Senate,
                                Special Committee on Aging,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 9:34 a.m., via 
Webex and in room SD-562, Dirksen Senate Office Building, Hon. 
Robert P. Casey, Jr., Chairman of the Committee, presiding.
    Present: Senators Casey, Gillibrand, Blumenthal, Rosen, 
Kelly, Warnock, Tim Scott, Collins, Braun, Rick Scott, and Lee.

                  OPENING STATEMENT OF SENATOR
                 ROBERT P. CASEY, JR., CHAIRMAN

    The Chairman. The Senate Special Committee on Aging will 
come to order.
    Today, the Committee convenes to discuss a critically 
important issue to the American people, the state of retirement 
security in our country. We will include both information about 
and discussions about for whom this system works well and then, 
also as well, those who the system leaves behind.
    I think it is true of all of us, no matter where we live or 
what point of view we have, that we all hope that when we reach 
old age we will be able to enjoy a retirement on our own terms. 
The reality is that millions of American families approach 
retirement with almost nothing saved. Despite working too hard 
their whole lives, too many seniors are barely able to make 
ends meet.
    In 2020, for example, one-fourth of adults who had not yet 
retired did not have any--any--retirement savings. One-fourth 
of adults.
    Many others have managed to save only a fraction of what 
they will need and the truth is that our retirement system does 
very well for some but it allows millions of Americans to fall 
through the cracksme workers do not have access to retirement 
plans because their employers do not offer it. For example, in 
my home state of Pennsylvania, 44 percent of workers aged 18 to 
64 in the private sector, work for businesses that do not offer 
a retirement plan. 44 percent. In my home state, that amounts 
to about 2.2 million Pennsylvanians.
    Others face student loan debt or job changes or caregiving 
responsibilities that disrupt their ability to save for 
retirement.
    In 2019, I was proud to vote for the SECURE Act to help 
close some of these retirement gaps and expand financial 
security for hard-working Americans. This year, Congress is 
considering many bipartisan proposals to build upon the SECURE 
Act and expand access to retirement plans, including auto 
enrolling workers and making it easier to carry a retirement 
plan with you when you change jobs.
    As we consider these proposals, let us not forget about 
continuing to both protect and strengthen Social Security, 
which is the bedrock of our retirement system. Social Security 
is the most common source of income for most retirees and 
provides critical protections against poverty for older 
Americans.
    We must also consider the foundational issues that prevent 
people from saving for retirement in the first place. Here is 
one example from my home region of Northeastern Pennsylvania. 
Sophia Samuel of Wilkes-Barre, Pennsylvania, Luzerne County, 
who faced the difficult choice that millions across our Nation 
are forced to confront.
    Sophia built a successful career as a professor, but her 
professional success coincided with a decline in her parents' 
health. As her parents battled cancer and other chronic health 
conditions, Sophia made a very touch choice. That choice was to 
leave her job.
    She accepted work with a home care agency where she would 
be able to be paid to provide care for her parents. Here is the 
problem, despite that act of love by Sophia for her parents, 
that came with a reduction in pay. Her salary went from $80,000 
as a professor to just $22,000 as a caregiver.
    Unfortunately, Sophia is not alone. Millions of Americans 
face choices like this. Millions of these family caregivers, 
mostly women, endure financial shocks like these, undermining 
their ability to save and plan for the future.
    That is why legislation like my Better Care Better Jobs Act 
is critical. This bill would raise wages for home care workers 
while allowing them to save more for retirement. It would also 
help family caregivers like Sophia. It would give them options 
that they do not have right now, so they do not have to leave 
their jobs. It would also allow them, of course, to continue to 
contribute to their retirement plans.
    Among other policies Democrats are working on, this policy 
would expand support for family caregivers as part of the Build 
Back Better budget and we are working to help at the same time, 
in a larger sense, help American families build economic 
security in their working life and into retirement.
    I look forward to our witnesses' testimony today and the 
wisdom that they bring to us, the ideas they are sharing.
    With that, I would yield to the Ranking Member, Senator 
Scott.

                 OPENING STATEMENT BY SENATOR 
                   TIM SCOTT, RANKING MEMBER

    Senator Tim Scott. Thank you, Mr. Chairman.
    I appreciate you holding a hearing on such a very important 
topic today. Seniors across the country will benefit from 
hearing what we are having to day today and hearing from our 
witnesses.
    More importantly, or at least not more importantly buy 
equally as important, folks who are in their 30's and 40's 
should benefit from the conversation we have about the 
importance of retirement.
    Having spent 25 years in the insurance and financial 
services industry, one of the things I realized is that we do 
not talk often enough about the importance of retirement 
security and how we achieve retirement security.
    For so many of our seniors today, retirement security when 
you are working from paycheck to paycheck seems to be outside 
of your grasp. It seems to be a little too far when you have 
too little money left at the end of the month.
    One of the reasons why I cosponsored a resolution 
designating October as National Retirement Security Month is 
because I want to make sure that we continue to emphasize the 
importance of focusing on retirement security for our seniors 
and, frankly, for those in their 40's and 50's.
    Over the course of the past decade, the population of those 
65 years and older has grown by more than one-third in just 10 
years, a trend that we expect will continue.
    Today, I am releasing a report entitled the American Dream 
and Our Golden Years: Improving Retirement Security and 
Building Independence. The report reviews the current trends 
and gaps in retirement savings, recent reforms, and proposals 
to strengthen America's retirement system.
    One important issue outlined in this report is retirement 
account leakage and auto portability. Roughly 15 million 
retirement plan participants change jobs every year. When my 
grandparents and my mom, when they started working, they 
literally stayed at the same employer for a very long time. My 
mother has been with her employer for 45-plus years.
    That trend is something in the rear-view mirror. The 
average person today will work for between seven and 11 
employers. That means that every time you change jobs you have 
a chance to withdraw your money from your 401(k) and that is 
what we mean by leakage. About $92 billion leak out.
    The importance of that is that when you have that kind of 
leakage on an annual basis, that means fewer dollars will be 
there when you really need it the most. When the future you 
wants to retire and live comfortably, too much of your 
resources may have leaked out along the way.
    We want to today talk about ways to address that really 
important issue. One of the witnesses that we will hear from 
today is Spencer Williams at Retirement Clearinghouse on how 
auto portability is slowing retirement account leakage, making 
it easier for folks to live more comfortably while retired. I 
look forward to hearing from Mr. Williams and working with my 
colleagues in Congress so we can increase retirement security 
for all Americans.
    My report also outlines other obstacles like helping small 
businesses provide retirement accounts. In South Carolina, 
approximately 400,000 full-time employers, and somewhere over 
200,000 part-time employees did not have access to an employer-
provided retirement plan in 2019.
    Helping small businesses launch retirement plans is crucial 
to boosting employee savings and closing the gap of how much 
money you need when you are retired and how much money you can 
save along the way. Research shows that workers who earn 
between $30,000 and $50,000 are 12 times more likely to save 
through employer provided plans than on their own.
    I, too, sponsored the SECURE Act, which included pooled 
employer plans to help small businesses launch retirement 
plans. In July 2021, John Iacofano, owner of Iacofano's 
Catering in Mount Pleasant, launched a PEP, Pooled Employer 
Plan, that allows him for the first time to provide a 
retirement plan to his employees.
    Another key area my report examines is the complicated and 
confusing rules seniors face when deciding when to collect 
Social Security. This rule, known as the Retirement Earnings 
Test, or RET, confuses retirees and disincentives work because 
it is viewed as a tax.
    That is why today I introduced the Senior Citizens Freedom 
to Work Act of 2021 to remove the RET and simplify the 
decisionmaking process for seniors. I look forward to 
discussing these reforms and more so we can ensure that all 
Americans have the tools necessary to retirement with dignity 
and independence during their golden years.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Ranking Member Scott.
    As many of you know, we have senators pretty busy on a 
Thursday morning, so people will be in and out. I wanted to 
acknowledge the presence of Senator Collins, our former 
Chairman; Senator Rosen, as well; and Senator Rick Scott.
    Let me move now to our witnesses by way of introductions.
    Our first witness is Dr. John Scott. Dr. Scott directs the 
Retirement Savings Project for Pew Charitable Trusts. He is 
also an Adjunct Associate Research Professor at the University 
of North Carolina at Chapel Hill. I want to acknowledge Dr. 
Scott's own Pennsylvania connection. He received a law degree 
from Penn State University.
    Our second witness is Shai Akabas. Shai Akabas is the 
Director of Economic Policy for the Bipartisan Policy Center. 
For the past several years, he has also steered the Center's 
Commission on Retirement Security and Personal Savings.
    Mr. Akabas has conducted research on a variety of economic 
issues, including on the issues of retirement coverage and 
financial security.
    Witness No. 3 is Dr. Nari Rhee. Dr. Rhee is the Director of 
the Retirement Security Program at the University of California 
at Berkeley Center for Labor Research and Education. She has 
written on a wide range of issues, including issues related to 
retirement security and pensions, including on the subject of 
gaps in retirement savings based upon gender, race, and 
ethnicity.
    I will now turn to Ranking Member Scott to introduce our 
fourth witness.
    Senator Tim Scott. Thank you, Mr. Chairman.
    It is my pleasure to introduce today Spencer Williams. 
Spencer lives in Greenville, South Carolina and is the Founder, 
President, and CEO of the Retirement Clearing House. He is an 
entrepreneur, leader, and a family man. I am proud of his work 
and the company he has built. Spencer's company has helped more 
than 1.5 million Americans retain and consolidate over $24 
billion in assets for their retirement.
    Spencer Williams earned his bachelor's degree in English 
from the United States Naval Academy and his MBA from the 
University of Pittsburgh. His testimony today is about the 
important issue of preventing leakage, financial leakage, in 
our retirement system.
    Mr. Williams will also talk about the important regulations 
we worked on together to allow for retirement accounts auto 
portability and what Congress can do to ensure this reform is 
codified into law.
    Spencer also works just as hard at home in Greenville, 
South Carolina, where he is a father of 13 children--I was 
going to say a 13-year-old, but there are 13 children. I guess 
that is truly a baker's dozen. A proud grandfather of 31 
grandchildren.
    Spencer, God bless you.
    We appreciate your entrepreneurship and hard work to help 
improve retirement security for millions of Americans. Thank 
you for being here with us today. We look forward to your 
testimony.
    The Chairman. Thank you, Ranking Member Scott.
    We will start with our first witness, Dr. Scott.
    Dr. Scott, you may begin.

