    [Senate Hearing 117-678]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 117-678

                       BUILDING ON BIPARTISAN RETIREMENT
                      LEGISLATION: HOW CAN CONGRESS HELP?

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

                                    HEARING

                                  BEFORE THE

                              COMMITTEE ON FINANCE
                              UNITED STATES SENATE

                        ONE HUNDRED SEVENTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                                 JULY 28, 2021

                                   __________

    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                Printed for the use of the Committee on Finance

                                  __________

                        U.S. GOVERNMENT PUBLISHING OFFICE
    52-448-PDF                 WASHINGTON : 2023

    -----------------------------------------------------------------------------------

                              COMMITTEE ON FINANCE

                          RON WYDEN, Oregon, Chairman

    DEBBIE STABENOW, Michigan            MIKE CRAPO, Idaho
    MARIA CANTWELL, Washington           CHUCK GRASSLEY, Iowa
    ROBERT MENENDEZ, New Jersey          JOHN CORNYN, Texas
    THOMAS R. CARPER, Delaware           JOHN THUNE, South Dakota
    BENJAMIN L. CARDIN, Maryland         RICHARD BURR, North Carolina
    SHERROD BROWN, Ohio                  ROB PORTMAN, Ohio
    MICHAEL F. BENNET, Colorado          PATRICK J. TOOMEY, Pennsylvania
    ROBERT P. CASEY, Jr., Pennsylvania   TIM SCOTT, South Carolina
    MARK R. WARNER, Virginia             BILL CASSIDY, Louisiana
    SHELDON WHITEHOUSE, Rhode Island     JAMES LANKFORD, Oklahoma
    MAGGIE HASSAN, New Hampshire         STEVE DAINES, Montana
    CATHERINE CORTEZ MASTO, Nevada       TODD YOUNG, Indiana
    ELIZABETH WARREN, Massachusetts      BEN SASSE, Nebraska
                                         JOHN BARRASSO, Wyoming

                        Joshua Sheinkman, Staff Director

                    Gregg Richard, Republican Staff Director

                                      (II)

                                C O N T E N T S

                                  ----------

                               OPENING STATEMENTS

                                                                       Page
    Wyden, Hon. Ron, a U.S. Senator from Oregon, chairman, Committee
      on Finance.....................................................     1
    Crapo, Hon. Mike, a U.S. Senator from Idaho......................     4

                                   WITNESSES

    Robinson, Aliya, senior vice president, retirement and
      compensation policy, The ERISA Industry Committee, Washington,
      DC.............................................................     6
    Graff, Brian H., chief executive officer, American Retirement
      Association, Arlington, VA.....................................     8
    Certner, David, legislative counsel and policy director, AARP,
      Washington, DC.................................................     9
    Read, Hon. Tobias, Oregon State Treasurer, Salem, OR.............    11

                   ALPHABETICAL LISTING AND APPENDIX MATERIAL

    Certner, David:
        Testimony....................................................     9
        Prepared statement...........................................    43
        Responses to questions from committee members................    51
    Crapo, Hon. Mike:
        Opening statement............................................     4
        Prepared statement...........................................    52
    Graff, Brian H.:
        Testimony....................................................     8
        Prepared statement...........................................    53
        Responses to questions from committee members................    60
    Read, Hon. Tobias:
        Testimony....................................................    11
        Prepared statement...........................................    67
        Responses to questions from committee members................    70
    Robinson, Aliya:
        Testimony....................................................     6
        Prepared statement...........................................    70
        Responses to questions from committee members................    77
    Wyden, Hon. Ron:
        Opening statement............................................     1
        Prepared statement...........................................    84

                                 Communications

    American Benefits Council........................................    87
    American Council of Life Insurers................................    94
    American Heart Association.......................................    99
    Association of Mature American Citizens (AMAC)...................   101
    Center for Fiscal Equity.........................................   106
    Church Alliance..................................................   110
    Coates, James Webster............................................   113
    Committee of Annuity Insurers....................................   114
    Employee-Owned S Corporations of America (ESCA)..................   115
    Financial Services Institute.....................................   118
    Gould, Erik C....................................................   119
    Hemel, Daniel and Steven Rosenthal...............................   120
    ICMA Retirement Corporation (ICMA-RC)............................   128
    Insured Retirement Institute.....................................   129
    National Association for Fixed Annuities.........................   135
    National Association of Government Defined Contribution
      Administrators.................................................   136
    Pew Charitable Trusts............................................   138
    Retirement Clearinghouse.........................................   143
    Retirement Solutions, LLC........................................   144
    Small Business Council of America................................   159
    South Carolina Small Business Chamber of Commerce................   164
    SPARK Institute, Inc.............................................   165
    State Street Global Advisors.....................................   167
    XY Planning Network..............................................   168

     BUILDING ON BIPARTISAN RETIREMENT LEGISLATION: HOW CAN CONGRESS HELP?

                                  ----------

                            WEDNESDAY, JULY 28, 2021

                                           U.S. Senate,
                                          Committee on Finance,
                                                        Washington, DC.
        The hearing was convened, pursuant to notice, at 10:13
    a.m., via Webex, in Room SD-215, Dirksen Senate Office
    Building, Hon. Ron Wyden (chairman of the committee) presiding.
        Present: Senators Cantwell, Cardin, Brown, Bennet, Hassan,
    Cortez Masto, Crapo, Grassley, Thune, Toomey, Cassidy,
    Lankford, Daines, Young, Sasse, and Barrasso.
        Also present: Democratic staff: Drew Crouch, Senior Tax and
    ERISA Counsel; Grace Enda, Tax Policy Analyst; Joshua
    Sheinkman, Staff Director; and Tiffany Smith, Chief Tax
    Counsel. Republican staff: Brandon Beall, Senior Policy
    Advisor; Jamie Cummins, Tax Counsel; Gregg Richard, Staff
    Director; and Jeffrey Wrase, Deputy Staff Director and Chief
    Economist.

       OPENING STATEMENT OF HON. RON WYDEN, A U.S. SENATOR FROM
                 OREGON, CHAIRMAN, COMMITTEE ON FINANCE

        The Chairman. The Finance Committee will come to order.
        Before there was much knowledge of COVID-19, it was already
    far too difficult for Americans to save for a dignified
    retirement. According to the National Institute on Retirement
    Security, as of 2018 more than 100 million working-age
    Americans had no pension and no retirement assets.
        The pandemic economic crash made saving even harder. A
    recent survey of the impact of the pandemic conducted by AARP
    found that, among those fortunate enough to have retirement
    accounts, nearly a quarter had to dip into their savings or
    quit contributing altogether just to pay the bills. Taken
    together, that means a sizeable majority of American workers
    fall into one of two camps. Either they cannot afford to save
    at all, or they have hardly any financial cushion when times
    get tough.
        Now more recently, Americans were reminded about long-
    running retirement rip-offs by ultra-wealthy individuals
    advised by the priciest accountants and lawyers. This really
    was not new in a literal sense because, at our request, the
    Government Accountability Office years and years ago put
    together an extensive report outlining the abuses. Now one of
    these reports that Americans learned about included details on
    a multi-billion-dollar IRA. And certainly, if you are somebody
    who was scrimping and trying to save during the pandemic--say
    you are a teacher or a restaurant manager who did not have a
    rainy-day fund--then you did not have anything. And then you
    read about these well-fed retirement accounts.
        What it signaled, just in the last few months, is another
    case of double-standard economics. The system does not do
    nearly enough to help working people of modest means get ahead,
    but individuals at the very top--at the very, very top--are
    able to game the rules to get ahead and basically abuse
    taxpayer-subsidized accounts with pricey accountants and
    lawyers.
        So this increases the already-existing inequality between
    retirement haves and have-nots to an extreme level. I want to
    make it clear--and Senator Crapo has probably heard this more
    times than he would wish--I want economic policy that gives
    everybody in America the chance to get ahead, not one that
    promotes, as we are going to see, retirement haves and have-
    nots.
        The Finance Committee--Senator Crapo and I were talking
    about this--has a bipartisan tradition when it comes to helping
    Americans save, and we are going to continue that tradition in
    the months ahead. This has been, certainly, a polarized
    Congress, but make no mistake about it: this committee is going
    to come together as it relates to promoting savings.
        So let me kick off a few proposals that I think will help.
    First, last week with Senator Bennet, Senator Casey, and
    Senator Menendez, I introduced the Encouraging Americans to
    Save Act, to get more help to the working folks who need it so
    badly. Under that proposal, the credit would be opened up to
    millions of Americans with modest incomes who never had access
    before. It would become a matching contribution that would go
    directly into a retirement account. It has the potential to be
    a game changer for folks in Oregon and all across the country
    who do not have the ability, as I said, to save much or
    anything at all.
        Second, our tax code ought to help young people get started
    saving earlier in their careers. Too many Americans are unable
    to save at work because they are paying off mountains of
    student loan debt. Let me drop a picture of the person I am
    concerned about. Say you have a young person from a community
    of color where nobody has had a chance to go to college, and
    they are the first generation that did. They go out and they
    get that exciting new job, say with a tech company or
    manufacturer, and the company has a terrific retirement
    package, but the worker has to match what the employer puts in.
    But they are up to their eyeballs in student debt, and so they
    cannot take advantage of it.
        So our Retirement Parity for Student Loans legislation--
    workers who make student loan payments would qualify to get a
    matching payment from their employer into a retirement savings
    plan like a 401(k). Their student loans shrink, and their nest
    egg grows under what we are talking about. That is my view of a
    savings win-win, and it is long overdue.
        Third, the committee ought to make it easier for them to
    move their retirement accounts and continue saving when they
    change jobs. This is another area Senator Crapo and I have
    talked about because, if you look at the number of people who
    change their jobs by the time they are 40, they care enormously
    about portability. And in 2021, it is fair to say very few
    people stay with an employer for their whole career.
        The fact is, given that, it should not be such a pain in
    the neck to move your retirement savings. Many Americans just
    give up, faced with all the complexity and hassle, and cash out
    their savings, losing out on a whole lot of earnings that would
    build up over time. These rules essentially penalize Americans
    for routine job changes in a modern economy.
        So the system ought to change. Even on this committee, back
    when we were having a debate in 2009, we also said we wanted to
    make health coverage more portable. But we've still got more to
    do on that, but this committee has a chance to make retirement
    savings more portable, and I am going to work closely with
    Senator Crapo to do it.
        Finally, it is long past time to crack down on the mega-
    IRAs, which, as I held up in this very long GAO report, was
    documented years ago. The fact is, from the beginning IRAs--and
    you go back and read the documents--Republicans and Democrats
    said IRAs were to promote retirement security for the typical
    American family. They were not meant to become another tax
    dodge for billionaires. And the GAO, as I indicated, in their
    landmark study that we requested, essentially looked at it a
    number of years back.
        GAO found then that nearly 8,000 taxpayers had aggregate
    IRA account balances in excess of $5 million. These massive
    IRAs have only gotten bigger and more prevalent. Yesterday, the
    Joint Committee on Taxation gave me data--and everybody should
    know this: it was lawfully obtained, okay, lawfully obtained.
    And it just basically showed GAO was right when we asked them
    to do it in 2014, and the problem is even greater now.
        In 2019, almost 25,000 taxpayers had aggregate IRA account
    balances of over $5 million; 497 of those taxpayers had
    aggregate IRA accounts of over $25 million, with an average
    aggregate account balance of over $150 million each. It is
    clearly a tax loophole that ought to be closed. Hopefully we
    will have bipartisan support for that.
        So we have a lot to talk about. I expect--and Senator Crapo
    and I have talked about this--we will have a lot of ideas
    coming in from both sides of the aisle. That is what public
    service is supposed to be about, to have big, important issues
    like retirement savings--which I started caring about years ago
    when I was director of the Gray Panthers at home in Oregon and
    had a full head of hair and rugged good looks.
        My friend Tobias, who will get introduced in a minute,
    remembers some of those pictures. He belonged to the Tall Guys
    Caucus. So I have a longstanding interest in this, and it is
    not about Democrats and Republicans. This is about good policy,
    helping people, and giving everybody in America the chance to
    get ahead.
        So we feel strongly about it, and I will look forward to
    remarks from my friend from Idaho.
        [The prepared statement of Chairman Wyden appears in the
    appendix.]

                 OPENING STATEMENT OF HON. MIKE CRAPO,
                       A U.S. SENATOR FROM IDAHO

        Senator Crapo. Thank you, Mr. Chairman, and I deeply
    appreciate your holding this important bipartisan hearing.
    Private retirement savings and retirement security are issues
    in the Finance Committee's jurisdiction that have a history of
    bipartisan cooperation, and I expect this time will be no
    different.
        The purpose of this hearing is to hear testimony on how we
    can build on that bipartisan track record. In 2015 under then-
    Chairman Hatch, I co-chaired the Finance Committee's Savings
    and Investment Tax Working Group with Senator Brown. That
    working group examined a host of proposals to increase access
    to retirement plans, to increase participation in plans, and to
    preserve retirement savings.
        Many of the findings from the working group--including open
    multiple-employer plans and provisions to help long-term part-
    time workers--were precursors to RESA and ultimately the SECURE
    Act, which became law in December 2019. At the same time,
    retirement savings were growing, and the economy was booming
    following the pro-growth, pro-worker policies enacted as part
    of the 2017 tax reform law. However, the pandemic put a great
    deal of stress on workers and retirees, and some had no choice
    but to withdraw money from their retirement accounts to make
    ends meet.
        As the economy continues to bounce back, we have a chance
    to build on the success of the SECURE Act in a bipartisan way.
    House Ways and Means Committee Chairman Neal and Ranking Member
    Brady have already started the process. In the Senate, we are
    also making significant progress on this issue, thanks to the
    leadership of Senator Portman and Senator Cardin.
        Other members, both those who sit on this committee and
    those who do not, have been working in a bipartisan way on
    retirement proposals which, as Senator Wyden has indicated, we
    expect we will hear more about today and will be coming to us
    as we put together the legislation that we expect to put
    together.
        The range of ideas put forth to improve the retirement
    system are all important, but my focus is on three points that
    are the most pressing for Idahoans and Americans across the
    country. First and foremost, Congress should enact policies to
    encourage workers to save, so that they can enjoy a retirement.
    One survey conducted by the Department of Labor found that,
    while 71 percent of civilian workers had access to retirement
    benefits, the participation rate for that same group was only
    55 percent.
        This survey was conducted only months after the SECURE Act
    was enacted, so I will be interested to see updated studies and
    surveys in the future. But concerns remain about whether enough
    workers are saving for retirement.
        Second, I frequently hear from small business owners in
    Idaho who tell me how expensive and cumbersome the rules are to
    offer their employees a retirement plan. These employers want
    to provide retirement benefits, but it is just not economically
    feasible. I am interested in hearing about what Congress can do
    to make it easier and cheaper for the smallest businesses to
    offer retirement plans for their employees.
        Third, our economy is constantly evolving. People are
    working longer. Workers are changing jobs more often, and the
    number of gig workers is on the rise. Our retirement system
    must adapt with this changing landscape, so that every worker
    has a chance to save for a secure retirement. There is no
    better time for the Finance Committee to consider further
    retirement legislation that will meet these needs.
        Mr. Chairman, I look forward to working with you, and all
    the members of this committee as well, to consider a so-called
    SECURE 2.0 package. To our panel of witnesses, I appreciate
    your willingness to share your expertise with us this morning,
    and I look forward to hearing from all of you.
        [The prepared statement of Senator Crapo appears in the
    appendix.]
        The Chairman. I thank my colleague.
        We have two Senators on our side with a longstanding
    interest in retirement security. As I was speaking, Senator
    Cardin came in, and he has been working in these savings
    precincts for decades, and he deserves an enormous amount of
    credit for saying years ago this was an area where Congress
    ought to get out beyond the partisan back-and-forth, and he has
    teamed up with Republicans repeatedly, and we appreciate it.
        The four witnesses are going to be Aliya Robinson, senior
    vice president for retirement and compensation policy for the
    ERISA Industry Committee. They focus on employee benefit issues
    for employers. She previously handled these issues for the
    Chamber of Commerce. We are glad you are here, ma'am.
        The second witness will be Mr. Brian Graff, the chief
    executive officer of the American Retirement Association. It is
    an organization that represents a wide range of retirement
    professionals. If I listed them all, we would be here until
    breakfast. But I would like to note that we have a number of
    members from Oregon, so we are very glad you are here.
        The third witness, David Certner, is with the American
    Association of Retired Persons. The Gray Panthers teamed up
    with them a long, long time ago. They do advocacy work for
    Americans aged 50 and older, and we are glad you are here.
        Our fourth witness is a long-time friend and professional
    colleague, the Honorable Tobias Read. He is the State Treasurer
    of Oregon. His office is responsible for several savings
    programs for Oregonians, and he has really been a pioneer in
    this field.
        We are very proud of our State. We have a program called
    OregonSaves, college savings plans established under the
    Federal tax code, and a savings account established under the
    Federal tax code for individuals with disabilities. So, Mr.
    Read, we welcome you. For all of you, we will make your
    prepared remarks a part of the record.
        If you would like to take maybe 5 minutes or so to
    summarize your comments. It is going to be a hectic day here in
    the Senate, as you might imagine with the bipartisan efforts,
    and what we are working on in our committee. So members will be
    coming in and out, and we welcome you, Ms. Robinson. Please go
    ahead.

    STATEMENT OF ALIYA ROBINSON, SENIOR VICE PRESIDENT, RETIREMENT
        AND COMPENSATION POLICY, THE ERISA INDUSTRY COMMITTEE,
                             WASHINGTON, DC

        Ms. Robinson. Thank you and good morning. Chairman Wyden,
    Ranking Member Crapo, members of the Senate Finance Committee,
    and others in attendance, I am pleased to testify on behalf of
    the ERISA Industry Committee, otherwise known as ERIC, on how
    Congress can continue to build bipartisan legislation to help
    American workers save for retirement.
        I am Aliya Robinson, senior vice president for retirement
    and compensation policy at ERIC. ERIC has a unique voice as the
    only national association that advocates exclusively for large
    employers on health, retirement, and compensation policies at
    the Federal, State, and local levels.
        Why do we offer a unique voice? Because we speak
    exclusively for large companies in their role as benefit plan
    sponsors. Our smallest member company has over 10,000
    employees, and each operates in multiple States. As a matter of
    fact, most of our member companies operate in every State.
        This can create compliance and logistical challenges that
    are not faced by other employers. More importantly, our member
    companies are at the forefront of benefit policies. They are
    driving innovative benefit designs and initiatives that often
    provide the blueprint for future legislative policies. We are
    pleased you want to help, and we have specific recommendations
    for action.
        ERIC appreciates the efforts of Congress and this committee
    in particular, as was noted, to provide much-needed updates to
    retirement plan design and operation in the SECURE Act, and to
    address COVID-19-related concerns in the CARES Act and, most
    recently, in the American Rescue Plan Act.
        As our economy continues to rebuild, we appreciate efforts
    to increase retirement security, particularly after the
    financial strain suffered by many workers and participants.
    Since all ERIC member companies offer retirement benefits to
    their employees, our focus is not on coverage but on increasing
    savings opportunities for plan participants and maximizing
    resources by decreasing administrative burdens.
        This morning I will highlight a few of our recommendations,
    but many more are detailed in my written testimony. So let us
    start with student loan assistance. ERIC supports treating
    student loan payments as elected deferrals for the purpose of
    employer matching contributions, as originally proposed by
    Chairman Wyden and included in the bipartisan Retirement
    Security and Savings Act introduced by----
        The Chairman. Ms. Robinson, can I just freeze that? And we
    are not going to do this except on this point. But student
    parity is so important to help all these students digging out
    from the debt. What this means is the hundreds of employers
    that you all represent are going to be supportive of this
    concept?
        Ms. Robinson. Yes.
        The Chairman. Great. Excuse me for interrupting.
        Ms. Robinson. Not at all. And to that point, employers do
    not want their workers to miss out on matching contributions
    because they are repaying their student loan debt. So we
    support these efforts to treat student loan payments as salary
    reduction contributions.
        Our next recommendation is also meant to address
    comprehensive financial strains that workers face. ERIC
    believes that allowing for emergency savings accounts as part
    of retirement savings plans is critical to strengthening the
    connection between short-term financial concerns and adequate
    savings for retirement.
        As such, ERIC supports the bipartisan Enhancing Emergency
    and Retirement Savings Act of 2021, introduced by Senators
    Lankford and Bennet. As I mentioned, ERIC member companies are
    in the forefront of benefit and plan design. One area where our
    member companies would like to see innovation is in the
    definition of a highly compensated employee.
        The purpose of the non-discrimination rules is to ensure
    that highly compensated employees who are in decision-making
    positions are incentivized to provide proportional benefits for
    non-
    highly compensated employees. I should note the definition of a
    highly compensated employee statutorily is about $130,000 per
    year. So we are not talking about billionaires or millionaires.
        Many industries have highly paid new hires, and flat
    payment structures are offered in locations where the cost of
    living is high. So, many employees are inappropriately treated
    as highly compensated employees, even though they do not have
    decision-making authority. This limits their ability to save,
    especially at the crucial early stages of their careers.
    Therefore, ERIC proposes that an employer be permitted to limit
    the employees considered highly compensated employees to the
    top 10 percent group of employees by compensation.
        In addition to increasing savings opportunities, ERIC
    believes it is equally important to reduce administrative
    burdens. Due to the size of ERIC member companies, logistical
    issues can be significant and costly, such as the need to
    prepare and send required notices. ERIC greatly supports the
    provision in the Retirement Security and Savings Act that would
    consolidate and simplify existing ERISA and tax reports,
    notices, and disclosures.
        However, simplifying and consolidating the notice
    requirements addresses only one part of the burden. A crucial
    factor is the distribution of notices and disclosures.
    Therefore, we are very supportive of the changes made by the
    Department of Labor to allow plan sponsors to use electronic
    delivery as the default option for providing retirement plan
    notices, and we encourage Congress to continue this flexibility
    for plan sponsors.
        My final point is to urge you to avoid unnecessary and
    harmful increases in single-employer PBGC premiums, and we look
    forward to working with you on the bipartisan Pension and
    Budget Integrity Act, which has been introduced in previous
    Congresses.
        ERIC applauds the leadership of this committee in
    recognizing the continued need to focus on retirement security,
    and we look forward to continuing to work with you to advance
    these and other measures to further promote retirement security
    for Americans.
        Thank you.
        The Chairman. Thank you, Ms. Robinson, and I am sure we are
    going to talk to you and ERIC often.
        Okay, Mr. Graff next.
        [The prepared statement of Ms. Robinson appears in the
    appendix.]

    STATEMENT OF BRIAN H. GRAFF, CHIEF EXECUTIVE OFFICER, AMERICAN
                 RETIREMENT ASSOCIATION, ARLINGTON, VA

        Mr. Graff. Thank you, Chairman Wyden, Ranking Member Crapo,
    and the other members of the committee, for holding this
    hearing on improving our Nation's retirement plan system. My
    name is Brian Graff. I am the CEO of the American Retirement
    Association.
        The ARA's 30,000 members and the organizations they are
    affiliated with support 95 percent of all the defined
    contribution plans like 401(k)s in the U.S. The workplace
    retirement plan system has been a success for those who have
    access. With almost $10 trillion in assets, these plans provide
    long-term economic growth and build financial security for the
    middle class.
        Nearly two-thirds of participants in 401(k)s earn less than
    $100,000 a year. One-third make less than $50,000. For moderate
    income workers, the gateway to a comfortable retirement is
    being covered by a workplace retirement program. Data shows
    moderate-income workers are 12 times more likely to save for
    retirement if they have access to some type of workplace
    retirement savings program.
        Despite these results, far too many Americans still lack
    access to a retirement plan at work. This lack of retirement
    plan coverage and the resulting lack of retirement savings is
    particularly pronounced in the Black and Latinx communities.
    Fifty-two percent of Black Americans and 58 percent of Latinx
    Americans do not currently have access to a workplace
    retirement plan. By contrast, only 40 percent of White
    Americans lack access.
        As a result, 56 percent of Black families and two-thirds of
    Latinx families have zero retirement savings compared to 35
    percent of White families. Expanding coverage with auto-
    enrollment is the key to solving this problem. Data shows that
    when moderate-
    income workers are auto-enrolled in a workplace plan, there is
    no, let me repeat, no racial disparity in retirement savings
    participation, with Black, Latinx, and White Americans all at
    about 80 percent.
        In recent years, State governments have taken steps to
    close the retirement plan coverage gap with the enactment of
    automatic IRA programs. The key policy feature of these
    programs is a requirement that businesses over a certain size
    provide access to some type of retirement plan to their
    employees. To date, 10 States have enacted such programs, with
    Oregon being the first.
        ARA applauds the success of these programs but believes a
    Federal policy would better assure the retirement plan coverage
    gap would be addressed consistently throughout the entire
    country. Senator Whitehouse has introduced the Automatic IRA
    Act, which would create a national requirement for businesses
    with 10 or more employees to adopt a retirement plan.
        Similar legislation has been introduced by House Ways and
    Means Chairman Neal, with a tax credit to fully cover any
    employer costs. We believe these proposals would significantly
    close the retirement plan coverage gap by leveraging existing
    retirement plan systems, while imposing practically no burden
    on employers.
        ARA also supports Chairman Wyden's Encouraging Americans to
    Save Act, which is also a key provision in Senator Cardin's and
    Senator Portman's bipartisan Retirement Security and Savings
    Act. The bill incentivizes and supplements the retirement
    savings of moderate-income workers by expanding and enhancing
    the existing Saver's Credit, turning it into a government
    matching contribution of up to $1,000 a year for workers who
    save in a retirement account.
        The bill also expands eligibility for the new Saver's
    Match, making the full 50-percent match available to families
    earning up to $65,000. With these increased income thresholds,
    over 120 million American workers would now be eligible for the
    new Saver's Match incentive for retirement savings. This
    includes millions of new gig workers in this country, as well
    as government workers like public school teachers, who
    currently are not eligible for matching contributions. Closing
    the retirement plan coverage gap and directly contributing to
    and incentivizing the retirement savings of
    moderate-income workers would have an amazing impact.
        Estimates show the enactment of the combination of the
    Automatic IRA Act and the Encouraging Americans to Save Act
    would create 51 million new retirement savers and over $6
    trillion in new savings over the next 10 years. Nearly all 98
    percent of these new savers earn less than $100,000 a year.
    These two proposals would also greatly benefit the Black and
    Latinx communities, creating over 14 million new Black and
    Latinx retirement savers.
        Retirement savings is accumulated wealth which leads to
    generational wealth and is an essential piece to closing the
    racial wealth gap. Besides these two important policies, as
    discussed in more detail in my written testimony, ARA supports
    several other legislative proposals that would strengthen and
    expand the workplace retirement plan system.
        I encourage the Finance Committee and ultimately Congress
    to enact the Automatic IRA Act, the Encouraging Americans to
    Save Act, and other proposals designed to expand access to
    workplace retirement plans. The 401(k) plan has been a success
    story. Now you can make it a story of diversity as well.
        Thank you, and I am happy to take any questions.
        [The prepared statement of Mr. Graff appears in the
    appendix.]
        The Chairman. Thank you, Mr. Graff.
        And I am glad to have Mr. Certner here. He has been someone
    who has given this committee a lot of counsel over the years.
    We welcome you, sir.

      STATEMENT OF DAVID CERTNER, LEGISLATIVE COUNSEL AND POLICY
                     DIRECTOR, AARP, WASHINGTON, DC

        Mr. Certner. Thank you, Mr. Chairman, members of the
    committee. My name is David Certner, and we thank you for the
    opportunity to testify today on behalf of AARP on improving our
    retirement system.
        A secure retirement traditionally centered on the three-
    legged stool of employer-provided pensions, personal savings,
    and Social Security. Unfortunately, diminishing pensions and
    inadequate savings, plus longer life expectancies and higher
    health costs, have put a secure retirement out of reach for too
    many, requiring Social Security to play an even greater role in
    retirement.
        Social Security is already the principal source of income
    for over half of older households. Roughly one-quarter, about
    10 million people, depend on Social Security for nearly all, 90
    percent or more, of their income. Social Security keeps
    approximately 15 million older Americans out of poverty and
    allows millions more to live without fear about losing their
    income.
        While Social Security is the base of income in retirement,
    more is needed. The dramatic switch from defined benefit plans
    to defined contribution plans over the past 40 years has had
    important implications for retirement security. Employees are
    now responsible for whether and how much to save, and must
    manage their retirement funds, even though most have little
    investment experience.
        Unfortunately, most workers are not saving enough. Of
    course, access to a plan is better than none at all, and only
    about half of all workers have access to a retirement plan at
    work. Congress has taken numerous steps to make retirement
    saving easier, including features such as automatic enrollment
    and default investments, that have helped workers and increased
    savings.
        However, automatic features only help workers who have a
    retirement plan. Expanding coverage to the tens of millions of
    workers without coverage remains a high priority. At the State
    level, AARP is focused on passing what are called Work and Save
    programs, which provide employer-facilitated access to payroll
    deduction savings for workers who do not have a way to save for
    retirement at work.
        Such access helps address the coverage gap, because workers
    are 15 times more likely to save for retirement simply through
    payroll deduction at work. State programs, as you will soon
    hear from my colleague in Oregon, have already shown much
    promise in increasing coverage and savings.
        In addition to State programs, Federal policy should also
    further encourage automatic payroll deduction savings. AARP has
    been a long-time supporter of Federal automatic IRA legislation
    such as that proposed by Senator Whitehouse.
        AARP also supports legislation recently approved by the
    Ways and Means Committee, also introduced by Senators Cardin
    and Portman, known as SECURE 2, which includes many important
    changes. The bill would improve coverage for the 27 million
    part-time workers who generally are not covered by retirement
    savings plans.
        This is especially important for older workers and
    caregivers, who often shift to part-time work. This bill would
    automatically enroll workers in new retirement plans as well.
    Of particular importance, the House version of SECURE 2
    includes a requirement for an annual paper benefits statement,
    which AARP strongly supports. Plan participants, who generally
    prefer paper copies of important financial documents, should be
    provided statements in paper form unless they choose electronic
    delivery.
        Congress needs to ensure workers receive and can review
    their annual benefit statements, similar to Social Security and
    the Federal employee statement of earned benefits, to help
    employees better understand and better manage their plans.
    Ensuring workers receive an annual paper statement can be
    complemented by added electronic measures.
        SECURE 2 would also establish a national lost and found
    office, also proposed by Senators Warren and Daines, to help
    workers locate retirement accounts of previous employers. This
    has become increasingly important as more workers change jobs
    several times over their careers.
        SECURE 2 also makes improvements to the required minimum
    distribution rules, including exempting a threshold amount that
    will both simplify the rules and help preserve savings. AARP
    also supports separate efforts to improve the saver's tax
    credit, which again acts as a matching contribution for low-
    and moderate-
    income taxpayers who contribute to a retirement plan.
    Improvements to the credit, such as those recently proposed by
    Chairman Wyden and others, can encourage and increase
    retirement savings for those least able to save.
        We also must do more to protect retirement nest eggs. All
    tax-deferred retirement savings should be prudently invested
    with reasonable fees and without conflicts of interest. A
    uniform fiduciary standard should ensure that all financial
    professionals act in the sole interest of their customers in
    providing investment advice.
        AARP also urges Congress to discourage pre-retirement cash-
    outs of retirement funds, and instead encourage portability and
    stable lifetime income streams. We should work together to
    encourage asset preservation and to provide low-cost
    distribution and spend-down options that meet workers and
    retirees' needs.
        Finally, AARP commends the Congress for enacting important
    legislation earlier this year to protect the earned benefits of
    millions of workers and retirees counting on multiemployer
    pensions. The legislative support was critical to protecting
    the benefits of at-risk workers and retirees who had worked
    hard, earned their benefits, and were put at risk through no
    fault of their own.
        Again, AARP would like to thank the committee for
    considering the challenges and needs for a secure retirement,
    and for the opportunity to share our policy views.
        [The prepared statement of Mr. Certner appears in the
    appendix.]
        The Chairman. Batting clean-up, as is fitting for
    Oregonians, is Tobias Read, and I want to again commend him for
    the terrific leadership that he has shown on these issues for a
    long, long time.
        Treasurer Read?