       STATEMENT OF JOHN SCOTT, Ph.D., PROJECT DIRECTOR,

              RETIREMENT SAVINGS PROJECT, THE PEW

              CHARITABLE TRUSTS, WASHINGTON, D.C.

    Dr. Scott. Thank you, Chairman Casey, Ranking Member Scott, 
and members of the Aging Committee, for this hearing and the 
opportunity to testify.
    The Pew Charitable Trusts is an independent, non-partisan, 
non-profit organization that applies a rigorous analytical 
approach to improving public policy.
    My oral comments will briefly touch on a few points from my 
written statement.
    At least one-third of private sector workers lack access to 
a retirement plan at their jobs, which could lead to reduced 
living standards in old age. The taxpayers are also affected by 
low savings. A Pennsylvania study, for example, found that 
insufficient retirement savings would cost the Commonwealth of 
Pennsylvania a cumulative $14.3 billion over a 15-year period.
    In terms of barriers to savings, workers at small 
businesses have low levels of access to retirement benefits. 
Only 52 percent of employees of firms with less than 50 workers 
have retirement benefits compared to 85 percent of those at 
firms with more than 100 workers. Also, 41 percent of part-time 
workers have access to a retirement plan. Even when they do 
have access, they often do not work enough to qualify.
    Non-traditional work also reduced retirement planning 
coverage. Non-traditional workers, also known as gig, 
contingent, or independent workers, do not have a traditional 
employer/employee relationship. Only 46 percent of non-
traditional workers had a job that offered a retirement plan 
with only 22 percent participating in a workplace savings plan. 
Even so, 77 percent of these workers would save if given the 
chance.
    Apart from employment factors, career disruptions also 
impact retirement security. For example, Pew's research shows 
that full-time workers who experienced unemployment in the past 
2 years are less likely to have access to an employer sponsored 
plan and less likely to participate even if they do than those 
who have been consistently employed. Laid off older workers 
have difficulty finding a new job with benefits and often 
retire early. At least 1.7 million more older workers than 
expected retired due to the pandemic recession.
    Like unemployment, disability affects access to retirement 
benefits. In 2020, only 18 percent of persons with a disability 
were employed. Across all age and educational groups, persons 
with disabilities were more likely to be unemployed, work part-
time, or work in non-traditional jobs, compared to those with 
no disability.
    Caring for a loved one also erodes savings. 20 percent of 
full-time workers provide regular care for a family member or 
friend and they often have to reduce their hours of work or 
quit their jobs altogether because of caregiving. As a result, 
27 percent of caregivers report that they have stopped saving 
and 11 percent used retirement accounts to pay for other 
things.
    Financial shocks also disrupt workers by causing them to 
take out funds from their retirement savings. Over half of 
American households have had a large unplanned expense such as 
a major medical bill. As the number or the cost of the 
financial shocks increase, so does the likelihood of retirement 
account withdrawals.
    Plan features such as employer contributions can boost 
participation and account balances but not all employers can 
afford to make contributions. Proposals in the current Congress 
to expand the savings credit would likely act like an employer 
contribution.
    Automatic enrollment is another feature that can jump start 
savings. Vanguard reports that auto enrollment increases 
participation by 30 percentage points. However, only 36 percent 
of small employer plans use this effective tool.
    Small employers also face obstacles in offering retirement 
savings options. Small business owners told Pew that starting a 
retirement plan either is too expensive or that they did not 
have the administrative capacity to run it. When asked which 
circumstances would motivate them to begin a plan, the most 
common responses were a change in their financial situation or 
government incentives.
    Finally, just a word about new research on State auto-IRA 
programs. Today, 10 states including Connecticut, Maine and--
just a few days ago--New York are implementing savings programs 
for workers without retirement benefits at their job. Four 
hundred thousand auto enrolled workers have amassed over $330 
million in savings. Employers are embracing these auto-IRA 
programs. Pew found that nearly three in four employers 
participating in the Oregon program said they were either 
satisfied or neutral about the program and 79 percent said that 
they have no out-of-pocket costs from participation.
    This concludes my oral comments. Thank you again for the 
opportunity to testify and I would be pleased to answer any 
questions.
    The Chairman. Dr. Scott, thanks for your testimony.
    Our second witness for today's testimony will be Mr. 
Akabas.

    STATEMENT OF SHAI AKABAS, DIRECTOR OF ECONOMIC POLICY, 
           BIPARTISAN POLICY CENTER, WASHINGTON, D.C.