                    STATEMENT OF HON. TOBIAS READ,
                   OREGON STATE TREASURER, SALEM, OR

        Mr. Read. Thank you, Mr. Chairman, Ranking Member Crapo. It
    is good to see two Senators from States that played an
    important role in my life, my home State and the State where I
    was raised, and thank you for giving us the opportunity to talk
    about this important topic today.
        My name is Tobias Read, and I have the honor of serving as
    State Treasurer in Oregon. As State Treasurer, I am focused on
    promoting the financial security of all Oregonians. In 2015,
    when I was a State Representative, I sponsored the legislation
    that ultimately created the Oregon Retirement Savings Program,
    which is now known as OregonSaves.
        The State Treasury is tasked with implementing that
    program, and I am here to give you an update on our progress.
    Oregon created this first-in-the-Nation State-based automatic
    IRA program in response to the growing retirement savings
    crisis. When we launched it in 2017, we saw that approximately
    1 million private-sector workers in Oregon did not have access
    to a retirement savings plan at work.
        I am happy to report to you today that more than 110,000
    Oregonians have funded IRAs with OregonSaves, and that
    collectively they have saved over $123 million. We know from
    the research conducted by AARP that people are more than 15
    times more likely to save for retirement if there is an option
    to do so at work. OregonSaves is proving that out.
        As you already heard and are likely already aware, this
    retirement savings crisis is particularly acute for people at
    the lower rungs of the economic ladder, and especially for
    women and people of color. This is one of the reasons that we
    are especially excited: in the past year, OregonSaves added
    home care workers and personal support workers who provide
    home-based help and services to adults and children
    experiencing disabilities across Oregon.
        These workers are obviously doing critical jobs, and we are
    trying to help them prepare for retirement. The inclusion of
    these workers in OregonSaves will not only make this a viable
    career for many more people, but it will reduce turnover and
    thereby improve care for seniors and people living with
    disabilities. It is a win for these important workers, a win
    for the people they serve, and a win for Oregon.
        As we were developing and rolling out OregonSaves, we knew
    that it would be important to build a strong collaborative
    relationship with employers. We constructed the program to
    limit the responsibilities of the employer as much as possible,
    and we are always on the lookout for ways to further reduce the
    time that employers spend facilitating the program. The goal,
    of course, is to ensure that all Oregonians have access to the
    program without placing an undue burden on the small employers
    around the State.
        In fact, in testimony before the Oregon legislature, one
    employer group said, ``The Treasurer's Office has been
    incredible in the implementation of this program. They have
    tirelessly worked with us throughout the rules process to
    ensure that this is easy to implement. Clients are excited
    about it, and employees are excited about it.'' That, by the
    way, is a credit to our team and our staff.
        In the beginning, these accounts were designed to provide
    workers with a continuity of savings that they otherwise would
    not have. Their account moves with them from employer to
    employer. The Roth IRA structure also provides flexibility to
    the savers, managing the contributions, enabling workers to
    leave their money in to grow, to move it elsewhere to another
    IRA, or even to withdraw it any time without fear of penalty, a
    feature that we know has been especially important to people as
    they have faced some real challenges over the last year and a
    half.
        For instance, in the early days of the pandemic as
    businesses were suddenly closing and people still had bills to
    pay and groceries to buy, we saw anecdotal evidence that people
    were able to use their accounts to provide much-needed
    financial stability. Many of these savers did tap their
    accounts, but we have seen many of them intentionally leave
    their accounts in place so that, as their circumstances change,
    they will be able to continue saving.
        Obviously, our roots are around retirement, but OregonSaves
    has given us a way to engage with Oregonians about the range of
    savings needs that they confront, including saving for future
    educational needs through 529s, and health-care needs from the
    ABLE account.
        Looking forward, we are going to continue focusing on ways
    to make it easier for people to save for retirement and find
    ways to further reduce what we hope is an already minimal
    administrative burden for employers. But we are also especially
    supportive of your efforts to incentivize savings.
        The Encouraging Americans to Save Act, which was introduced
    by you, Chairman Wyden, would be a significant boost to
    OregonSaves and other programs like it by offering the matching
    credit you have already heard about. Anything we can do to
    encourage people to save for their future will ultimately take
    pressure off of local, State, and Federal budgets.
        We are also very excited about discussions here that point
    to a possible expansion of who is eligible to participate in
    the ABLE savings program led by Senator Casey and others. The
    success of OregonSaves will have long-term positive
    implications for savers and for Oregon. Fewer Oregonians will
    enter into retirement in poverty, being less reliant on the
    social safety net, and people will have more dignity and choice
    as they age. OregonSaves was designed to improve our business
    climate and meet the needs of workers from a variety of
    circumstances, ultimately increasing the financial stability of
    Oregonians.
        This is something we are very proud of as we get started,
    and we are also happy to say that this is just the start. I
    appreciate this hearing, and I look forward very much to the
    discussion we are having today.
        Thank you, Mr. Chairman.
        [The prepared statement of Mr. Read appears in the
    appendix.]
        The Chairman. Thank you all. I am going to try and see if
    we can cover a fair amount of ground pretty quickly.
        Let me start with you, Mr. Graff. You gave everybody really
    a jaw-dropping statistic early on. I just want to make sure we
    get this right. You said combining our savings credit reforms
    with a national program like the one Mr. Read is talking about,
    OregonSaves, would result in over 50 million additional
    retirement savers, and would add $6.2 trillion in retirement
    savings over a decade.
        So, if I am getting this right--I want to make sure that we
    are--what you are saying is, if you encourage non-savers to
    save and those with limited savings to save more, that can
    really be a head start for America's future with respect to
    retirement savings; is that right?
        Mr. Graff. Thank you. Absolutely, Mr. Chairman. It would
    have a tremendous impact on, frankly, the potential for a
    comfortable retirement for tens of millions of Americans who
    currently do not have access. We know that getting access at
    the workplace as well as auto-enrollment, which is part of
    these proposals, works. The data is absolutely, positively
    clear.
        As I indicated in my oral testimony, the active
    participation rate for folks, regardless of color, is around 80
    percent. So these ideas have been proven to work. We just want
    to scale them at a national level. And what we are excited
    about with respect to your proposal, the Encouraging Americans
    to Save Act, is that we think it will bring even more savers
    who are currently not employed in a typical way, like gig
    workers, into the system, as well as a lot of public employees,
    like schoolteachers, who currently do not get matching
    contributions.
        We are trying to deploy, basically, the success of how
    401(k)s in the private workplace have succeeded and apply it
    much more universally. The data is very clear on this. This
    will work.
        The Chairman. Good. And for the record, I want to make
    clear that this is the kind of principal Tobias Read has been
    employing for Oregon. We appreciate it.
        The next question I want to pose to Ms. Robinson and Mr.
    Graff is on this issue of portability. And the fact is that,
    when the worker takes a devastating financial hit when they
    cash out their retirement too early, the statistics are really
    pretty ugly.
        Research estimates $92 billion leaves the U.S. retirement
    system every year as a result of these early cash-outs. Could
    you two just briefly offer up your thoughts? I want to get to
    one other area before we wrap up, because we are going to work
    with you on this for the long term. In fact, why don't we just
    start with you, Ms. Robinson?
        Ms. Robinson. We absolutely agree. Anything that helps
    participants keep track of their retirement accounts, keeps
    them in their qualified plan systems, we absolutely support.
        In addition to the leakage problem you mentioned, we think
    it will also help with the missing participant problem, where
    participants either have a small account balance or spend a
    short amount of time with an employer, and the employer loses
    track of that participant.
        If there is an auto-portability, then they are able to keep
    track of their accounts, and we think this will be helpful in a
    number of different areas.
        The Chairman. All right.
        Let us turn to this: our question of these abusively large
    IRAs. And I want to get your thoughts on this in particular,
    because it looks to me, as we unpack this--you look at the GAO
    report years ago, reinforced by the new data that when you have
    private equity and hedge fund traders and investment managers
    using these kinds of vehicles--it sure looks again like the
    double standard, because they have access to something that the
    typical American, this person who is not able to save at all or
    cannot save enough, does not have access to.
        So my question to you, Mr. Graff, is, do you think these
    massive accumulations are possible largely as a result of the
    annual contribution limit to IRAs, whether Roth or traditional
    accounts? And what are your thoughts with respect to this,
    because it sure looks to me like they are getting access to
    something that can explode in value, and the typical American
    does not have access to?
        Mr. Graff. Thank you, Mr. Chairman. I think it is important
    in this regard to distinguish between what are called rollover
    IRAs versus contributory IRAs. Rollover IRAs, which most
    Americans are familiar with, come from 401(k) plans, other
    defined contribution plans, and they were already subject to
    very strict limits and non-discrimination rules.
        What you are really referring to is more typically
    described as a contributory IRA, and I think the concern that
    you have usually stems from where venture capitalists
    contribute start-up company stock into a contributory IRA.
    These are hard-to-value assets that typically are valued at
    zero or next to zero. You know, I can give you an example where
    you have a venture capitalist go do ten start-ups in a year.
    They will put start-up stock in ten of these contributory IRAs,
    and one of them hits in a big way like you are talking about
    with the data.
        You could have hundreds of millions, sometimes billions of
    dollars in this IRA. The problem in these hard-to-value assets
    is that, one, they are hard to value, and two, the IRS really
    has practically no ability to enforce how to value them because
    there is typically no appraisal associated with them.
        So I think if you are concerned about this type of usage--
    this idea of putting the start-up stock into an IRA really is
    not a retirement tool. It is more of a tax-planning tool.
        The Chairman. Just so we are clear, what I am talking about
    is not something that regularly the middle-class American has
    access to, in terms of being able to find these kinds of
    investments that just explode in value.
        Mr. Graff. You have to be a registered securities investor,
    and yes, you are absolutely right.
        The Chairman. That is the point.
        Mr. Graff. Right. That is the point.
        The Chairman. Great; thank you very much.
        Senator Crapo?
        Senator Crapo. Thank you, Chairman Wyden.
        I would like to go back to you, Ms. Robinson, and bring up
    a topic that has not really been focused on yet. I have long
    been a supporter of employee stock ownership plans, ESOPs.
        I have talked with middle-income workers in Idaho whose
    opportunity for saving for their retirement essentially has
    just been phenomenally successful through the ability to
    participate in an employee stock ownership plan, and the
    employers themselves are very, very interested in this.
        Do you believe that we should encourage the use of ESOPs
    and, if you do agree with that, could you comment on the role
    ESOPs play in the overall retirement system?
        Ms. Robinson. Yes, thank you. We are supportive of ESOPs
    generally, but also employee stock ownership generally, and it
    has been shown that they are a benefit both to the business and
    to the participants themselves. There is greater employment
    stability.
        People are less likely to leave those jobs. There is less
    likely to be layoffs when there is employee ownership. They are
    more likely to offer secondary retirement plans so that there
    is more opportunity for retirement savings.
        Participants in these plans often save more than they would
    in a 401(k) plan, and they have higher rates of return and less
    volatility than 401(k) plans. So they also cover the under-paid
    employees and lower-paid employees more so than 401(k) plans.
        So we think these are a really good opportunity for
    companies that offer this kind of choice in their retirement
    savings.
        Senator Crapo. Well, thank you. I agree with that
    perspective. I hope we will not lose sight of that as we move
    forward in this important arena.
        Mr. Certner, according to a 2019 survey conducted by your
    organization and the Ad Council of moderate-income adults in
    their 40s and 50s, roughly 47 percent of the respondents
    identified retirement as being in their top three savings
    priorities. While this was just one survey, we can probably all
    agree that we want that statistic to be higher.
        And setting aside for a moment the proposed changes to the
    Saver's Credit, can you speak about other policies that would
    incentivize and encourage workers to save for retirement?
        Mr. Certner. I think first of all, we are talking about a
    large percentage who do not have access to a plan. So
    certainly, having access to a plan such as, for example the
    automatic IRA or programs like the one in Oregon, will help get
    more people covered.
        Because--to put in context what was talked about earlier--
    we have a coverage rate in this country of about 50 percent.
    But that coverage rate has not changed in 4 decades. We have
    changed what type of plans people have, but we have not really
    changed the overall number. So doing more to establish more
    plans would be helpful.
        Also, we have seen that automatic enrollment has been
    incredibly helpful. When plans have automatic enrollment, we
    get significantly more people who basically, through inertia,
    are going to end up doing the right thing--being in a plan--and
    not the wrong thing--being out of a plan. And so we think that
    can be very helpful as well.
        So giving people access to a plan and having automatic
    enrollment are probably two of the most helpful things that we
    can do to improve coverage.
        Senator Crapo. All right; thank you.
        And, Treasurer Read, I understand you were raised in Idaho?
        Mr. Read. That is true.
        Senator Crapo. Well, I am proud to hear that today; thank
    you. I appreciated hearing about your experience with the
    OregonSaves program. It certainly is an interesting program,
    and I would be interested to hear more about how the
    interaction has been with
    employer-provided retirement plans.
        How have the employers reacted to this program now that it
    has been in effect for a few years?
        Mr. Read. Mr. Chair, Senator, thank you for the question. I
    would say there was, you know, some degree of skepticism as we
    got started. There is always some danger in being the first to
    try something. But in the years that we have proceeded, we have
    addressed a lot of those concerns.
        I think there is a range of opinions, of course. But what
    has really been striking to me is the number of small
    employers--we heard this echoed through your opening comments
    and some of the other testimony--who have wanted to provide
    retirement options for their employees but have struggled to do
    so, either because of their other obligations, the cost, time,
    and those sorts of things.
        There is a restaurateur in the community where I live--
    Beaverton always comes to mind--who summarized this really
    well. He said, ``I would love to do this for my employees, but
    I do not have an HR department. I have sandwiches to make.''
        I think we have addressed a lot of the anxiety that people
    felt, as evidenced by the testimony that was offered in the
    Oregon legislature as we were doing some clean-up. There is a
    relentless focus on our part to make it as easy as possible, as
    light a touch as we can possibly muster for employers; and it
    is easy for individual savers to participate.
        Our point here is to introduce something that is otherwise
    complicated and intimidating for a lot of people in a way that
    makes it easy for them to get on a good path.
        Senator Crapo. Thank you very much.
        The Chairman. Thank you, Senator Crapo.
        Senator Grassley is next, and he is in person.
        Senator Grassley. Thank you. Before I ask a couple of
    questions, I would like to say that I appreciate, Mr. Chairman,
    your holding this hearing to examine proposals to enhance and
    expand access to retirement savings vehicles. It was a pleasure
    working with you in the last Congress to enact a bipartisan
    retirement plan that this committee had worked on, I think,
    over a course of three Congresses.
        That legislation, known as the SECURE Act, made a number of
    important reforms to expand access and increase participation
    of employer-sponsored retirement plans. Chief among those
    reforms was to make it easier for employers to pull together to
    sponsor a group retirement plan for their workers. By
    harnessing economies of scale and reducing administrative
    costs, these reforms are making it easier for small businesses
    to offer retirement plans.
        As a result, these reforms have the potential to expand
    retirement plan coverage for millions of American workers. The
    SECURE Act represents an important step forward in improving
    Americans' retirement security. But because we have a dynamic
    economy, that is why we are here now, to see what we can do to
    further the successes of the past.
        My first question will be to Mr. Graff. I, along with
    Senators Hassan and Lankford, introduced the Improving Access
    to Retirement Savings Act, which will make pooled employer
    plans accessible to more employees.
        Our bill clarifies that the small business retirement plan
    start-up credit applies to businesses doing pooled plans, and
    also would allow non-profit employers to just join pool plans.
    So can you expand upon how these provisions could help more
    workers gain access to workplace retirement plans?
        Mr. Graff. Thank you, Senator Grassley. And absolutely, I
    think these are very important changes that we fully support.
    You particularly mentioned your proposal that would expand
    pooled employer plans to cover 403(b) plans, which is a
    particular type of plan like a 401(k) that is utilized by non-
    profit organizations.
        As I know you are aware, in Iowa as well as throughout the
    country, there are literally hundreds of thousands of these
    smaller non-profit organizations that do really important work
    throughout the country. They want to be able to provide lower-
    cost retirement savings options to their employees, and this
    proposal, by allowing them to pool just like private-sector
    employers, would go a long way towards increasing access for
    those employees to a retirement savings program at work.
        The tax credit is also important to clarify, so that if a
    non-profit organization or any organization joins a pooled
    employer plan that might be in existence for a number of years,
    they can still get the start-up tax credit even though the
    pooled employer plan has been around for a while, because they
    have not had a plan before. So these are important changes we
    support.
        Senator Grassley. A third provision in our bill would allow
    employers to make retroactive plan amendments to increase
    benefit accruals for employees up until the due date of the
    employer's tax return. Can you elaborate on how this provision
    could be used by small employers to increase the retirement
    savings of their employees?
        Mr. Graff. Absolutely; thank you again, Senator Grassley. A
    lot of small businesses, as you know, really do not know what
    their financial situation is until after the end of the year.
    Prior to this proposal, under current law a small business, a
    mid-size business, could not do a profit-sharing contribution,
    because they did not know whether or not they had any profit
    until after they had had a chance to do the books and figure
    out where they stood.
        This would allow them more time, up until the due date of
    the tax return, to assess how their prior year's performance
    was and hopefully benefit their employees by providing a bonus
    profit-
    sharing contribution that would be retroactively applied to the
    prior year.
        Senator Grassley. My last question will be to Ms. Robinson.
    In today's economy it has become increasingly rare for
    employees to spend their entire career working for one
    employer. The Bureau of Labor says the average worker switches
    jobs about every 4 years.
        With such frequent turnover, employees may lose track of
    employer-based retirement accounts they contributed to early on
    in their career. Can you comment on ways we could make sure
    workers are not leaving retirement savings behind when they
    switch jobs?
        Ms. Robinson. Thank you, Senator. Yes, and this is a
    concern for our member companies as well. So one we discussed
    earlier was the auto-portability, to make sure that, as
    participants leave one job, they are automatically tracking
    that retirement account moving to their next job.
        Another is the lost and found registry, which was also
    mentioned, which would give participants a database where they
    could look for accounts that they may have left at a previous
    employer, where maybe a merger or acquisition has happened, and
    they no longer know the name of that employer.
        So those are two things that could really help, in terms of
    making sure that there are not accounts left behind.
        The Chairman. Thank you, Senator Grassley.
        Next is Senator Carper on the web.
        Senator Carper. Thanks, Mr. Chairman. Good morning,
    colleagues. Good morning to each of our witnesses, and many
    thanks for joining us today.
        Research shows that--part of my background, I used to be
    Treasurer of the State of Delaware for about 6 years, and I
    focused a whole lot on a pension system, but focused a lot on a
    deferred compensation program to encourage folks to save, and
    in some cases for the State to match that.
        I also worked here in the Senate with Rob Portman, Senator
    Portman from Ohio, to make some changes in the Thrift Savings
    Plan to encourage greater participation, and I think to good
    success. So these are issues I care about, and they are really
    important. You all outlined and highlighted that, and I could
    not agree more.
        Research shows that access to a retirement account is
    critical to helping workers save for their future, and workers,
    I am told, are some 15 times more likely to save if there is an
    option to do so through their employer--15 times. Now nearly
    one-half of private-sector employees do not have access to
    employer-sponsored plans, and many of these individuals work
    for small businesses, which face heightened costs to establish
    these plans.
        In recent years, I am told, a number of States have
    established automatic IRA programs that help extend coverage to
    these workers. States like Oregon have had real success in
    expanding access to retirement savings vehicles, including
    under the leadership of one of our witnesses, Mr. Read. I am
    glad to have you back before us.
        I am encouraged that leaders in my own State of Delaware
    are considering implementing a similar program under the
    leadership of our State Treasurer.
        I have a question for Mr. Read and Mr. Certner. How can the
    Federal Government better help facilitate the broader adoption
    and success of auto IRA plans? What features of the Oregon auto
    IRA program should be replicated, could be replicated by
    similar programs----
        Mr. Read. Senator Carper, I am sorry to interrupt. If you
    are finished, I think it is a great question. I think there is
    a huge opportunity for Congress to provide leadership here. I
    would hope that whatever legislation you might consider would
    preserve the pioneering role that States like Oregon and
    Delaware and others are providing in establishing and designing
    and implementing programs like this.
        I hope that it would allow States to continue that
    experimentation, that innovation, to adapt to changing
    circumstances and needs of our various States, potentially even
    collaborating among States that have seen significant potential
    benefits there as well.
        I think there is real benefit to preserving what Louie
    Brandeis said, which is States' roles as laboratories of
    democracy. Those commonalities amongst the different States,
    the experiences that we have had, I think, are already leading
    to better outcomes for individual savers and ultimately for the
    entire country.
        Senator Carper. Thank you for that.
        Mr. Certner, your comments, please?
        Mr. Certner. Yes, Senator Carper, I think I would agree
    with much of what was just said. You know we had previously and
    have proposals now to do a Federal auto IRA, to make sure that
    every State can have this access and automatic enrollment. That
    would really help move people into the retirement system that
    we do not have today.
        But I think it is important that States which have really
    taken the lead on this now be allowed to continue to do what
    they are doing across the country. We have at least 10 States
    that have done this. We have another 15 or so that are in
    process of either moving towards it or looking at it.
        We want to make sure we continue to encourage that, while
    we also look at the Federal level to see if we can bring this
    up nationally, because we do need to make a change like this
    that brings access and automatic enrollment to the rest of the
    population, if we want to really bump up the numbers of people
    who are actually beginning to contribute to accounts for
    retirement.
        Senator Carper. All right; thank you. Thank you, Mr.
    Chairman.
        I have one more question I would like to ask you--just
    really short answers from each of our witnesses, please. The
    question for each of you is, in addition to automatic
    enrollment and auto-
    escalation of contributions, what are the most effective
    behavioral incentives or educational tools Congress could
    consider, should consider for promoting increased savings?
        Mr. Read. Mr. Chair, Senator Carper, I think you nailed it.
    I think it is automatic enrollment. I think it is auto-
    escalation. And I think the additional credits and matching
    mechanisms in the proposal that Chairman Wyden has offered are
    very good starts.
        Senator Carper. Okay; thank you.
        Other witnesses, please? Mr. Certner?
        Mr. Certner. I would agree with that. Having matching
    contributions would be very helpful, because we know that
    incentives like a saver's tax credit, which are like an
    employer matching contribution, will also greatly increase, not
    just what one may be contributing but obviously will be adding
    to the savings with the match.
        Senator Carper. Great, thank you.
        Mr. Graff?
        Mr. Graff. Thank you, Senator. Coverage and auto enrollment
    are absolutely the key. The data consistently shows that. And
    then, once we get workers to save, we want to do everything we
    can to encourage and incentivize them to keep the money in the
    plan or in the IRA. That is also important: preventing leakage.
        Senator Carper. And lastly, Ms. Robinson, please.
        Ms. Robinson. Thank you, Senator. I agree with what my
    colleagues have said, but I do want to highlight that, for
    those participants who already are auto-enrolled, auto-
    escalated, let us keep moving forward and thinking of new ways
    to continue to incentivize employers to offer these plans, but
    also incentivize employees to increase their savings as well.
        Senator Carper. Here's to you, Mrs. Robinson, and to all of
    our other witnesses. Timely testimony, important testimony.
        Mr. Chairman, thank you.
        The Chairman. Thank you, Senator Carper.
        Here is our plan, colleagues, for the morning. We are going
    to have a vote at 11:30. Senator Crapo and I are going to keep
    this moving. I thank my colleagues for doing it. We have a lot
    of Senators because of the great interest in this. We are just
    going to keep moving.
        Now, Senator Cardin--and many have invoked his name because
    of his good work.
        Senator Cardin. Well, Senator Wyden, Senator Crapo, thank
    you both for your leadership on this issue, and thank you for
    conducting this hearing. Just an observation. When I first
    started on retirement security issues with Congressman Portman
    when we were both in the House of Representatives many years
    ago, it was kind of lonely. We did not have a lot of people
    interested.
        I must tell you, this is such an encouraging hearing, to
    see how many initiatives have been made by members of our
    committee, how many members of this committee are so interested
    in expanding opportunity for savings for retirement.
        I want to just give a shout-out to the tragic loss this
    week of Mike Enzi, a member of this committee. I joined him on
    sponsoring the National Retirement Security Month issues, and
    we miss his common sense in this committee, and his loss was a
    tragic loss this week. It just was--I want to acknowledge that.
        Senator Portman and I have introduced legislation--and I
    think almost all of the bills that we have talked about are
    trying to focus on how we can get lower-income workers and more
    people involved in savings for retirement. I think what we are
    all trying to do is at the entry level.
        There is the leakage issue, that if we were designing
    retirement plans today from scratch, we would not make it as
    easy for people to be able to divert retirement funds for other
    purposes. But we are where we are, and we now need to work with
    the current system, and I think our focus is to help lower-
    income workers to save for their retirement.
        The auto IRAs and the auto issues are fine, but the issue
    for a lot of lower-wage workers is, can they afford to put
    money into retirement? That is why an employer-sponsored plan
    with this employer match where the employer puts money on the
    table--it is hard to leave money on the table, so employees are
    likely to participate, and we know that in the Thrift Savings
    Plan here as Federal workers.
        If you do not have that, the Saver's Credit fills the gap,
    and that is why the expansion of the Saver's Credit is such an
    important part of any effort to try to expand opportunities,
    and it is included in our legislation.
        I also want to mention Senator Wyden's initiative in regard
    to student loan payment, because students, young workers, have
    to pay their student loan debt. That could be--if the employers
    match, that solves the problem, and we get more people engaged.
        I also support expansion to part-time workers, because
    part-time workers are low-wage workers, and any way that we can
    get part-time workers engaged in the plans, I think is also an
    important part. Enhanced catch-up contributions are important
    because, particularly women leave the workplace during parts of
    the years. This gives them a chance of equality.
        We have already talked about the automatic enrollment. That
    is critically important, because too many people make their
    decisions by inaction. Access for small companies to get plans
    is also important. All these issues are incorporated in a lot
    of the bills that have been brought forward.
        So I guess my question--I will start with Mr. Graff--is
    that, if you had to pick the priorities on trying to enhance
    lower-wage workers being able to participate in retirement
    savings, which of these tools do you think are most important?
    Or do we have to have a menu opportunity here, that one will
    not be sufficient without reinforcing other areas?
        Mr. Graff. So we have done a lot of economic modeling with
    a lot of these proposals, and thank you, Senator Cardin, for
    your decades of leadership on these issues. It really is
    telling what will move the needle in terms of getting millions
    of more people into the system, and really boosting savings at
    a macro level.
        The two things that are clear are coverage, getting people
    access to a plan, and auto-enrolling them as much as possible.
    I think right behind that would be, as in your proposal, some
    type of booster incentive for folks. There are a lot of folks,
    particularly in small businesses, a lot of government workers
    in smaller municipalities, who do not have that match incentive
    that private-sector workers do. So those, that combination.
        What we have found--and this is work that was done by the
    non-partisan Employee Benefits Research Institute--is that that
    would increase savings over the next 10 years by over $6
    trillion.
        Senator Cardin. My time is running short. If I could just
    emphasize one point and get your response to that, with the
    chairman's indulgence: the tax deferral is an important point
    for people putting money away for retirement. We find with
    younger workers, it unfortunately, in and of itself, does not
    motivate them to set up an IRA.
        I agree automatic enrollment helps. An employer's match
    definitely helps. The Saver's Credit helps, am I correct?
        Mr. Graff. Absolutely, and making it into a match, a true
    match like you are proposing that would be contributed to the
    401(k) and the IRA account of the worker, is also a key part of
    that.
        Senator Cardin. Thank you.
        The Chairman. Thank you, Senator Cardin.
        Next will be Senator Brown.
        Senator Brown. Thank you, Mr. Chairman. Thank you for just
    a succession of really important hearings that we are doing,
    and this is an amazing committee and the jurisdiction we have,
    and everything that you have done in this committee and these
    hearings is so helpful.
        I want to start with Ms. Robinson. I would--I said March
    6th, the day that the Senate passed the American Rescue Plan--
    we had been voting all night for 13 hours. It was Saturday
    about noon. I turned to Senator Casey, also a member of this
    committee, and said, ``This is the best day of my political
    career.''
        I said it for two reasons. One, that the Senate passed the
    Child Tax Credit, which a number of people on this committee,
    particularly Senator Bennet and Senator Wyden, had worked on
    with us, that we passed that, which will have a huge impact on
    this country for years, we hope.
        The other was the multiemployer pension bill, and that that
    was included in it. So I want to talk to you for a moment, Ms.
    Robinson, about that. The PBGC was tasked with writing
    regulations earlier this month. It released an interim final
    rule. It is a momentous program. It is going to protect workers
    across, especially the industrial heartland and elsewhere, but
    especially there. I am proud of the great work the PBGC has
    done in a short period of time to get these regulations
    written.
        I am concerned, however, about whether the regulations as
    written will provide enough funding to keep them solvent for
    the 30 years, as required by statute. One of my main concerns
    is that PGBC is determining the amount of financial assistance
    by assuming the plan will earn 5.5 percent annually for 30
    years.
        At the same time, they require plans to invest the special
    financial assistance in investment-grade bonds, which typically
    yield about 2 percent. It seems it could encourage the plans in
    the worse shape to take undue risk with their plan assets in
    order to earn the amount required to keep them solvent.
        Have you heard this concern, Ms. Robinson, from your
    members? And tell me what they are saying about this.
        Ms. Robinson. Yes. Thank you, Senator, for the question and
    for your incredible work on the multiemployer pension crisis
    and the work done in the American Rescue Plan. Because of the
    size of ERIC member companies, we would be the last man
    standing. So it was crucial that these reforms happen, and we
    were very pleased to see that legislation passed.
        And we are working with the PBGC. We are looking at the
    guidance that they just put out, and your point is correct.
    There have been concerns raised that if there is not enough
    flexibility for plans to be able to use the special funds in
    the same investments or different investments as they use for
    their regular assets, then these funds might not last the way
    Congress intended and really be used to help the system. And
    not just the multiemployer system itself, but the businesses
    and the economy, which tend to also save as well.
        Senator Brown. Thank you for that.
        Mr. Graff, on a different issue, I want to ask about
    section 402(l) of the tax code. This provision allows retired
    public safety officers to exclude up to $3,000 from their
    income when they use it to pay for health care, for long-term
    care insurance, as long as the premiums are paid directly by
    the retirement system to the insurance provider.
        This does not work for retired Ohio police and
    firefighters. It also does not work in Oklahoma, in Iowa and
    Texas and Maryland, Virginia and Colorado and Nebraska. Would
    you support repealing the direct-pay requirement and increasing
    the exclusion from $3,000 to $6,000? Give me your thoughts on
    that, Mr. Graff.
        Mr. Graff. Thank you, Senator Brown. I think the issue with
    respect to the exclusion for retired public safety officers--it
    is a very important issue. Obviously, these are people that we
    all care about and very much appreciate the amazing work that
    they do protecting us.
        My understanding is that the problem is the fact that a lot
    of these programs, like the one in Ohio, have converted from a
    direct payment to passing these subsidies through health
    reimbursement accounts. It certainly, from my standpoint, makes
    sense to also treat them as direct payments, regardless of
    whether they are being directly sent to a health insurance
    company or being paid through that health insurance company
    through a health reimbursement account. There should be really
    no distinction.
        As for the amount, you know, I think that is something that
    ought to be looked at. I have not seen any specific data as to
    where the costs are. Certainly, we all know health-care costs
    are rising. One of the things to also think about might be
    indexing that amount. So that is certainly something we
    obviously have to take a look at.
        But as to the fundamental issue as to whether it should be
    treated as a direct payment, we certainly agree with you.
        Senator Brown. Well indexing--if we can raise first then
    index. But okay, I appreciate that, Mr. Graff. Thank you, and,
    Mr. Chairman, again thanks for holding this hearing.
        The Chairman. Thank you, Senator Brown. I know this has
    been part of your efforts to help working families, and it is
    great to work with you. Another friend of those workers,
    Senator Cortez Masto, will be next, and then I will recognize
    our friend from Wyoming and tell him a little bit about what
    happened yesterday in this room.
        Okay, Senator Cortez Masto.
        Senator Cortez Masto. Thank you. Thank you so much. Thank
    you to the panelists. It has been such an important
    conversation this morning, and we so appreciate all of your
    input.
        Mr. Certner, let me start with you. In the most recent
    legislative session in Nevada, the Nevada legislature
    considered a measure to establish an auto IRA program, much
    like OregonSaves.
        The bill was met, however, with stiff opposition from some
    in the retirement industry, who characterized State-based plans
    as a low-yield burden on taxpayers and suggested that new
    pooled employer plan rules that worked under the SECURE Act
    would be a preferable alternative for employers in Nevada.
        I was hoping that you could respond to some of these
    criticisms and talk about the features of the State-based
    option, and whether it is population served or specific
    benefits that lead State legislators to get involved despite
    the opposition.
        Mr. Certner. Senator Cortez Masto, I do not understand that
    argument at all. Anyone who is actually interested in coverage
    should understand that these are different options. We
    supported pooled employer plans, and those are targeted
    actually at small employers who want to take advantage of
    economies of scale in setting up pension plans and taking on
    fiduciary duties.
        The auto IRA mechanisms really reach almost a different
    kind of employer, who is not interested in setting up an ERISA-
    covered plan, and it is much simpler and easier for them. They
    have less tasks. They do not have fiduciary responsibilities.
    And you can get a lot more people covered, particularly
    individuals who are not even associated with an employer, such
    as gig workers.
        So these options should work in a complementary manner. It
    is not a choice of one or the other. And in terms of your
    comment about this being bad for taxpayers, I think just the
    opposite. To the extent that we can get more people to
    accumulate savings and have savings in retirement, that is
    going to be less people who are going to have to fall back on
    State or Federal support systems for needed money because they
    will have their own savings that they can rely on.
        So I think actually, it will help taxpayers. So I think the
    argument is just completely off-base.
        Senator Cortez Masto. Yes, and I appreciate that. In
    listening to the conversations this morning in all of your
    opening statements and your responses to questions, there is
    nothing wrong with more choices for individuals to decide how
    they want to participate in a retirement plan.
        But I do also appreciate the comments around financial
    literacy. I know just listening this morning, the concerns
    about the racial retirement savings gap and how it contributes
    to the racial wealth gap--that creates intergenerational
    challenges for families working to get ahead.
        Nevada has a large Latino population. They are a Spanish-
    speaking population, and we found that the language barrier can
    create access challenges for communities seeking access to the
    services and supports that can improve financial stability.
        So I would like to just open it up to the panel. I am
    curious. Can any of you talk about efforts that the retirement
    industry has engaged in to enhance financial literacy among our
    diverse communities? Anybody want to take that on?
        Mr. Graff. Thanks, Senator. I think the retirement plan
    industry is very much aware of the challenges facing all
    communities of color, and language barriers have been an issue.
    I am happy to say that efforts recently, particularly in the
    area of financial wellness, have really been quite successful
    in trying to improve that for people who have access to a plan.
        And so, more and more of the advisors and firms that work
    with employers helping to set up and maintain plans, have been
    providing these type of programs--financial wellness programs,
    participant education--and doing so on a multilingual basis.
        Obviously, we need to do more. Probably the biggest thing,
    as I think a lot of us have emphasized, is the importance of
    getting more working Americans, particularly in communities of
    color, covered by these programs so they have a fair chance at
    getting a comfortable retirement, because it is really the only
    way we have gotten them effectively to save.
        Senator Cortez Masto. Yes, and I could not agree more. Just
    the statistics that you talked about earlier, the panelists
    talked about in our Latinx communities and our Black
    communities. We need to do more. There needs to be more
    financial literacy. There needs to be more outreach. If it is
    auto-enrollment, whatever it is, I think it is worth making the
    effort to do so.
        This is a great discussion. I have more questions. I will
    submit those for the record. I just so appreciate Mr. Chairman
    and the Ranking Member and so many members of this committee
    really focused on this issue, and how we ensure that so many
    across this country have access and opportunity for retirement
    savings. So, thanks again.
        The Chairman. Thank you for your good work.
        Before I recognize our colleague from Wyoming for his
    remarks, I just wanted to pass on briefly what happened in this
    hearing room yesterday: the grief welling up from both sides,
    with colleague after colleague talking about Mike and what we
    remembered so fondly.
        I read a text where he invited me to Gillette, and he was
    worried my wife would not eat steak and beef. Mike was worried
    about it. Well, she happens to love steak. But that was vintage
    Mike Enzi. He was always caring about other people.
        So I just wanted you to know so you can tell Diana, John.
    Just please tell her about this outpouring of grief, because
    that is not what is supposed to happen when you retire. When
    you retire, you are supposed to have a lot of years, a lot of
    years with family.
        So please tell Diana that everybody here is thinking about
    her, and we recognize you for 5 minutes.
        Senator Barrasso. Well, I will most certainly do that, Mr.
    Chairman. I am so very grateful for yours and other's comments,
    and we have heard from so many members. The entire Senate
    Prayer Breakfast today had big pictures of Mike up there in
    various parts of the world in some of the missionary work he
    had done overseas in Africa.
        Every member, Republican and Democrat, had the kindest
    things to say about the kindest man you would ever know. He was
    a long-term member of this committee, did an amazing job in the
    Senate. Twenty-four years, and he always won with big, big
    numbers, and it is because people really--they respected him
    because he respected them. They understood him because he
    understood them and their problems. They believed in Mike
    because they knew he believed in them, and it was a model for
    all of us.