    Mr. Akabas. Thank you, Chairman Casey.
    Chairman Casey, Ranking Member Scott, and distinguished 
members of the Committee, I appreciate you inviting me here to 
testify today about the current State of retirement security in 
America and where we can go from here.
    My name is Shai Akabas and I am the Director of Economic 
Policy at the Bipartisan Policy Center, a non-profit 
organization that combines the best ideas from both parties to 
promote health, security, and opportunity for all Americans.
    The U.S. retirement system is working well for many people, 
particularly those with stable employment, sufficient income, 
and opportunities to save throughout their life. While the 
structures in place have room for improvement, they result in 
positive financially stable outcomes for a majority of 
households.
    The reality is that America is home to a piecemeal 
retirement system. Congress should focus its efforts on those 
whom the system does not serve well or at all.
    My testimony will discuss where current gaps exist and how 
members of this Committee can address them.
    Let me begin by framing the retirement security challenge 
we face. A majority of Americans worry about running out of 
money in retirement, making it the Nation's top financial 
concern. Recent events and trends from the COVID-19 pandemic 
and recession to rising health care costs to increasing life 
expectancies have made building a secure retirement both more 
important and more difficult.
    Although all Americans face this challenge, the ability to 
meet it varies significantly. Workers with low incomes, those 
without college degrees, people of color, women, and part-time, 
seasonal and temporary workers, all disproportionately struggle 
to save for requirement.
    Part of the reason why is explained in a recent BPC survey 
which found that nearly 90 percent of households making at 
least $100,000 report having access to a workplace retirement 
plan. The same is true for only half of households making less 
than $50,000. Even when workers can and want to save, they 
frequently do not have access to a payroll deduction plan.
    In 2016, BPC convened a bipartisan commission co-chaired by 
former Senator Kent Conrad and Jim Lockhart, a senior Bush 
administration official. The Commission spent 2 years studying 
the State of retirement security in America and made 
recommendations in six key areas which include 1) improving 
access to and the design of workplace retirement savings plans; 
2) facilitating lifetime income options to reduce the risk of 
outliving savings; 3) enabling the use of home equity for 
retirement consumption; 4) improving financial capability among 
all Americans; 5) strengthening Social Security's finances and 
modernizing the program; and 6) promoting personal savings for 
short-term needs and preserving retirement savings for older 
age.
    Saving for retirement requires sufficient income. It also 
requires enough financial security and financial wherewithal to 
lock some of that income for years or decades in a long-term 
account. A worker's ability to do this depends on their overall 
financial health. While the most common tool Americans use to 
save for retirement is a plan offered through an employer, only 
two-thirds of workers in private businesses have access to such 
a plan. Among those, only three-quarters participate meaning 
that only about half of private sector workers are 
participating in an employer-sponsored retirement plan.
    Further, if someone lives paycheck to paycheck, had credit 
card or student loan debt or lacks job security, we know that 
person will struggle to save.
    For these and other reasons, various studies show that 
millions of Americans are at risk of running out of money in 
retirement. Public policy needs to address this challenge not 
only be looking at the accumulation of retirement assets but 
also at the decumulation phase.
    Instead of handing people a pot of money at retirement and 
expecting them to figure out how to make it last, we should 
focus on equipping Americans with the tools to produce 
sustainable retirement income, such as guidance on systematic 
withdrawals, options to convert savings into an annuity, access 
to well-designed home equity products, and helping people 
determine the optimal age to claim Social Security benefits.
    There is no one policy prescription that will cure 
America's retirement security challenge. Different solutions 
will help different groups of savers. We need an all-of-the-
above approach to maximize the reach and effectiveness of our 
current retirement system.
    I will briefly propose a few places to start that have 
historically had bipartisan support.
    When you ask businesses why they do not offer retirement 
plans for employees, the No. 1 reason cited is often cost or 
administrative burden. The emerging Pooled Employer Plans 
authorized by the SECURE Act should help with this. There is 
another part of the equation.
    Most employers wishing to adopt a retirement plan today 
must also accept the fiduciary responsibility that goes along 
with it. For businesses with small or non-existent H.R. 
departments, this task is daunting or simply impossible without 
paying for external support. To help these businesses offer 
plans while ensuring that their employees are protected, 
Congress should relax fiduciary obligations for small 
businesses while transferring that responsibility to other 
private sector entities and regulators better equipped to 
handle them.
    Meanwhile, several states have enacted laws requiring all 
employers over a certain size to automatically enroll their 
workers in some form of retirement savings plan. More states 
are following suit. Workers in states without these 
requirements are getting left behind, while the emerging 
patchwork of different requirements in different states is a 
headache for businesses that operate across State lines.
    Congress can extend coverage to Americans everywhere and 
streamline regulations by creating a national minimum coverage 
standard that preempts the multitude of mandates at the State 
level. One study found that this approach could increase 
average retirement savings for the middle income earners by 
roughly 50 percent.
    On a related front, several pieces of pending bipartisan 
legislation would build on the success of automatic features 
and their incorporation into more retirement plans.
    Congress should also look to extend automatic enrollment 
into the emergency savings policy space. Boosting short-term 
savings not only improves household financial resiliency, it 
also protects against retirement leakage.
    I expand on these promising solutions in my written 
testimony and would be glad to discuss them with you further.
    Finally, I want to note that retirement security has been a 
stand-out area of bipartisan cooperation in Congress, in no 
small part thanks to the leadership of many members of this 
Committee. We at BPC have seen the power that a broad coalition 
can bring to an issue like retirement security. We launched the 
Funding Our Future initiative in 2018 and our coalition now 
unites nearly 60 organizations from the academic, non-profit, 
trade association, and corporate sectors.
    Funding Our Future's three goals are to make savings easier 
for Americans at all ages, help them transform nest eggs into 
retirement accounts, and ensure that Social Security is 
financially stable both for current and future retirees.
    I can attest that the coalition's strength and success 
comes from its bipartisan makeup. We at BPS and Funding Our 
Future are eager to continue working toward those goals with 
all of you.
    Thank you for your time and I look forward to your 
questions.
    The Chairman. Mr. Akabas, thank you for your testimony.
    Our next witness will be Dr. Rhee.
    Dr. Rhee, you may begin.

           STATEMENT OF NARI RHEE, Ph.D., DIRECTOR OF

           RETIREMENT SECURITY PROGRAM, UNIVERSITY OF

        CALIFORNIA AT BERKELEY CENTER FOR LABOR RESEARCH

              AND EDUCATION, BERKELEY, CALIFORNIA

    Dr. Rhee. Thank you.
    Good morning, Chairman Casey, Ranking Member Scott, and 
members of the Aging Committee. I am Nari Rhee, Director of the 
Retirement Security Program at the UC-Berkeley Center for Labor 
Research and Education. Thank you for this opportunity to speak 
before you on this very important subject.
    As other witnesses have testified, there are large 
structural gaps in the current employer-sponsored retirement 
system. I want to delve a little bit into some key areas where 
workers are being excluded.
    In order to have financial security in old age, all workers 
need to participate in some kind of retirement plan throughout 
the full arc of their earnings careers. Social Security 
provides for a minimum layer of income but obviously that is 
not enough for most workers.
    The employer-sponsored system falls far short of universal 
coverage. About a third to maybe half of workers do not have 
access to a retirement plan at work. What is really important 
to keep in mind is that there are clear patterns in who gets 
excluded.
    The two key areas of fallout that I want to highlight 
include low-wage workers and workers of color and also the care 
workforce. Let me talk about the low-wage workforce and workers 
of color.
    There is a direct correlation between the opportunity to 
save in the workplace retirement plan and how high or low your 
wages are. Two out of five workers at the bottom 25 percent of 
the wage distribution have access to a plan at work, whereas 
nine out of 10 workers in the top 25 percent of the wage 
distribution do. If you look at actual participation rates, the 
disparity by income is even worse.
    In addition, sectors with the lowest offer rates for 
retirement plans are where Black and Latino workers tend to be 
overrepresented. A couple of key examples: administrative and 
waste services, that is where a lot of building services, 
janitorial services are, only 38 percent of workers are offered 
a plan and only 25 percent participate. That is a sector where 
Black and Latino workers are 40 percent overrepresented in 
relation to their overall labor force presence.
    The hotel and restaurant sector had some of the worst offer 
rates, it is about 30 percent. Only 12 percent of workers in 
that sector actually participate in a job-based retirement 
plan. There, Black and Latino workers are about 60 percent 
overrepresented.
    The upshot is that only 46 percent of Black working 
households and only 37 percent of Latino working households had 
anyone in a workplace plan, whether it is a pension or 401(k) 
in 2019 compared to 60 percent of white working households.
    With regards to the care workforce, which consists mostly 
of women, roughly 1 million home care workers are employed by 
individual clients and households. These employers simply do 
not have the wherewithal to offer a retirement benefit.
    Another key example is family based childcare providers. 
These are essentially self-employed small business women who 
operate small childcare operations out of their own homes. They 
are a really pivotal component of the childcare infrastructure 
in the United States.
    While IRAs are theoretically available to them and other 
self-employed people, the reality with regard to IRA usage is 
that only 14 percent of self-employed workers contribute to an 
IRA. Those tend to be high income self-employed people who 
often have incorporated businesses. Family based providers 
often make less than the minimum wage when all expenses are 
accounted for and so it is a high bar for them to actually go 
and sign up for a plan.
    I have done some technical assistance for a number of care 
worker and domestic worker organizations that are trying to 
figure out ways to offer a systematic return of benefit for 
their members. What they are running into is a series of 
obstacles in the regulatory arena because the entire system was 
designed around a key relationship between employers and the 
firm. Workers who fall outside that model really do not have 
access to anything like auto enrollment or any way to receive 
clients or employer contributions. This is a huge barrier.
    Looking forward, we need a holistic approach to improving 
the retirement security of low-wage workers and the workers who 
are currently left out of the system. One of the things that I 
think we need to focus on, it is both a matter of wage policy 
and retirement policy. Low-wage workers need more income in 
order to be able to save and they need a systematic means 
through which to save.
    Another key area that needs attention is Social Security 
reform.
    With regard to State initiatives, I think what states have 
done is realize that they need to step into the voids because 
this is going to have major fiscal repercussions down the line 
to have a lot of workers retire without sufficient means to 
live on.
    I think there actually needs to be Federal policy. Whether 
it is like the U.K. NEST program or the Australian 
Superannuation program that essentially says all workers, no 
matter what, will be covered including independent contractors.
    Thank you. That concludes my comments.
    The Chairman. Dr. Rhee, thanks for your testimony.
    Before turning to our next witness, we are also joined this 
morning by Senator Warnock.
    Next, we will turn to Mr. Williams. He will be our last 
witness for testimony today. Thank you.