        So I am very grateful for the kind comments of you, other
    Senators on this committee, and the entire body of the United
    States Senate. Yesterday on the floor, Senator Leahy, as
    president pro tempore, started and then the majority leader and
    the minority leader both spoke about Mike. Very kind, as you
    can imagine, and Cynthia Lummis and I gave presentations as
    well and big pictures of Mike with a smile.
        Last night we met with his staff, former staff members--
    some of them are still on the Hill, others from the community,
    and we had a big gathering in Senator Lummis's office, just to
    share some of the great stories that we all have of the memory
    of a remarkable man. So, thank you very much, Mr. Chairman. I
    am very grateful.
        I also want to thank you and Senator Crapo for holding this
    important hearing. A secure retirement is important for all of
    our constituents, and the Federal policy should reflect that
    importance.
        So, for Mr. Graff, we have data here on employee access and
    participation rates, and for employees working at small
    businesses--fewer than 50 employees--only half of them have
    access to a workplace retirement plan, it looks like. At all of
    these businesses, all of these small businesses, it seems like
    only about a third of the employees actually participate in the
    plans.
        So we have seen various proposals to improve participation
    in the plans. What can Congress do to help small employers use
    these proposals to encourage participation in plans?
        Mr. Graff. Thank you, Senator. One of the things that is
    critical in terms of getting workers to actually participate--
    and the data is very clear on this--is auto-enrollment. We
    talked about that a little bit before. But to the extent we
    could encourage smaller employers, frankly all employers, to
    auto-enroll their workers into these plans, what we see from a
    behavioral, economic standpoint is that they stick with it.
    They continue to participate.
        So the two critical elements--having access in the
    workplace and getting small businesses to adopt a plan, and
    making it easier for them--we did one amazingly important step
    in the SECURE Act with pooled employer plans, and thank you for
    that.
        But I think there are some other things that we can do to
    make the smallest of businesses--to make it easier for them to
    offer these programs. One is a tax credit, as some have been
    proposing, that would be 100-percent of the cost for the
    smallest of businesses.
        There is something to be said for being able to tell a
    small business owner that this is effectively free; it is not
    going to cost you anything. The marketing value of that is very
    meaningful. And then there are some things that we could do for
    the smallest of businesses around safe harbors, to make the
    rules even simpler for them so that it is cost-free and worry-
    free.
        If we can do those things and do automatic enrollment, we
    can make it a long way towards getting the employees that you
    are talking about part of the system.
        Senator Barrasso. So, in terms of the auto-enrollment, it
    is kind of like for organ donors, opt-in versus opt-out, and
    making the decision there, where two countries' organ donation
    numbers, big or small, relate to whether people have to choose
    a decision.
        Mr. Graff. Exactly; precisely.
        Senator Barrasso. So, in your testimony, you mentioned the
    importance of--you just worked in the word ``cost'' there. So,
    what costs do small businesses face today when setting up and
    running a retirement plan for their employees? Because, as you
    said, if we can get it to zero, there is much more of an
    incentive.
        Mr. Graff. Absolutely. So the two chief costs are the
    administrative costs associated with implementing a plan, and
    there are requirements and laws and rules and regulations, and
    there is a cost associated with that. And then for some
    employers, there is a cost associated with having to make
    employer contributions to the plan, even if they really cannot
    afford it, to satisfy certain non-
    discrimination rules.
        So I think a combination of encouraging auto-enrollment,
    but also, for the smallest of businesses, maybe doing a safe
    harbor for smaller businesses that would streamline those
    regulations, make it easier for them to put a plan in first
    without having to deal with both the admin costs and the
    employer contribution costs. That would go a long way towards
    expanding coverage in the small business sector.
        Senator Barrasso. Sir, in your opinion do the proposals
    that we are discussing here today, do they make it easier for
    small businesses to establish retirement plans for their
    employees, and is there more we can do?
        Mr. Graff. I think that a lot of these proposals do move in
    that direction, but I also think there are additional things we
    could do to make it easier.
        Senator Barrasso. What might those be?
        Mr. Graff. Well, for example, you could have for the
    smallest of businesses, it is called a safe harbor design with
    lower limits, because a lot of small businesses do not need to
    save a lot. It is really just to start saving a few thousand
    dollars for many of these business owners. It goes a long way
    towards the ultimate goal.
        If we could create a plan that was a safe harbor plan--
    perhaps with lower limits--and all of the testing and
    administrative and regulatory requirements could be eliminated
    for those smaller business plans, that would have a tremendous
    effect in terms of making it easier for them.
        Senator Barrasso. Thank you.
        Thank you, Mr. Chairman.
        The Chairman. Thank you, Senator Barrasso.
        I believe next we will have Senator Thune, who I am told is
    on the web.
        Senator Thune. Yes, sir. Thank you, Mr. Chairman. And I
    want to thank the witnesses for being here today as well, as
    the Finance Committee reviews the state of retirement savings
    in our Nation and a variety of proposals intended to further
    encourage Americans to save for retirement.
        This question is for Ms. Robinson. In your testimony, you
    outline a number of proposals that have been introduced this
    Congress to encourage retirement savings, one of which would
    allow employers to make matching 401(k) contributions for
    employees paying down student loan debt.
        Do you believe companies, both large and small, would
    choose to make these matching contributions? And in addition,
    for employers choosing to make these matching contributions, in
    your view, what degree of confidence would they have in knowing
    their employees are in fact making their monthly student loan
    payments in full to the loan servicer?
        Ms. Robinson. Thank you, Senator, for the question. First,
    yes, we are very supportive of this provision. And this is
    something that--a lot of times, as a policy person, you bring
    ideas to your member companies and ask them if they are okay
    with them. But this is one that they came to us with.
        They were definitely seeing from their employees--people
    were leaving positions for what they call low-dollar amounts,
    because every dollar was needed to repay their student loan
    benefits. And so, something like this, any benefit they could
    see where they could help people with their student loan
    repayment and also help them contribute to their retirement,
    would be very beneficial and critical.
        In terms of making sure that people are actually making
    their student loan repayments, they are already in place:
    employer-
    provided student loan payment assistance programs. So there are
    payroll providers and other third-party administrators who are
    helping employers verify this information, and to do this in
    conjunction with the 401(k) plan would be something that could
    easily be done and verified.
        Senator Thune. Thank you.
        And this is a question, frankly, for any of the witnesses.
    As you know, the SECURE Act increased the required minimum
    distribution age from 70\1/2\ to 72. Proposals under
    consideration this year would further increase the RMD age to
    75 over the next decade. Could any of you share your views on
    proposals to further increase the RMD age and to what extent 75
    is the most appropriate age for it to be increased further?
        In addition, since Congress increased the RMD age to 72
    through the SECURE Act in 2019, can any of you speak to what
    extent we have already seen the effects of that increase, or if
    it is too soon to tell?
        Mr. Certner. Senator, I think it may be too soon to tell
    from the previous change. But what is clear is that, to the
    extent that you can raise the age, you are going to do a couple
    of things. One, you are going to simplify the rules because,
    obviously, people are not going to have to deal with the issue
    for a number of years, and that will help simplify it. It will
    also ensure that people can keep money in the plans longer.
    Remember, these distribution rules are based on lifetime
    estimates, and they were set, I think, almost 50 years ago now.
    So, if you updated those ages, 75 is probably about the right
    age.
        And also, we want to make sure that we are not asking
    people on average to take their money out too fast because,
    obviously, half the folks are going to be living longer than
    average. So we want to be able to make sure that people can
    keep money in their plans.
        A similar proposal that is on the table is to have an
    income threshold below which the minimum distribution rules
    would not apply. Again, that would be very much of a
    simplification rule, because anybody below that level just
    would not have to deal with those rules at all and get caught
    up in the potential penalties and so forth for not obeying the
    rules.
        Senator Thune. Anybody else?
        Mr. Graff. I would like to just echo what David said about
    the idea of having an amount, a safe harbor amount of
    contributions in an IRA or a plan that would be exempt from the
    required minimum distribution rules. For a lot of folks in
    retirement, for elderly folks, it is very complicated.
        If they have $20,000, $30,000 in an IRA, trying to figure
    out that amount is extremely complicated. A lot of them do not
    have access to professionals to help them figure it out. So, if
    we could come up with some amount--I have seen proposals, I
    think, for like $100,000, where folks, seniors would be able to
    avoid having to deal with this altogether. It would be a huge
    simplification for a lot of folks.
        Senator Thune. Okay; thank you.
        I have another question, Mr. Chairman. My time is running
    out, so maybe I can submit it for the record. But I do want to
    get, Mr. Graff, you on the record with respect to the issue of
    the gig economy. This workforce increased 50 percent between
    2001 and 2016, and I would like to ask whether existing
    retirement plans like pooled employer plans, for example,
    adequately accommodate contractors in their ability to save for
    retirement. So I will put that one to you for the record, and I
    would be interested in getting your response to that.
        Thank you, Mr. Chairman.
        The Chairman. I thank my colleague. I am very interested as
    well in this issue that Senator Thune is talking about, so I
    thank my colleague for asking that.
        We have a vote on. Let us see if we can get Senator
    Lankford and Senator Daines in and still somehow make the vote.
    Senator Crapo is trying to get back, so, Senator Lankford.
        Senator Lankford. Great. Mr. Chairman, thank you. Thanks
    for the bipartisan conversation on retirement savings. This
    should not be a partisan issue. This is an issue we should be
    able to work together on, so I appreciate that.
        Senator Grassley and Senator Hassan and I are partnering
    together to reintroduce the Improving Access to Retirement
    Savings Act, which some of you have mentioned already--I
    appreciate that--trying to deal with multiple-employer plans.
    Then last month, Senator Bennet and I introduced the Enhancing
    Emergency and Retirement Savings Act of 2021, which a couple of
    you have mentioned already today, so I appreciate that.
        I want to be able to drill down a little bit more. This is
    a result of conversations I have had with multiple folks in my
    State who want to be able to set aside for retirement but are
    also worried about not having enough in their savings. So they
    think, ``How can I save for retirement when I do not even have
    enough in my emergency account?'' So they just do not do
    retirement savings and stop setting anything aside on this.
        The concern is, how do we actually incentivize that when
    the most recent survey from a couple of years ago said that 4
    in 10 Americans could not even come up with $400 if they had to
    at the last minute?
        So the goal of the legislation that Senator Bennet and I
    have together is to try to figure out, how can we create
    flexibility in the plans so that, if you have retirement
    savings plans, you could one time a year take out $1,000 as an
    emergency without penalty? It would give you the opportunity to
    be able to pay that back. When you had actually paid that back,
    you could do it again. But you would be limited in the number
    of times.
        We do not want this to be a bank account. We want it to be
    a retirement savings account. But we do want people to have
    access to those retirement savings when they have an emergency.
        Ms. Robinson, you mentioned that earlier in your oral
    testimony. You mention it in your written testimony as well. Is
    that the right kind of flexibility, to be able to give the
    individuals the right amount and the right way to be able to
    take this on?
        Ms. Robinson. Thank you. Thank you for both your work on
    this and for the question. We believe that flexibility is
    appropriate both ways, for the participant, so that they have
    this money in their retirement savings, and when we do come to
    them and say, ``Hey, let us put this money away,'' and the
    response sometimes is, ``I do not have enough, or I might need
    this for an emergency later down the road,'' you can say, ``You
    can take this out for an emergency.''
        It is also flexible for the plan sponsor, in terms of not
    having to set up a separate account or maintain different
    account information for the participant. The amount, $1,000, we
    think is appropriate. We got responses back from our membership
    that were anywhere from $1,000 to $3,000, so I think there is
    still room for conversation in that.
        But I think the consensus was definitely on the smaller
    side. You do not want it to be too large to encourage, as you
    said, people taking it out for things other than emergencies.
    But you do want to make it large enough that they can cover an
    emergency that comes up.
        Senator Lankford. Mr. Graff, you work with a lot of
    different employers. How would this flexibility work? Is this
    the kind of thing that employers are looking for as well,
    because we are trying to design this in such a way that it is
    simple for employers, simple for the plans themselves to be
    able to manage, and simple for individuals to be able to get
    access to funds in case of emergency. Would this work in this
    kind of structure from what you see?
        Mr. Graff. Definitely, Senator Lankford. And I also want to
    say, thank you for your leadership on this important issue. The
    issue of emergency savings, particularly over the last year and
    a half, has become a particularly obvious and acute problem, as
    you mentioned, given the fact that so many Americans could not
    come up with $400 in the case of emergency.
        This would go a long way to solving that problem and do so
    in a way that is not too much of a burden on employers, because
    it does not require them to maintain two different types of
    savings systems, and would also do so in a way that does not
    undermine the existing retirement saving system, because
    employers are not forced with a choice between one account
    versus another account.
        So we think this is the absolute right way to go, and it
    will make a huge difference in terms of making people not only
    able to deal with unfortunate situations, but frankly it will
    make it more comfortable for them to save in the first place,
    because they will know that, in the case of emergency, they
    would have access to this money.
        Senator Lankford. Ms. Robinson, you, in your written
    testimony and then you just mentioned it in your oral
    testimony--I do not know if everybody caught it; I caught it
    when you said it. You brought up an incredibly wonky budget
    issue, the issue of single-employer pension plan premiums being
    considered on budget, and so they are used as a pay-for and
    used for spending elsewhere.
        My friend and all of our friend, Mike Enzi, who passed away
    this week, that was his bill that actually our office is
    carrying now. We have through this year--not just since his
    passing obviously this week, but we started earlier this year--
    we are working together, with bipartisan support as he had
    bipartisan support for that in the past.
        I was surprised when you mentioned that, because a lot of
    people do not dig down into that. But we think it is a really
    important issue. Why is that important to you?
        Ms. Robinson. Thank you. Thank you for your work on this.
    Thank you for allowing me to be even more wonky and talking
    about it even more. So single-employer PGBC premiums for
    employers that offer defined benefit plans--increasing
    unnecessarily the premiums has led them to make negative
    decisions about their plans, whether it is to freeze the plan,
    to not allow new workers in in an effort to get that number
    down. The best way to get the number down is to have fewer
    people who are subject to that premium, which is unfortunate
    because the PBGC single-employer fund is adequately funded and
    has been for the last 10 years.
        So it has not been necessary to have an increase, and
    neither the PBGC nor the administration has called for an
    increase in these premiums. They have been done simply to raise
    money on the budgetary side, and it is a little bit of a
    gimmick because the money goes to the PBGC in a lockbox. It can
    only be used for people who are in defined benefit plans, but
    it shows up in the budget numbers as going to general
    treasuries and can be used for other things.
        So we have been working very hard, and we appreciate your
    efforts on this, both in educating the Congress about this,
    because it is a budgetary gimmick that has a negative impact on
    retirement plans, and moving forward to make sure that this
    does not happen anymore. So, thank you.
        Senator Lankford. Well, thank you.
        Thank you, Mr. Chairman.
        Senator Crapo [presiding]. Thank you.
        Senator Daines?
        Senator Daines. Thanks, Mr. Chairman. I am glad to be here
    today to talk about the importance of retirement security and
    some of the ways that Congress could help Montanans and all
    Americans better prepare for retirement.
        One very easy thing Congress could do to help current and
    future retirees is to pass the bipartisan bill that I
    introduced with Senator Warren, which is the Retirement Savings
    Lost and Found Act. I am happy this legislation has actually
    been included in House Ways and Means Chairman Neal's and
    Ranking Member Brady's Securing a Strong Retirement Act, as
    well as in Senator Cardin's and Senator Portman's Security and
    Savings Act.
        Our bill recognizes that Montanans and Americans are
    switching jobs at higher rates than ever before, and are often
    unknowingly leaving behind their 401(k)s. In fact, these
    numbers are staggering. According to the analysis released just
    in May of this year, there will be 25 million forgotten 401(k)
    accounts.
        I am not sure I would have forgotten one, but I guess that
    happens now. That is about $1.35 trillion in assets,
    representing 20 percent of the $6.7 trillion in total assets in
    401(k) plans. Our bill would solve this problem by creating a
    national lost and found registry for retirement accounts.
        Using this registry, employees will be able to find all of
    their former employer-sponsored retirement accounts in one easy
    location online. This bipartisan bill will be a huge help for
    employers as well, who often spend countless hours trying to
    reunite employees with their lost accounts. It is a win for our
    workers and families and businesses, and I hope we can get this
    passed into law.
        A question for the panel. We will start with you, Ms.
    Robinson, and we will just go down the line since you have been
    wonking out here and geeking out on policy. Do you agree that
    creating some kind of retirement lost and found registry would
    help reunite workers and retirees with their missing retirement
    accounts?
        Ms. Robinson. Absolutely. So, thank you for the legislation
    and for your work. We fully support it. The missing participant
    problem has been something that ERIC has been working on with
    the Department of Labor for quite some time.
        Employers spend a lot of time and effort voluntarily
    setting up benefit plans, with the ultimate goal of getting
    participants a retirement benefit. So finding these
    participants is a large part of what they consider important,
    and it is critical.
        To your point, not only are people changing jobs more, but
    companies are merging, acquiring other companies. Their names
    are changing, and one of the things we found is that when
    employers try to connect with the participant, since the
    company name is now different from the company that they worked
    for, they are hesitant to give personal information about a
    retirement plan.
        So we think the registry would be very helpful, not only in
    addressing that issue but really just raising the profile, that
    there is this money out there that people may have forgotten
    about, and that they should really be looking at it and trying
    to get that money back to them.
        Senator Daines. I think we all remember those calculations
    that were shown, where the earlier you get in, the greater
    effect that has, certainly in terms of compounding effect on a
    retirement account, and just to help oftentimes younger
    employees to consolidate that, find it. It will help prepare
    them for retirement.
        Ms. Robinson. Exactly.
        Senator Daines. Yes.
        Mr. Graff?
        Mr. Graff. Thank you, Senator Daines, and we also fully
    support your effort in this area. We have heard from our
    thousands of plan sponsor members, and they are, as was just
    stated, very concerned about having to deal with these missing
    participants. This would go a long way to helping solve that
    problem.
        In fact, we would even like to talk to you about perhaps
    expanding it a little bit more than its current levels. For
    right now, there is a part of your proposal that would allow a
    plan sponsor to send money over to the PBGC as a sort of way to
    collect these accounts, the actual assets of the account.
        We would like to at least discuss with you the idea of
    maybe expanding that a little bit, so that amounts, somewhat
    higher amounts that are in accounts of missing participants,
    can also be sent to the PBGC, because they are in a much better
    position to help find these lost individuals as opposed to a
    small business owner, who really is in no position to figure
    out where these folks potentially are. And so, we would like
    to--we happily will work with you about doing more.
        Senator Daines. Thanks, Mr. Graff. Happy to have that
    conversation as well. Thank you.
        Mr. Certner?
        Mr. Certner. Yes, and to be short and quick about it, we
    have supported your bill, as you know. We support its inclusion
    in the House Ways and Means package. We certainly support the