           STATEMENT OF J. SPENCER WILLIAMS, FOUNDER,

                PRESIDENT AND CEO OF RETIREMENT

           CLEARINGHOUSE, GREENVILLE, SOUTH CAROLINA

    Mr. Williams. Thank you.
    Good morning, Chairman Casey, Ranking Member Scott, and 
members of the Committee. Thank you for the opportunity to 
speak today and for your work to improve the retirement system.
    It is a particular honor to be here today because I live in 
the Greenville area, a pastoral paradise in the Upstate of 
South Carolina and I have the pleasure of being represented by 
Senator Scott.
    Retirement Clearinghouse is a fintech company with a 
mission to dramatically improve the system by preserving 
retirement savings for the many millions of Americans who 
change jobs each year. My boss, a fellow by the name of Bob 
Johnson, is the majority of Retirement Clearinghouse and its 
chairman of the board. You most likely know Bob as the founder 
of Black Entertainment Television.
    Bob invested in Retirement Clearinghouse more than a decade 
ago and over the years I have personally witnessed Bob working 
on the front lines to help minorities and lower income families 
save for retirement through our work at RCH.
    Getting people to save is job one. Right after that, the 
most important improvement we can make, is to help those same 
participants preserve their saving when switching jobs or 
facing career disruptions.
    Today more than 30 percent of all participants and nearly 
50 percent of minority participants cash out their retirements 
savings when they change jobs. The savings lost to cash outs 
adds up to about $100 billion every year, which means that each 
year millions of people are cashing out their savings and 
putting their retirement at risk.
    That is why we created auto portability. Based on our work 
with a very large employer, we set out to fix the cash out 
problem and help preserve savings for America's mobile 
workforce, in particular for low-income workers.
    Auto portability is a simple concept. It is a technology 
that allows a person's account to automatically follow them 
from one employer's plan to the next. The idea is that if we 
make it easy and automatic, more people will keep their savings 
in a plan rather than cashing out.
    Let me give you a real life example of the impact 
portability can have on a worker's retirement. In November 
2017, at age 30, Jaime Cevantes was hired by one of our 
clients, a very large employer in the health care services 
industry which we would note is a high turnover industry. Jaime 
lives in El Paso, Texas.
    Over the course of 3 years and two job changes, our 
services helped Jaime preserve his savings. He made two good 
decisions that have kept his savings intact. By normal 
retirement age his current balance of $5,006 will grow to more 
than $50,000.
    There are literally millions of Jaime's that change jobs 
each year, and with a modest mix of a nudge and enabling 
technology, we can help them all.
    Thanks to support from the Ranking Member and other members 
of this Committee, including Senator Warren, we were able to 
work with the Department of Labor on critical regulatory 
guidance that facilitated auto portability. Now we are working 
with two of the industry's largest providers, Alight Solutions 
and Vanguard, which will make auto portability available to 
over 16 million 401(k) savers, and that is just the beginning.
    Auto portability will have a tremendous impact on the 
retirement system. The Employee Benefit Research Institute 
estimates that auto portability can preserve $1.5 trillion in 
additional savings over the coming generation. Of that amount, 
more than $190 billion will be saved by Black workers.
    We are very appreciative of bipartisan support from Members 
of Congress and their interest in legislation to help encourage 
systemwide adoption of auto portability. One way to do that 
would be to provide certainty and stability by codifying into 
law guidance issued by the Department of Labor.
    We also think it would be helpful to create modest tax 
incentives to encourage early adopters of auto portability. 
These gentle legislative nudges would deliver a tremendous 
benefit to working families.
    Thank you for your attention to these issues, your support 
for auto portability, and for the opportunity to testify today. 
I will be pleased to answer any questions.
    The Chairman. Mr. Williams, thanks very much for your 
testimony. I did not acknowledge, when I was making references 
to witnesses' biographies that you, too, have a degree from a 
Pennsylvania institution. Senator Scott noted the MBA from Pitt 
so I have got to make sure that is on the record.
    Senator Tim Scott. I just wanted to make you happy, Mr. 
Chairman.
    The Chairman. Thank you, Ranking Member Scott.
    I wanted to also note that we have votes today start at 11 
so we will be mindful of that. I will start with the 
questioning. I will try to go underneath the time so we can go 
right to our Republican questioners when we get to that.
    Dr. Rhee, I will start with you and your testimony. I was 
struck by a lot of the data in your testimony, and also the 
many ways that you highlight those who are left out. One of the 
highlights on your first page says, and I quote, ``The current 
employer-sponsored retirement savings system leaves out many 
works and this disproportionately impacts workers of color.'' 
The words ``leaves out'' jumped out at me.
    You also say, and I am quoting again, ``The current 
retirement system is also not designed to meet the needs of 
workers in non-standard employment relationships, including 
those in care work.''
    We know that women are often doing the most when it comes 
to caregiving generally and unpaid caregiving in particular. We 
saw this especially over the last 19 months of this terrible, 
terrible pandemic as women left the workforce in droves to care 
for children and aging parents.
    Dr. Rhee, can you explain the effects of caregiving on 
workers' ability to save for retirement?
    Dr. Rhee.[no audio]
    The Chairman. I do not know if we are having trouble--
    Dr. Rhee. Oh sorry, I forgot to unmute myself, my 
apologies.
    Caregiving has tremendous impacts on women in terms of 
their retirement income security. It comes at the beginning of 
their careers, with caregiving of children and taking time off 
of work or reducing their work hours; and also at the tail end 
of your career when you are taking of either aging parents or 
ailing spouses.
    The early career interruption for child care means that 
women can lose up to a half a million dollars total in lifetime 
earnings, cumulative earnings lost, and also Social Security 
benefit loss and retirement savings loss. It is important to 
note that if a women takes 3 years off to take care of a young 
child it is not just those lost years of earnings. There is 
essentially sort of a penalty that follows them for at least a 
decade or so.
    What happens at the tail end is that if you take time off 
or start to reduce your work hours, it has an impact not only 
in terms of your savings capacity but the fact that you are 
likely to start eating into your retirement savings sooner and 
also claim Social Security benefits sooner than planned, which 
can have anywhere between a 7 to 12 percent annual penalty 
compared to your base benefit when you do that.
    I think I will just close there and say there is just a 
phenomenal and compounding cumulative negative impact on 
women's retirement security from caregiving.
    The Chairman. Your testimony made that very clear.
    I wanted to get back to this same issue in the different 
context of people being left out, left out of the labor force 
and unable to build retirement savings. Many of them, of 
course, rely on Social Security and Supplement Security Income, 
SSI, for their later years.
    I am committed, as I know so many are in the Congress, to 
protecting and strengthening these programs. I introduced a 
piece of legislation called the SWIFT Act, or Senate Bill 1772, 
which would strengthen and expand Social Security benefits for 
widows, widowers, as well as surviving divorced spouses.
    What are your thoughts, Dr. Rhee, on improving Social 
Security and SSI as tools to address the gaps in retirement 
coverage and access?
    Dr. Rhee. Yes, I think when we talk about aging issues, we 
often focus exclusively on the workforce. We need to remember 
when it comes to issues like income security and old age, and 
also long-term care access and funds to have long-term care, we 
need to be looking at people who cannot work or have 
interruptions.
    One of the issues with SSI is that the benefits are so low. 
They actually have not kept up at all with the cost of living. 
It essentially forces people to live well under the poverty 
line in some cases. That improving SSI benefits to actually 
penalize and actually have a minimum standard of income that is 
actually sufficient to live on is really important.
    The Chairman. Thanks very much, Dr. Rhee.
    I will turn to Ranking Member Scott.
    Senator Tim Scott. I will defer my question time to Senator 
Collins.
    Senator Collins. Thank you very much, Senator Scott. That 
is typically gracious of you.
    I want to thank both you and the Chairman for holding this 
important hearing. It builds on some work we did in the last 
Congress on retirement security. I know, Senator Scott, that it 
is a real passion of yours and that you bring great expertise 
to the subject.
    My first question is for Dr. Scott and let me start, Dr. 
Scott, by saying it is good to see you again, even if it is 
remote.
    In 2019, when Congress enacted the SECURE Act, which many 
of us cosponsored, it included a provision that I authored to 
allow small businesses to band together in a single retirement 
plan called a Pooled Employment Plan or PEP. PEPs allows small 
employers to share the administrative burden of a retirement 
plan without requiring a connection, a nexus, among them.
    I know the law is very, very new, but Dr. Scott, could you 
help us better understand how Pooled Employer Plans and other 
provisions of the SECURE Act can improve retirement security 
for the employees of small businesses.
    Dr. John Scott. Well, first of all, let me say, Senator 
Collins, it is good to see you, as well, and I look forward to 
a time when we can both face fully in person again.
    To your question, I think this is actually a pretty 
exciting provision. As you note, it is very new, and the data 
is not quite in yet. I think we are still even waiting for 
regulations from the executive branch on the implementation of 
the SECURE Act in this area.
    However, I would say that I was pleasantly surprised by the 
reaction from the financial services industry. There seems to 
be a lot of interest in offering Pooled Employer Plan products 
to small businesses and other employers. I think we are off to 
a good start there.
    I think what is really encouraging about PEPs, in 
particular, is that it does reduce the fiduciary liability to a 
degree for the small business owner. I think a lot of small 
business owners are not fully aware of these fiduciary 
responsibilities when they are thinking about adopting a 
retirement plan. They are typically focused on the costs of 
starting a plan and then whether they have the administrative 
capacity to operate the plan. I think it helps a little bit in 
that regard. It takes some of the shock of that fiduciary 
liability away.
    Also, I think it does address the administrative capacity 
issue in the sense that it is much easier to operate in this 
more streamlined, less customized approach which the PEPs 
offer.
    I think the jury is still a little bit out on the cost 
component, and that is really up to the providers about how 
they price these. I think they are pretty aware that to appeal 
to small business owners that they have to be competitive. We 
are still waiting to see how that pans out as these products 
mature and are more widely available in the marketplace.
    I think we are pleasantly--or I should say I think we are 
optimistic going forward about how these PEPs might improve 
coverage in this area.
    Senator Collins. Thank you, very much.
    Mr. Williams, I do have a special interest in expanding 
access to retirement plans among the employees of smaller 
businesses because they tend not to have access to plans.
    In April, I introduced the SIMPLE Plan Modernization Act 
with Senator Warner. Our bill would provide greater flexibility 
and access to small businesses and their employees seeking to 
use what is known as the SIMPLE Plan as a retirement savings 
option.
    These accounts are available to businesses with 100 or 
fewer employees. Here is the catch under the current law. The 
employees of these small businesses are not allowed to 
contribute as much to their plans as those who work for larger 
businesses with 401(k)'s.
    The SIMPLE Plan Modernization Act would address this 
inequity by increasing the contribution limit for SIMPLE Plans, 
allowing small business employees to save more.
    Mr. Williams, if small business employees were treated 
comparably to large business employees, would this help improve 
the savings for the employees of your clients?
    Mr. Williams. Yes, Senator. We, in the industry, use a term 
harmonization. There is a lot of strange rules and regulations 
that have built up over the years. I think Dr. Rhee referred to 
a few of those earlier in her testimony.
    Any effort to harmonize the rules and optimize savings for 
all workers equally is a good thing.
    Senator Collins. Thank you very much. Thank you both.
    The Chairman. Thank you, Senator Collins.
    I know we are awaiting a Democratic Senator but Senator 
Scott, in the interim would you like to take your time?
    Senator Tim Scott. Yes, especially since we are going to be 
timely for the votes scheduled that we have coming up. Thank 
you, Mr. Chairman.
    Mr. Williams. Thank you for being here with us today. I 
would love to continue the conversation around the issue of 
leakage. I recognize that in 2015 about $92 billion was lost 
out of retirement accounts because of leakage.
    I like to make things practical from sometimes personal 
experience. I remember in my late 20's I had a retirement 
account and decided that I needed the money for something else 
and took the money out. I had to pay a 10 percent penalty and 
declare it as ordinary income. I did not understand that until 
I filed my taxes and then I had a better understanding and 
appreciation for the definition of leakage.
    The importance of this issue, and if you think about $92 
billion in 2015 over a decade, that is close to $1 trillion 
lost out of American's retirement accounts in addition to 
paying a 10 percent penalty on those dollars as well as 
declaring that nearly $1 trillion in a decade as ordinary 
income. That is a devastating impact to those retirement 
accounts.
    You just maybe give us more light on why people cash out of 
their retirement accounts and who is most likely to cash out of 
the retirement accounts? That may bring us more focus on the 
importance of the issue of leakage as well as auto portability, 
making that decision not to cash out easier when you go from 
job to job?
    Mr. Williams. Thank you, Senator Scott.
    Yes, the data is very clear. The workers and participants 
who are most likely to cash out are those with the smallest 
balances. There is a very strong impulse to preserve retirement 
savings, I think Northern Trust did some research a few years 
ago and they cited $10,000 as a very important flexion point. 
Somebody gets $10,000 in their retirement savings and their 
mindset changes over the value of those savings. They start to 
think of it as retirement savings.
    We are trying to solve the problem with auto portability 
down at the low end where--frankly we need to incubate 
accounts. We need to make it super easy. Every time someone 
changes a job, they are faced with a decision particularly at 
the very low end. The decision is I can keep this money intact, 
and sometimes that involves a lot of paperwork and it is not 
easy and it is cumbersome. It is hard to imagine in 2021 that 
we do not have a system that can electronically transfer moneys 
between plans, which is essentially what we are building with 
auto portability, but those little hurdles cause people to say 
well, it is easier for me to take this money, and just like you 
said, they pay taxes, they pay penalties, and then they lose 
the compound value of the earnings for 30, 40, 50 years.
    Senator Tim Scott. Yes.
    Mr. Williams. That is just disastrous.
    If we can incubate the savings and get people to understand 
that preserving these savings, their financial well-being, 
their sense, their own internal sense of financial health 
improves dramatically.
    Senator Tim Scott. Thank you, sir.
    My next question is for Mr. Akabas. I noted in your opening 
statement really a tone of optimism for many retirees or those 
approaching retirement age. Sometimes we feel like the entire 
country is on a collision course with a lack of resources in 
retirement.
    I would love to hear from you your understanding of the 
State of retirement for our seniors and then, with the limited 
time that I have left, which will give you about a minute to 
answer the question: a) what is the true State of our 
retirement for our seniors? and b), the difference between a 
job and a career as it relates to the availability of 
retirement accounts?
    Mr. Akabas. Sure. Thank you, Senator Scott.
    In terms of the overall State, I think it is broken into 
two groups. One is people for whom the system is working quite 
well, where people have access to a retirement plan at work, 
they make enough income to save in that plan throughout the 
course of their career. They accumulate savings and have them 
compound over time. Then they reach retirement and Social 
Security supplements their income. Perhaps they have options 
for lifetime income.
    For a whole other group of people, they have very little of 
that. Many of that same group of people do not have the same 
level of financial literacy or financial capability, and so for 
their retirement security, the system really is not even there. 
Even if it was, they would not necessarily know all of the 
decisions to navigate the complexity that we have today. A lot 
of those people are people of color, women, people who work for 
small businesses, temporary workers, et cetera.
    To answer the second part of your questions, this group of 
people who are workers who change jobs often, and we know that 
workers are changing jobs more than they did a generation or 
two ago. We need to make sure that not only auto portability, 
like Spencer has been talking about and I know that you, 
yourself, have done a lot of work on, but also making sure that 
those workers have plans to save in the first place, because 
either small businesses or the big economy, there is much less 
availability.
    Dr. Rhee said in her testimony that many of those people, 
while they have access to save in an IRA, do not end up doing 
so.
    There is a lot of holes in the retirement system that 
public policy can plug.
    Senator Tim Scott. Thank you.
    The Chairman. Senator, as I said earlier, we will continue 
to update as members join us.
    Senator Blumenthal joined us and, as we are awaiting two 
Senators coming up, maybe I will get a question and then maybe 
turn to Senator Braun unless we have a Democratic Senator who 
will take the rest of my time.
    Dr. Scott, I wanted to turn to you regarding the importance 
of incentive for savings. One specific incentive for low-wage 
workers to save for retirement is the Saver's Credit, which is 
a credit that we are happy is in place. There is two basic 
problems with it right now. One is awareness of the credit. 
That is true of sometimes a lot of government programs, a lot 
of opportunities that people have. It is certainly the case 
that the awareness is too low.
    Then second, the process of claiming the credit can be 
complicated.
    Earlier this year, in the Recovery Act we passed in the 
Senate, Democrats were proud of the fact that we had an 
expansion of an existing tax credit, in this case three of 
them: the Earned Income Tax Credit, the Child Tax Credit, and 
the Child and Dependent Care Tax Credit. We, of course, want to 
extend the benefits of those expansions in the upcoming Build 
Back Better legislation.
    I would ask, because that awareness is an issue, I would 
ask you how can we expand awareness of the Saver's Credit and 
streamline access to it.
    Dr. John Scott. Thank you, Chairman Casey. I think that is 
a great question.
    The Saver's Credit can be incredibly impactful for certain 
taxpayers. I would note that there are more than one proposal 
in the current Congress to expand the Saver's Credit and make 
it refundable as well as the ability to directly deposit it 
into retirement accounts. I think one of the great things about 
these proposals is that they have bipartisan support. We are 
looking forward to some movement there.
    In terms of awareness, I think this is a tricky issue, as 
you know. It is not with the Saver's Credit. It is with the 