    Senate acting on this as well. I think, as you know, it is
    really hard enough for people to save these days, so the least
    we can do is reunite people with their own money.
        Senator Daines. Great; thanks.
        Mr. Read?
        Mr. Read. Sure, Senator Daines. I think it is a good idea.
    Anything we can do to reunite money with its rightful owners is
    good. Another thing Congress could do is help the U.S. Treasury
    send the billions of dollars of unclaimed savings bonds to
    State Treasurers, so that they can reunite them with their
    rightful owners as well.
        Senator Daines. There is the voice of a State Treasurer
    right there. Thank you.
        Senator Crapo, thank you.
        Senator Crapo. Thank you, and I believe we have Senator
    Cantwell with us remotely. Is Senator Cantwell with us?
        How about Senator Young? Senator Young, are you with us?
        Senator Young. Thank you, Mr. Chairman.
        Senator Crapo. Go ahead.
        Senator Young. I want to thank our witnesses for spending
    the morning with this committee to discuss retirement security.
    This has been an issue of particular importance to me since I
    came into the U.S. House of Representatives back in 2011, and
    now as ranking member of the Subcommittee on Social Security,
    Pensions, and Family Policy.
        I will continue to focus on meaningful ways we can help
    Americans prepare for their retirement. In Indiana, only 40
    percent of the State's workforce participates in an employer-
    provided retirement plan. In fact, just half of our Hoosier
    workers are offered such a plan at all. I will soon be
    reintroducing my Retirement Security Flexibility Act, to help
    more Americans save for retirement by expanding access to and
    participation in well-designed workplace retirement plans.
        There are really two features to this legislation. First,
    my bill would enable more small businesses to offer retirement
    plans by providing flexibility on the employer contribution
    requirements for safe harbor eligibility. Second, the bill
    encourages those workplace plans to include automatic
    enrollment and automatic escalation provisions, to make it
    easier for workers to participate and more quickly escalate
    their savings.
        Mr. Graff, could you please speak for a moment on the
    barriers that currently prevent small business owners from
    offering a retirement plan for their employees?
        Mr. Graff. Thank you, Senator Young. I think the two key
    issues that a lot of small businesses face on a daily basis is
    they are, frankly, struggling through the challenges of the
    pandemic and other things that a small business owner has to
    deal with in terms of keeping their business going, revolving
    around administrative costs associated with plans as well as--
    as you alluded to, and I think is an important part of your
    proposal--the idea of trying to have some flexibility around
    the costs associated with employer contributions.
        And so, I think if we could do some things to address both
    of those points, either through tax credits or making the rules
    easier, it would go a long way to making it easier for small
    businesses in Indiana to offer plans for their employees. We
    would be happy to work with you on some other ideas around even
    simpler safe harbors for the smallest of businesses that would
    make it, for those very small businesses, easier for them as
    well.
        Senator Young. I will look forward to that opportunity to
    work together. How specifically would easing safe harbor
    eligibility rules for these smaller enterprises fit in with
    other incentives such as the start-up credit?
        Mr. Graff. So the start-up credit particularly gets to the
    administrative costs, and these are plans that are subject to
    lots of different rules and regulations, as I know you are
    aware.
        So there is a certain cost associated with operating a plan
    that has to be met, and there are tax credits that were in the
    SECURE Act, and there are proposals to actually expand those
    credits to 100 percent to cover those out-of-pocket costs for
    the first 2 years of a small business. So we can tell those
    small business owners that, hey, this is essentially free from
    an administrative standpoint.
        And then on the contribution side, there is an idea to have
    even a simpler safe harbor for small businesses with say 25, 50
    employees or less, where they would not have to make any
    employer contributions necessarily if they cannot afford it, as
    long as they have limits that are a little bit lower than a
    typical 401(k) plan.
        And so this super-simple safe harbor, if you will, would be
    a lot easier on those microbusinesses because, one, there would
    be a tax credit to fully cover the entire cost, and they would
    not have to worry about the testing requirements that sometimes
    require them to make contributions they cannot afford.
        So really you could tell that small business owner, hey,
    there is no reason not to do this because this is practically
    free.
        Senator Young. Okay. Thank you for that response.
        My time is expiring, so I think I will end with maybe what
    I hope is a ``yes'' or ``no'' response from you. As I shift to
    the employee side, data from 2020 indicates that, on average,
    around 87 percent of employees participated in retirement plans
    when those plans had an auto-enrollment feature. Without auto-
    enrollment, that number drops to 52 percent. The data also
    shows that 91 percent of employees who are auto-enrolled do not
    drop out.
        So, in your opening testimony, you shared that auto-
    enrollment is the key to addressing racial inequalities in
    retirement plans. My proposal would further incentivize auto-
    enrollment and auto-
    escalation. Do you think that proposals like mine could help
    bridge racial inequality as it relates to retirement security?
        Mr. Graff. Very much so, Senator. It is very clear from the
    data that if we can get workers access to plans and get them
    auto-
    enrolled, we can effectively, with respect to retirement
    savings, eliminate a large portion of the racial disparity that
    we have seen to date in a lot of the data.
        We have data that shows when you do both those things, you
    can pretty much eliminate that, and regardless of color, people
    are saving at the same rates.
        Senator Young. Thanks so much.
        Mr. Graff. Thank you.
        The Chairman. Thank you, Senator Young.
        I believe Senator Cantwell is next, and then Senator
    Hassan, and I just would say to colleagues on both sides, we
    are getting close to wrapping up.
        Senator Cantwell?
        [No response.]
        The Chairman. Senator Hassan?
        [No response.]
        The Chairman. All right. She is on her way. And do we have
    reports on Senator Cantwell? Was she planning to come in
    person?
        Okay. No reports on how long it might take Senator Hassan?
        Senator Cantwell. Hi, Mr. Chairman.
        The Chairman. There is Senator Cantwell.
        Senator Cantwell. Thank you so much for this important
    hearing.
        One continuing challenge we face on retirement plans and
    the gap coverages, particularly for employees of small
    businesses and gig workers and those who are self-employed--the
    Bureau of Labor Statistics estimates that 53 percent of
    businesses with less than 50 people have access to workplace
    retirement. By comparison, 69 percent of those firms with more
    than 50 workers and 83 percent of those firms with more than
    100 workers have retirement plans.
        So, Mr. Graff, you also noted this in your testimony, that
    the gap is most pronounced between African Americans and Latino
    workers.
        Thankfully though, States are leading the way to expand
    retirement savings options through innovative solutions. In our
    State, we created a small business retirement marketplace in
    2015, which makes it easier and less expensive for businesses
    to offer retirement savings options to employees. Washington
    employers with fewer than 100 employees are able to voluntarily
    participate in this marketplace, shop for lower-cost, portable
    retirement saving plans for employees.
        Mr. Certner and Mr. Graff, what has been the impact of
    these kind of marketplaces on small business participation and
    making retirement plans supportable? What is the impact to
    saving rates to those employees?
        Mr. Certner. I think that you are rightly talking about
    targeting the small business sector, because we know that those
    with the least coverage are either those who are working for
    small business or those who are gig workers or independent
    contractors who may not be covered at all.
        And so providing--we have been for years trying to provide
    incentives for small employers. The recent credit for employers
    to make it simpler and easier and less costly to put in plans
    is very helpful. Having automatic enrollment is very helpful,
    anything we can do to expand access.
        The work that States are doing now basically fills in the
    gaps for small employers that do not want to put in a plan, do
    not want to take on any of the fiduciary responsibility or any
    of the other cost or bothers because they are running a small
    business. They also do not want to run a plan. Having State-run
    plans step in and facilitate programs and use payroll deduction
    to enable more people to save has really been, I think, the
    biggest jump and change that we have had in the last few years,
    and something I think more States should consider.
        We are basically working at AARP and across the country to
    encourage more States to adopt these employer-facilitated
    payroll deduction programs.
        Senator Cantwell. So I know in the chairman's State in
    Oregon, they have an auto IRA model which allows workers to
    save through their employers' retirement saving plan. So what
    would we need to do at the Federal level to aid in the
    implementation of these State-based auto IRA programs?
        Mr. Certner. I think one big help is, obviously, a signal
    at the Federal level. One, we could do it federally for the
    States that are not engaged. Second would be to make sure, at
    the Federal level, that we signal to States that what they are
    doing is good, that they can go ahead and keep experimenting
    and working on what they are doing at the State level.
        A third piece is also improving the Saver's Credit so that
    small employers in particular will have a type of matching
    contribution, the individuals can have a matching contribution
    for contributions that they make, either for a small employer
    plan or that they make through some of these State-run
    programs.
        We know what incentives work: payroll deduction, automatic
    enrollment, matching contributions. So being able to get those
    to a more universal group of employees is what is going to
    really bump up the coverage numbers.
        The Chairman. Thank you.
        Senator Cantwell. Thank you.
        Well, Mr. Chairman, I know you and I are both in the State
    innovation camp, but I think again it shows you why allowing
    innovation to happen at a less bureaucratic level gets us
    answers that we need. So I hope we can pursue avenues to making
    small business retirement more of an option and more of a saver
    for so many Americans. So I thank you for the hearing, and I
    thank the witnesses.
        The Chairman. Thank you, Senator Cantwell. And the fact is
    that the Pacific Northwest is again out in front in the
    innovation derby, and we are very proud of that. And what has
    been striking is--Mr. Graff has really touched on it today, and
    we are going to wrap up here in a moment and talk about the
    bipartisan path forward.
        But what it really also allows us to say is, when Oregon
    and Washington are doing this phenomenal work and leading the
    way, you partner with what we are talking about now, for
    example, at the Federal level, and you get what Mr. Graff told
    us was this jaw-dropping number.
        Senator Hassan, I know you have had a lot of hearings this
    morning. But I mean, what Mr. Graff told us is that the
    combination of these State efforts and these Federal efforts is
    really helpful for two groups of people: people who cannot save
    at all and people who cannot save enough.
        If you mobilize innovative approaches at the State and
    Federal level, Mr. Graff tells you in the next decade, you are
    going to make an enormous amount of difference for our families
    in New Hampshire and the like. We are going to talk about it
    when we wrap up.
        But I think it is great to see Oregon and Washington pave
    the way at the State level, and what we are going to try to
    do--and Senator Crapo and I have been talking about it--is
    matching at the Federal level.
        Senator Hassan?
        Senator Hassan. Well, thank you, Mr. Chair and Ranking
    Member Crapo, and I never like to cede innovation chops to any
    other part of the country. We are pretty innovative in New
    England and New Hampshire too. But boy, it is good to see the
    witnesses, and it is really good to be having this hearing,
    because we want every American to be able to save for a
    dignified retirement, and that is really what this is all
    about, and I really look forward to continuing to work with all
    of my colleagues to do that.
        I have a couple of questions. I will start with you, Ms.
    Robinson, because one of the things I have been focused on is
    military spouses and their capacity to save, because they often
    face a wide gap in terms of retirement because they move
    locations more frequently. So they do not always stay long
    enough in one job to become eligible for employer-sponsored
    retirement plans, and that obviously means they have less
    employer matches for retirement savings. So Senator Collins and
    I have a bill to help address this issue by incentivizing
    employers to make military spouses immediately eligible for
    retirement plan participation, including employer
    contributions.
        So, Ms. Robinson, do you believe that providing employer
    incentives would help military spouses save more for
    retirement?
        Ms. Robinson. Of course, all incentives help employees save
    for retirement, so we actually support that, and thank you for
    your work. We have not taken a position on this. I would have
    to take it back to our membership. But obviously our member
    companies are at the forefront of offering retirement plans. We
    believe it is an important thing.
        So I am very happy to work with you to make sure
    administratively it is feasible, and that whatever we do put in
    place is actually helpful to the spouses as they are moving
    from job to job.
        Senator Hassan. Yes; I appreciate that very much. It is
    something that we have seen a lot of action on in a variety of
    different ways, because military spouses, you know, face such
    unique situations. So, thank you for being willing to take it
    back to your membership.
        I also wanted to talk generally to all of you about the
    issue of retirement savings for women, because women often
    struggle to save enough for retirement. They lag behind men due
    to a number of factors, including lower earnings and more time
    away from the workplace because they are primarily caregivers
    in a lot of circumstances.
        So the pandemic exacerbated many of these issues, with
    nearly 1.8 million women leaving the workforce. So, to each of
    you, how can Congress help address the retirement gap for
    women, especially as the country recovers from COVID-19? We
    will start with Treasurer Read and just move right down.
        Mr. Read. Mr. Chair, Senator Hassan, I think it is an
    excellent observation. The work that we are doing in our State
    continues to be about making it easier for people to get
    started at an earlier age and establish that habit.
        The power, I think, of our example is not going to become
    fully realized until someone who starts, maybe without
    realizing it, early in their career gets to the point that that
    has become a habit and moves on. I think that is especially
    true for women and people of color, who do not tend to have
    that access through their employers.
        So auto-enrollment, escalation, the credit that Senator
    Wyden and others have offered, I think those are all really
    important elements.
        Senator Hassan. Thank you.
        Mr. Certner?
        Mr. Certner. I think you make a good observation about
    women lagging behind, obviously, for a number of reasons,
    including lower wages and less access to retirement plans, more
    part-timers. We are very strongly supportive of improving
    coverage for part-time workers. We know that it is particularly
    helpful to women who are caregivers.
        We are generally very supportive of trying to improve
    access in general, because women tend to be in workplaces that
    do not have any coverage. So, if you cannot get employer-
    provided coverage, that is where we need those State kinds of
    programs that we are doing in Oregon that will help people get
    access to a plan, a payroll deduction plan they do not have
    now.
        Again, we are talking about people who are generally lower-
    income. So you need to have additional, I think, incentives for
    them to also contribute. So improving on the Saver's Credit,
    which is really a matching contribution at the Federal level,
    will help both encourage people to contribute to a plan, but
    not only that, will obviously increase the size of the
    contribution amounts going to the plan.
        So I think a combination of those things could all help
    improve coverage and adequacy.
        Senator Hassan. Thank you.
        Mr. Graff?
        Mr. Graff. Thank you, Senator Hassan. The issue that you
    raise is extremely important, and in particular what the data
    shows is that the coverage gap and the savings gap is
    particularly acute for single women. There are very similar
    challenges with communities of color that we have been
    discussing today.
        What we found--I am happy to share this data with you--is
    that when you overlay proposals like the Automatic IRA Act, the
    Encouraging Americans to Save Act, and steps to both get people
    covered, single women covered, as well as incentivize them to
    save, then you see really great boosts in savings rates among
    single females. I can show you. It is very promising.
        Senator Hassan. Well, great. And if it is all right with
    the chair, Ms. Robinson, can you quickly comment?
        Ms. Robinson. Representing plan sponsors who have already
    tackled the coverage issue, I will talk about increasing
    retirement savings, that increasing catch-up contributions is
    enormously helpful for women who may not have had the money
    earlier in their careers to, later in their careers, put more
    of that into retirement.
        We would actually encourage even expanding that for other
    opportunities such as being able to do make-up, catch-up
    contributions if you had to take time off during your career,
    in addition to the other things that have been mentioned, such
    as the student loan matching and the emergency savings
    provisions that, obviously, impact more than just women, but
    probably women in particular.
        Senator Hassan. Well, thank you very much.
        And, Mr. Chair, as we celebrate the 31st anniversary of the
    Americans with Disabilities Act this week, I also just want to
    recognize how important ABLE accounts have been to people with
    disabilities, and I look forward--I know Treasurer Read has
    been particularly involved in administering those accounts. So
    I would look forward to continuing to strengthen them as well.
        The Chairman. Well, thank you, Senator Hassan. And the fact
    that for years you have been such a strong voice for these
    families--I guess there is something about the water. And New
    Hampshire and Oregon are always teaming up on these kinds of
    approaches to empower families that are having some real
    challenges and just want a shot.
        That is what you and Treasurer Read have been all about. So
    we really look forward to working with you on these kinds of
    issues, and thank you for being a champion for empowering folks
    who are vulnerable to be able to save and participate in our
    society.
        Senator Hassan. Thanks so much, and thanks again to all the
    witnesses.
        The Chairman. Thank you.
        So Senator Crapo and I, I would say to our guests, have
    lengthy closing statements, and when a chair says that is going
    to happen, everybody slouches in their seat and says, ``Oh my
    God, this is going to be a ghastly affair.''
        Now both of us will be very brief, but you have been
    terrific, and this has really helped us build on our bipartisan
    tradition of working on these issues, and we will recognize
    Senator Crapo, and my lengthy statement will take about 2
    minutes.
        Okay, Senator Crapo.
        Senator Crapo. Thank you very much, Mr. Chairman, and I
    will be brief. As I said at the outset in my opening statement,
    this is a bipartisan issue where retirement security is
    something that we all agree on, and the solutions you have
    heard discussed today, I believe, are a broad set of solutions.
        We will be adding some more to this list as we continue to
    work. The message is that Senator Wyden and I have agreed that,
    not only is this going to be done on a bipartisan basis, but it
    is going to be done on a priority basis. We are moving this to
    the very top part of the agenda for our committee and for our
    efforts here, because it is so critical.
        I want to again thank the witnesses for your testimony
    today, and I expect you will get to help us some more as we
    reach out to you as we put this legislation together.
        Senator Wyden?
        The Chairman. Thank you, Senator Crapo. And my colleague is
    speaking for me.
        Let me just mention four quick takeaways from today. First,
    we learned that our Saver's Credit proposal, combined with a
    national program like OregonSaves, could lead to a staggering
    number of new savers, 50 million new savers, $6.2 trillion in
    additional savings, over the next decade. That is a big
    takeaway to leave the room with.
        Second, we learned from Mr. Graff of the Retirement
    Association that mega-IRAs owned by mega-millionaires and
    billionaires are largely the result of their access to
    investments like private equity that are not generally
    available to the middle class and other savers of moderate
    means, because these investments are limited under securities
    law to wealth investors.
        And so, I want everybody in America the chance to get ahead
    and to save, and the abusive use of tax incentives meant to
    help middle-class savers creates an economic double standard.
    It creates a system of saving haves and have-nots. We can do
    better than that. We can make sure that everybody has a chance
    to get ahead.
        We learned about the importance of auto-enrolling workers
    in workplace savings plans. I think that was something that was
    touched on by a number of our experts, and we also learned that
    this will reduce racial disparities in retirement plan savings
    rates, which is especially important.
        Finally, we learned, because of the important questions of
    Senator Cortez Masto, about the importance of multilingual
    retirement savings education materials. We have another
    opportunity to reduce racial disparities in saving.
        We will take those and the other important thoughts that
    you all have given us, use them, as Senator Crapo mentioned, on
    our efforts, and make sure we continue our tradition of working
    on these issues in a bipartisan way.
        Members will have 7 days to submit questions for the record
    for the witnesses. That means Wednesday, August 4th by close of
    business.
        With that, the Senate Finance Committee is closing a very
    productive hearing.
        [Whereupon, at 12:19 p.m., the hearing was concluded.]