EITC and a host of other government incentives, that it is 
often getting people to have some knowledge about it and then 
how to claim them. I think there is probably multiple ways to 
do this. One is through the tax code and the Internal Revenue 
Service and the tax filing process. I think the IRS could be 
empowered to do a bit more to help eligible savers not only 
become aware but help them file for it.
    Another issue, though, is that you do have to currently 
file a tax return to claim the credit. For many Americans who 
are eligible for the Saver's Credit, they do not pay Federal 
income taxes, or they do not have to. I think we have to think 
about ways of how do we sort of get them to the point and 
streamline that awareness so that we are actually bringing them 
to the table so we can take advantage of this credit.
    We might also think about beyond what government can do, 
such as the IRS. We might think about how plan sponsors or, I 
had mentioned in my opening remarks of the State auto-IRA 
programs, how they might be facilitators or almost Sherpas in 
helping these workers claim these credits in a way.
    I think there is multiple things that we can think about, 
both from the public sector side but also from the private 
sector side, that could help these people. I think, at the end 
of the day, expanding the Saver's Credit, making it refundable 
so that it is not just an offset against tax liability, and 
also making sure that it gets deposited directly into 
retirement accounts, those proposals in Congress that would do 
that would be a huge lift for a lot of working Americans out 
there.
    The Chairman. Dr. Scott, thanks very much.
    I will turn to Senator Braun next, and then Senator Kelly. 
Now Senator Braun.
    Senator Braun. Thank you, Mr. Chairman.
    This is an interesting discussion because, as an owner of a 
business for 37 years prior to becoming a U.S. Senator, my wife 
has a business in our downtown of Jasper, Indiana, where we 
both grew up, I had to go through a lot of trials and 
tribulations, especially that all small businesses have to 
contend with. I mean, there is a high fatality rate to make it, 
in terms of surviving into 5 years, let alone 10 years. When 
you do finally get there, you have got to remember that 
probably those businesses to keep employees and keep customers 
have had to do things generally right.
    In the short period of time that I have been here, a little 
under 3 years, and especially over the last nine to 10 months, 
I think there is just a complete disregard for the productive 
side of the economy that pays all of the bills for this place. 
Then we have to contend with the mandates that seem to be 
rolling out on a weekly basis.
    I think a lot of what we have had to deal with, of course, 
was with the pandemic. I saw that businesses across the board--
I visited all 92 counties in my home State, talked probably 
more than any Senator to entrepreneurs and business owners 
because I am the one most recently from there.
    All I can say is here, when it comes to retirement plans, 
having some way to get your employees hooked with an IRA or 
401(k). It is not like employers are shirking that. It comes 
down probably to whether they have the capability to do that, 
and all of the other things that are being asked of them 
currently. Like, for instance, forcing businesses that now had 
100 employees to where you either have to get a vaccine or lose 
your job. That is government in overdrive, government gone 
wild. It is a completely lack of respect for that productive 
side of our economy.
    I do not know when enough is enough. I think when 
bureaucrats in government do things, they do it with no context 
or perspective because most of them have never been there.
    All I can tell you, and I am not talking about the U.S. 
Chamber of Commerce. I am talking about maybe the National 
Federation of Independent Businesses. When you take it down to 
five employees and you are willing to be that punitive to a $10 
per day per worker penalty, something is out of order.
    I think that as these accumulate, as we keep hitting a 
sector of the economy, small businesses, in this fashion with 
what they have just come through, unless you are purposefully, 
intentionally trying to put even more companies out of 
business, it is not the time to do it. Especially when, I can 
tell you, they are doing everything they can currently, if it 
is within the realm of their capability, to do these things 
anyway.
    I have got a question, and I would like Mr. Akabas to 
answer this. Along with what we are talking about here, along 
with the other mandates you have seen either looming or already 
issued, what does this do to the health of Main Street America 
and focus on the broad maybe picture as well as this particular 
new directive, new mandate that we are putting on small 
businesses.
    Mr. Akabas. Well, thank you, Senator. It is good to see you 
again.
    I think you are right that we need to be mindful of the 
types of burdens that we are placing on small businesses who 
have limited resources and limited financials to manage those 
types of burdens.
    When it comes to retirement in particular, I think that 
there is a way to navigate this and make sure that we make it 
extremely simple and almost costless for businesses to comply 
with some type of standard that supplies with their employees 
with an ability to save for retirement.
    I agree with you that having a heavy handed requirement 
with lots of specific requirements that entails a lot of cost 
would not be appropriate.
    I do think that there is a way that--we know that these 
mandates are coming already at the State level. We can have a 
standard at the Federal level that first makes it easier for 
small businesses to comply and provides them with tax credits 
in order to do so and simplifies the system for them. Then 
expect that they would provide their employees with an ability 
to save for retirement, I do think that is really important. 
Right now we know that so many employees and small businesses 
do not have that opportunity.
    I fully agree with you that we need to make sure that any 
mandate or burden that is put on employers is taken with deep 
consideration and making sure that it is as costless and 
burdenless as possible. We also need to balance that with the 
need to make sure that their employees have the opportunity to 
save.
    I think both are important.
    Senator Braun. Thank you. I think that is a good way to 
look at it. I appreciate the comments.
    The Chairman. Thank you, Senator Braun. Now Senator 4Kelly.
    Senator Kelly. Thank you, Mr. Chairman. Thank you for the 
folks that have come here to testify today.
    My first question here is for Dr. Rhee.
    Dr. Rhee, earlier this year this Committee looked at the 
impact COVID-19 pandemic on older workers. Something we saw 
then, and we are continuing to see now, is that some folks are 
just not returning to work. Instead, they are choosing to 
retire early. Now whether that is for health and safety or 
trouble finding a job or other reasons, it is unclear. I would 
like to get into that for a second.
    Dr. Rhee, recent data suggests that as many as 3 million 
Americans, 3 million retired earlier than they had planned due 
to the pandemic. I am interested to find out from you if you 
have any data on, first of all, why specifically? Also, are we 
concerned or is there a concern that these individuals risk 
running out of money during retirement? Is there any data on 
that?
    Dr. Rhee. Thank you. That is a really good question.
    The pandemic recession was a really strange recession 
because it impacted different groups of workers by income in 
different ways. Older workers who were high income did not see 
as much impact. The low-income workers, especially low-income 
older workers were hit much harder in this recession than back 
in the 2008 Great Recession. Workers who were eligible for 
Social Security, 62 and older, who were low income, they were 
20 percent more likely to retire last year than they were the 
year before.
    One thing to keep in mind is that retirement savings is 
really concentrated in honestly the top 20 percent of the 
income distribution. If you look at the middle 20 percent of 
workers, of households by income, the media retirement savings 
was only $30,000 for age 55 to 64, which is negligible. Then if 
you look at lower income scales, it is essentially a typical 
household has nothing.
    The big issue is that they then are claiming Social 
Security earlier than they should be and, again, every year 
that you claim early can have a 7 to 12 percent deduction from 
your base Social Security benefit. That is for the rest of your 
life.
    Senator Kelly. Thank you, Dr. Rhee.
    Dr. Scott, your testimony referenced retirement savings for 
independent contractors and gig workers. We know they have 
access to retirement plans if they want them. We have seen the 
benefits of automatic enrollment and we know folks are much 
more likely to save if they have a little bit of a nudge or a 
push from your employer.
    How can we make retirement plans more attractive to 
independent workers and freelancers, and how can we create more 
portable plans that people can take with them from job to job?
    Dr. John Scott. Thank you, Senator. That is a great 
question.
    As I mentioned in my statement, I think the demand is there 
despite the low levels of access amongst these non-traditional 
workers or contingent workers. I think part of the issue is 
that there is a wide variety of these kinds of workers. We have 
independent contractors who work in the high industry. We have 
day laborers. We have temp staff. It is very difficult to say 
well, here is one solution that is going to fit all of these 
kinds of workers who have different kinds of jobs, that work in 
different ways and, probably most relevant, they get paid in 
different ways.
    Approximately, according to our survey, about 70 percent of 
non-traditional workers are paid electronically but many others 
are paid by check, or by cash. I remember I paid my real eState 
agent when I bought my house by check, so you think, how can we 
divert 5 percent of that check, paper check, into an IRA?
    I think it is probably going to take more than one way to 
get these non-traditional workers into the savings system.
    I think we should be thinking about maybe it is through the 
tax system. Some of these workers have to file quarterly 
returns or estimated payments. Maybe that is an opportunity to 
sort of nudge them toward saving for retirement. Perhaps it is 
through some of the companies that employee these workers as 