                                A P P E N D I X

                  Additional Material Submitted for the Record

                                  ----------

                     Prepared Statement of David Certner,
                 Legislative Counsel and Policy Director, AARP
                                  introduction
        On behalf of our nearly 38 million members, and all Americans age
    50 and over, AARP thanks Chairman Wyden and Ranking Member Crapo for
    holding a hearing to consider needed improvements to the U.S.
    retirement system for American workers, retirees, and their families.
    AARP is committed to expanding retirement savings so that all Americans
    have adequate income for retirement through Social Security, pensions
    and private savings, and we have worked throughout our history to
    develop and improve America's retirement system.

        We greatly appreciate the committee's leadership on U.S. retirement
    system development and improvements. AARP has worked closely with the
    committee over decades, from the development of tax favored retirement
    accounts to the most recent legislative solutions for the millions of
    workers and retirees covered by multiemployer pension plans that face
    imminent and long-term funding shortfalls. We look forward to
    continuing to work together to expand coverage and adequacy for all
    workers and retirees.
           impact of covid-19 on current workers and their retirement
        Millions of families continue to face dire financial circumstances
    as a result of the pandemic and related workplace closures. In a matter
    of months, the national unemployment rate climbed from 3.5 percent in
    February 2020 to an historic high of 14.7 percent in April. And while
    the unemployment rate has since declined to 5.9 percent,\1\ the
    percentage of job seekers who are long-term unemployed (i.e., those who
    have been looking for work for 27 weeks or more) remains a serious
    concern, with older workers being especially hard hit. In June 2021,
    36.0 percent of job seekers ages 16 to 54, and 55.3 percent of job
    seekers ages 55 and older, were long-term unemployed.\2\
    ---------------------------------------------------------------------------
        \1\ Bureau of Labor Statistics, Economic News Release, The
    Employment Situation, June 2021, https://www.bls.gov/news.release/pdf/
    empsit.pdf.
        \2\ AARP Public Policy Institute's Employment Data Digest, June
    2021, https://www.aarp.org/ppi/info-2020/employment-data-digest.html.