independent contractors.
    It is very difficult to use automatic enrollment in this 
situation because it is not like the situation with an 
employee. However, there are other methods that, as you said, 
could nudge them. Or something called active choice where you 
present them with the opportunity do you want to save part of 
this money that we are paying you, say 5 percent, or not? That 
act of active choice makes people stop and consider and then 
they are more likely--not as likely as through automatic 
enrollment--but they are more likely to divert some of that 
money into savings.
    I think we need to be a little creative and innovative with 
this segment of the workforce.
    Senator Kelly. Thank you, Dr. Scott. Thank you, Mr. 
Chairman.
    The Chairman. Thank you, Senator Kelly. Now Senator Lee.
    Senator Lee. Thank you, Mr. Chairman.
    Auto enrollment is an idea that is founded in behavioral 
economics and recognizes the reality that people typically make 
decisions based on habit and human nature. Research on auto 
enrollment that if people were signed up automatically in a 
savings plan with money taken out of their paychecks and then 
told that they can fill in a form in order to opt out, most 
never get around to opting out.
    Mr. Akabas, can you, if you could, please provide a yes or 
a no answer to each of the following simple questions. Does 
auto enrollment require that a percentage of a worker's income 
be automatically rerouted into a retirement savings account?
    Mr. Akabas. Require? They have the opportunity to opt out, 
but yes.
    Senator Lee. Is there a possibility that some workers may 
be unaware that their income is being redirected into a 
retirement savings account?
    Mr. Akabas. Possibility, but there are lots of forms that 
are provided to make sure that workers are aware of that fact.
    Senator Lee. Still a possibility.
    Is there a Federal income tax and a 10 percent penalty on 
the amount that a worker withdraws, in addition to any relevant 
State income tax of a worker decides to withdraw from a 401(k) 
account before they reach the age of 59-and-a-half?
    Mr. Akabas. Yes.
    Senator Lee. In an auto enrollment system could a low-
income American living paycheck to paycheck be auto enrolled in 
a retirement savings account, find a decrease in their biweekly 
paycheck, decide to opt out of auto enrollment in order to 
regain the income that was being redirected and then, in an 
attempt to recoup the income that was redirected, be forced to 
pay the aforementioned penalties or fees in order to get it 
back?
    Mr. Akabas. In theory, yes. I do not know how often that 
happens, but yes.
    Senator Lee. Is what you are telling me, what I am hearing 
is that low-income Americans, those under the age of 59-and-a-
half, who are living paycheck to paycheck could potentially 
lose money due to auto enrollment if they decide to opt out and 
recoup the funds that they need in order to have a roof over 
their head and put food on the table?
    Mr. Akabas. Yes, that is possible.
    Senator Lee. The financial literacy of Americans is a 
problem. It is an issue. I think it is something that ought to 
be addressed not only in families but in schools, in 
workplaces, homes, civil society, institutions of civil 
society. It is something we ought to focus on.
    I also believe in the American people and I think auto 
enrollment could end up harming the daily budgets of many low-
income Americans and young families. Removing the 
responsibility and the opportunity from the American people to 
make a conscious decision to save is not necessarily going to 
make them more financially literate, nor will it empower them 
to handle the financial burdens that come with being a working 
citizen.
    We should instead seek out ways to encourage savings rather 
than forcing it.
    Now in 2019, the Department of Labor issued a final rule 
that allowed for auto portability of retirement savings, 
meaning participants in provider-provided retirement savings 
accounts no longer needed to consent to have existing 
retirement savings of $5,000 or less transferred into a Safe 
Harbor IRA or be automatically enrolled into a new employer's 
retirement plan.
    Mr. Williams, can you tell me how can auto portability 
benefit families that have only a small amount that they can 
contribute to a retirement savings account but desire to do 
what they can in order to build their savings steadily over 
time?
    Mr. Williams. Thank you, Senator, for the question.
    First of all, our focus is on these very small accounts. 
When you peel back the onion on the demographic, you are going 
to find low income is virtually synonymous with minorities and 
women. What we find--first of all, the Department of Labor 
ruling provided huge guardrails in terms of the notice and the 
affirmative notice that we have to get to folks and things like 
that. There is a very long period where someone can opt out.
    What we have also learned through--it is not really a 
pilot, auto portability has been in place for about 4 years now 
with a particular employer--is that we actually get a 30 
percent response rate once we let an individual know that there 
is two accounts and we can get them into the current employer 
plan. We get a 30 percent response rate of people calling us 
and saying please move my money to my new employer plan.
    I think the job change and the education and the activity 
that occurs around that is just a perfect opportunity to 
enhance someone's financial education, explain the benefits of 
long-term savings. It is kind of hard to explain compound 
interest, even Einstein had a little trouble with that one; 
right? What a perfect time, because it is kind of Johnny on the 
spot, in terms of this money is available, I need to make a 
decision.
    We have found people to be very responsible when they get a 
chance to keep their savings intact, but equally responsible if 
they have an emergency, take it. Do not get in the way of, you 
know, a funeral for your mom or next month's rent check.
    I think the mechanisms that the Department of Labor put in 
place are highly protective of individuals that need an 
opportunity to do something else but also streamlines the 
process. Those that just want to stay in the system can do so.
    Senator Lee. Thank you very much.
    Thank you, Mr. Chairman. I see my time has expired.
    The Chairman. Thank you, Senator Lee. I want to thank the 
members who are with us today as well as, of course, our 
witnesses for this testimony today on a critically important 
set of topics under the broad heading of retirement security.
    I just have some closing thoughts. We know that too many 
Americans enter retirement with either no savings or too little 
savings to make ends meet. The barriers that they have in front 
of them to achieving financial security in retirement are 
complex, requiring thoughtful exploration on both sides of the 
aisle. I think we have heard some of that today.
    An important lesson from today's hearing is about our 
Nation's retirement system is the question of who is left 
behind? America's low-wage workers and family caregivers, of 
course, are among those left behind. It is past time for 
Congress to act on behalf of these Americans. Reforms that 
benefit them are more than 40 years overdue.
    Congress must enact policies to help these Americans find 
good paying jobs and allow them to care for their loved ones. 
Not one or the other, both. That is why Democrats are working 
to pass the Build Back Better budget. Its provisions for 
families, for workers, for caregivers will help Americans build 
a more secure future.
    It is why we have convened today's hearing, to explore the 
proposals that both Democrats and Republicans are working 
together on to improve access to 401(k) plans and other 
retirement accounts.
    I want to thank Senator Scott for his work preparing for 
this hearing, and I now turn to Ranking Member Scott for his 
closing remarks.
    Senator Tim Scott. Mr. Chairman, let me say something off 
subject for a quick minute here. I will say that throughout our 
country we oftentimes yearn for a bipartisan approach in 
government and we so often seem to fall short on behalf of the 
American people.
    I thank you for your leadership on this Committee for 
making this as bipartisan, and frankly nonpartisan, as 
possible. Many of the subjects that we talk about has nothing 
to do with the left or the right, Democrats or Republicans. It 
has to do with Americans struggling to make their ends meet. I 
cannot think of a better way to show the American people that 
we care about them more than we do of ourselves by working on 
their behalf and not having a political partisan conversation 
just because there is a microphone and a camera nearby.
    I appreciate the spirit in which we lead and, frankly, 
serve the American people.
    I think that retirement is a very important issue and one 
that too many Americans struggle with bringing those two ends 
together. I think that there are things that we can do that 
will help that process for every American. Every American 
should be able to work hard, save for retirement, and enjoy 
their golden years with peace of mind.
    I thin there are things that should be done and must be 
done in order to accomplish that goal: improve retirement plan 
access, boost plan participation, protect auto portability, 
provide better lifetime income options, improve financial 
literacy, boost health savings accounts, simply Social Security 
decisions, and promote work.
    By ensuring these common sense solutions and building on 
the success of the bipartisan SECURE Act, we can help hard-
working American retire comfortably.
    Again, thank you to everyone for being here with us today. 
Your testimony helps us to understand and to support the golden 
Americans.
    I yield back.
    The Chairman. Thank you, Raking Member Scott.
    I, once again, want to thank all of our witnesses for 
contributing their time and their expertise today.
    If any Senators have additional questions for witnesses or 
statements to be added to the record, the hearing record will 
be open for 7 days until next Thursday, November 4. Thank you 
all for participating.
    This concludes today's hearing.
    [Whereupon, at 10:56 a.m., the Committee was adjourned.]



      
      
      
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                      Prepared Witness Statements

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                  Additional Statements for the Record

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