        As a result, many workers continue to have little choice but to
    take actions that reduce their long-term retirement security in order
    to make ends meet. Some individuals have been forced to retire earlier
    than planned because they were unable to return to work due to
    legitimate health concerns or because their jobs simply no longer
    exist. According to a June 2020 survey, nearly a quarter (23 percent)
    of respondents age 55 to 73 have retired early, or considered retiring
    early, because of the pandemic.\3\ Nearly one in four adults ages 25
    and older surveyed by AARP dipped into their retirement savings or
    stopped contributing to their retirement accounts during the height of
    the pandemic.\4\ Earlier retirements and emergency withdrawals from
    retirement accounts will likely prevent these workers from accumulating
    additional years of wages and savings, resulting in reduced pensions
    and lower monthly Social Security benefits for life, as well as the
    need to spend down their retirement savings earlier than anticipated.
    ---------------------------------------------------------------------------
        \3\ TD Ameritrade, ``COVID-19 and Retirement Survey,'' June 2020,
    https://s2.q4cdn.com/437609071/files/doc_news/research/2020/covid-19-
    and-retirement-survey.pdf.
        \4\ Brown, S. Kathi. How Financial Experiences During the Pandemic
    Shape Future Outlook, Washington, DC: AARP Research, April 2021.
    https://doi.org/10.26419/res.00450.001.

        Americans of any age who are fortunate enough to have a retirement
    savings vehicle like a 401(k) plan or an individual retirement account
    (IRA) may now be unable to contribute to these accounts, or worse, have
    a need to tap them to pay for essentials. According to one survey, 37
    and 40 percent of Millennials, 26 and 32 percent of Gen X, and 13 and
    18 percent of Boomers have withdrawn, or considered withdrawing, from
    an individual retirement account or a 401(k) plan.\5\ Doing so,
    however, forces them to reduce what are likely already inadequate
    savings, sacrificing future amounts necessary for a secure retirement.
    Many who have lost jobs have also lost health insurance and have faced
    increased costs for both health-care coverage and treatment.
    ---------------------------------------------------------------------------
        \5\ TD Ameritrade, ``COVID-19 and Retirement Survey,'' June 2020,
    https://s2.q4cdn.com/437609071/files/doc_news/research/2020/covid-19-
    and-retirement-survey.pdf.

        These COVID-related pressures only add to other challenges that
    have accelerated in recent decades, including diminishing employer-
    sponsored pensions, higher health-care costs, and inadequate retirement
    savings. Consequently, the prospects of a secure retirement for
    millions of workers will be even more precarious following the
    pandemic, and more Americans of all ages will need to rely even more on
    Social Security's modest benefits for an even greater portion of their
    retirement security.
                         importance of social security
        According to the Social Security Administration (SSA), an estimated
    180 million Americans paid into Social Security in 2020,\6\ and in June
    2021, Social Security provided critical retirement, disability and
    survivor benefits to almost 65 million individuals.\7\ Social Security
    is already the principal source of income for over half of older
    American households receiving benefits and roughly one quarter of those
    households, or about 10 million people aged 65 and older, depend on
    Social Security for nearly all (90 percent or more) of their income.\8\
    The reliance in minority communities is even more pronounced; over 36
    percent of African American women in families receiving benefits rely
    on Social Security for almost all of their income, and 34 percent of
    older Hispanic women do the same.\9\
    ---------------------------------------------------------------------------
        \6\ Social Security Administration, ``The 2020 Annual Report of the
    Board of Trustees of the Federal Old-Age and Survivors Insurance and
    Federal Disability Insurance Trust Funds,'' April 2020; www.sss.gov/
    news/press/factsheets/basicfact-alt.pdf.
        \7\ Social Security Administration, Monthly Statistical Snapshot,
    June 2021, https://www.
    ssa.gov/policy/docs/quickfacts/stat_snapshot/index.html?qs.
        \8\ Reliance estimates available at AARP Public Policy Institute
    Data Explorer, https://dataexplorer.aarp.org.
        \9\ Ibid.

        Despite its critical importance, Social Security's earned benefits
    are modest and in June 2021, average only $1,555 per month for all
    retired workers. Disability benefits are even more modest, averaging
    only $1,280 per month.\10\ Nonetheless, Social Security keeps
    approximately 15 million older Americans out of poverty \11\ and allows
    millions more to live their retirement years independently and without
    fear of outliving their income.
    ---------------------------------------------------------------------------
        \10\ Social Security Administration, Monthly Statistical Snapshot,
    June 2021, https://www.ssa.gov/policy/docs/quickfacts/stat_snapshot/
    index.html?qs.
        \11\ Kathleen Romig, Center on Budget and Policy Priorities
    analysis of data from the U.S. Census Bureau's March 2019 Current
    Population Survey, February 2020, https://www.cbpp.org/research/social-
    security/social-security-lifts-more-americans-above-poverty-than-any-
    other-program.

        For most Americans, Social Security is their only inflation-
    protected, guaranteed source of retirement income they have or will
    have. AARP believes we must therefore work together--and sooner rather
    than later--to ensure Social Security remains strong, not only for
    those who are at or near retirement, but also for younger generations
    who will likely rely on Social Security benefits as much or even more
    ---------------------------------------------------------------------------
    due to the effects of COVID-19 and other retirement trends.

        In addition, and on behalf of multiple generations of American
    workers, AARP would like to thank Chairman Wyden and Senator Cassidy
    for recently introducing the Know Your Social Security Act. This
    legislation would once again place vital, paper Social Security
    statements in the hands of millions of Americans to help them more
    effectively plan for retirement, ensure correct earnings records, and
    better understand their stake in Social Security.

        The Social Security statement is an essential financial planning
    tool that provides key information on an individual's earnings and
    payroll tax contributions record, as well as an estimate of their
    earned monthly benefits. When Social Security sends this statement
    through the mail, more Americans are able to better plan for their
    future, not only due to an increased understanding of their Social
    Security benefits, but also any gaps in their current retirement plan.
    Having a hard copy of your Social Security statement also allows an
    individual to spot and correct errors or even to detect outright fraud.
    Finding and correcting these errors in a timely manner will save
    workers and the Social Security Administration frustration, time, and
    money. Moreover, when Americans receive an annual statement in the
    mail, it helps them better understand the importance of Social Security
    as part of their overall retirement plan.

        Paper statements are annual reminders, especially to younger
    workers, that they have contributed to Social Security and have earned
    a stake in the program. AARP believes strongly that all Americans,
    unless they choose otherwise, should have access to their Social
    Security statements via mail and we once again thank Chairman Wyden and
    Senator Cassidy for introducing the Know Your Social Security Act and
    urge its enactment.
                           the retirement income gap
        For more than half a century, a secure retirement in the United
    States centered on reliable income from three sources, the so-called
    ``three-legged stool'' of retirement--employer-provided defined benefit
    pension plans, personal savings, and Social Security. Together, these
    sources of income offered a stable financial future. Unfortunately,
    diminishing pensions and inadequate retirement savings--coupled with
    longer life expectancies and higher health costs--has endangered the
    dream of a secure retirement for millions of Americans, and without
    significant action, will likely require Social Security to play an even
    greater role in the lives of older Americans.

        Defined Benefit (DB) pension plans once dominated the employment
    landscape. In 1983, roughly 60 percent of workers with an employer-
    sponsored retirement plan had a DB pension plan; by 2020, however, just
    18 percent of full time, private sector workers had access to a DB
    pension.\12\ At the same time that fewer workers have been offered a
    pension with guaranteed lifetime income, more workers have been offered
    defined contribution (DC) plans--such as 401(k) plans--to save for
    their retirement. In 1983, only 12 percent of workers offered a
    workplace retirement plan were exclusively offered a DC plan, but by
    2020, 73 percent of workers offered a workplace retirement plan were
    only offered a DC plan.
    ---------------------------------------------------------------------------
        \12\ https://fas.org/sgp/crs/misc/R43439.pdf (from CRS quoting
    National Compensation Survey of March 2020).

        The switch from DB to DC plans has important implications for
    retirement security. First, employees now must take responsibility for
    determining if and how much to save, and must manage their retirement
    funds, even though most have little or no investment experience. As
    discussed below, automatic enrollment and similar features help with
    these decisions, but not all DC plans include these mechanisms. Second,
    retirees run the risk that they may either outlive the savings in a DC
    plan because account balances run out, or they fail to spend them for
    fear that the money will be needed for some future emergency, resulting
    in a lower retirement standard of living than possible.\13\ Third,
    despite the increased use of DC plans, financial experts generally
    agree individual savings and earnings may not fully compensate for the
    loss of employer provided DB pensions.\14\
    ---------------------------------------------------------------------------
        \13\ Chris Browning, Tao Guo, and Yuanshan Chen, SSRN, The
    Retirement Consumption Gap: Evidence from the HRS, November 2014,
    https://papers.ssrn.com/sol3/papers.cfm?abstract
    _id=2479021.
        \14\ Center for Retirement Research (2015), ``Investment Returns:
    Defined Benefit vs. Defined Contribution Plans, '' https://crr.bc.edu/
    wpcontent/uploads/2015/12/IB_15-211.pdf.

        Most workers who only have access to a workplace savings plan are
    not saving enough to adequately fund a secure retirement. For middle-
    income households ages 55-64 with a DC plan or IRA, the median balance
    is roughly $144,000, not nearly enough to ensure a secure retirement,
    especially given that the average number of retirement years has
    increased markedly from 12 in the 1960s to almost 20 today.\15\ It is
    no wonder that surveys persistently show that Americans do not feel
    financially prepared to retire. A Financial Health Network poll, funded
    in part by AARP, found that only 18 percent of respondents felt very
    confident they could meet their long-term financial goals, including
    retirement.\16\
    ---------------------------------------------------------------------------
        \15\ Center for Retirement Research (2019), ``401(k)/IRA Balances
    for Median Working Household with a 401(k)/IRA, Age 55-64, By Income
    Quintile, 2019,'' http://crr.bc.edu/wp-content/uploads/2019/10/Table-
    17.pdf; Center for Retirement Research (2019), ``Average Years in
    Retirement, 1962-2050,'' http://crr.bc.edu/wpcontent/uploads/2015/10/
    figure-10.pdf.
        \16\ Thea Garon, Andrew Dunn, Katy Golvala, and Eric Wilson (2018),
    ``U.S. Financial Health Pulse: 2018 Baseline Survey Results,'' Center
    for Financial Services Innovation, https://s3.
    amazonaws.com/cfsi-innovation-files-2018/wpcontent/uploads/2019/02/
    25191008/Pulse-2018-Baseline-Survey-Results.pdf.

        Of course, access to a workplace retirement plan is better than
    none at all. Remarkably, just over half of all workers in the United
    States do not have access to a retirement plan at work,\17\ a
    percentage that has remained largely unchanged for 3 decades. The
    coverage gap in communities of color is even greater; 66 percent of
    Latino workers, 52 percent of Asian American workers, and 50 percent of
    Black workers work for an employer that does not offer a retirement
    savings plan.\18\ Workers without a plan are more likely to work part-
    time or work in a small business, tend to have less formal education,
    and are more likely to be lower paid.\19\ Many middle and higher-income
    earners also lack access to a workplace retirement plan; people earning
    more than $40,000 represent about 23 percent of the 55 million
    employees without a plan.\20\
    ---------------------------------------------------------------------------
        \17\  When comparing coverage and participation statistics, it is
    important to look at which populations are being considered. Most
    studies cover private-sector workers only but differ on including only
    full-time employees or both full- and part-time. Similarly, studies
    focusing just on employees don't include the millions of contingent
    workers of differing types, who may be paid by an employer, but who are
    not considered as employees and thus are not eligible to participate in
    a retirement plan.
        \18\ https://www.aarp.org/content/dam/aarp/ppi/2017-01/
    Retirement%20Access%20Race%20
    Ethnicity.pdf.
        \19\ Center for Retirement Research (n.d.), ``Pension Participation
    of All Workers, By Type of Plan, 1989-2016,'' http://crr.bc.edu/wp-
    content/uploads/2015/10/Pension-coverage.pdf; Craig Copeland (2014),
    ``Employment-Based Retirement Plan Participation: Geographic
    Differences and Trends, 2013,'' Employee Benefit Research Institute
    (EBRI), Issue Brief 405, p. 27, Washington, DC.
        \20\ https://www.aarp.org/content/dam/aarp/ppi/2014-10/aarp-
    workplace-retirement-plans-build-economic-security.pdf.
    ---------------------------------------------------------------------------
                        the future of retirement savings
        For decades, Congress has enacted laws with the aim of making
    retirement saving easier. Congress has created many different types of
    plans for employers to offer their workers, including IRAs, SIMPLEs,
    Simplified Employee Pensions (SEPs), and Multiple and Pooled Employer
    Plans (MEPs/PEPs). Congress has also authorized a number of automatic
    features--including automatic enrollment, automatic deferral amounts,
    automatic escalation, and automatic default investments--to help
    workers who do not make affirmative decisions to begin saving for their
    retirement. Such automatic features and payroll deductions have
    resulted in significant higher savings. Among new hires, participation
    rates nearly double to 93 percent under automatic enrollment, compared
    with 47 percent under voluntary enrollment. Over time, 8 in 10
    participants increase their contribution rates, either automatically or
    on their own, while three quarters of participants remain exclusively
    invested in the default investment fund.\21\ Furthermore, plans with
    automatic enrollment had an 87 percent participation rate as of the end
    of the second quarter, whereas plans without automatic enrollment had a
    participation rate of 52 percent. Since 2008, the average savings rate
    among employees automatically enrolled has risen from 4 percent to 6.7
    percent, and 63 percent of automatically enrolled participants in the
    past 10 years have increased their savings rate.\22\
    ---------------------------------------------------------------------------
        \21\ https://nam05.safelinks.protection.outlook.com/
    ?url=https%3A%2F%2Finstitutional.van
    guard.com%2Fiam%2Fpdf%2FCIRAE.pdf&data=02%7C01%7C%7C34dd87bd990145d2
    669c
    08d6d3fd5585%7Ca395e38b4b754e4493499a37de460a33%7C0%7C0%7C63692948234042
    9841&
    amp;sdata=SuhVz6d8Xc9OYzTEKINqQe817YWi0gH8zpEYW3XgEZM%3D&reserved=0
    (February 2018).
        \22\ Fidelity data--August 2018, https://
    nam05.safelinks.protection.outlook.com/?url=https%3A
    %2F%2Fwww.planadviser.com%2Fautomatic-enrollment-helping-participants-
    increase-retirement
    -
    savings%2F&data=02%7C01%7C%7C34dd87bd990145d2669c08d6d3fd5585%7Ca395
    e38b4
    b754e4493499a37de460a33%7C0%7C0%7C636929482340429841&sdata=FQXZs0ELy
    8txGg
    DLlfREGecvdvjKIpmFighaFYer8rA%3D&reserved=0.

        However, these automatic savings features can only help workers
    whose employers offer a workplace retirement plan, and as noted
    earlier, over 50 percent of the workforce lacks any workplace
    retirement coverage. Expanding coverage for the tens of millions of
    workers without coverage continues to be a high priority, and AARP
    supports several approaches to extend retirement coverage in the
    workplace at both the Federal and State levels.
                          state work and save programs
        To complement our work at the Federal level to help address the
    coverage gap, AARP has focused on passing what are called State-level
    Work and Save programs, which are intended to provide employer
    facilitated access to payroll deduction retirement savings options for
    workers who don't otherwise have a way to save for retirement at work.
    State-facilitated Work and Save programs, such as Oregon Saves,
    CalSavers, and Illinois Secure Choice, are providing critical access to
    large, currently underserved populations, such as women, workers of
    color, and much of the contingent workforce, including gig workers.
    Such access is essential to addressing the retirement income gap
    because workers are 15 times more likely to save for retirement simply
    by having access to payroll deduction at work. While participation
    rates in traditional retirement plans have not budged in decades, Work
    and Save programs are leading a change for the better.

        Nationwide, the majority of States have considered laws to address
    the retirement gap in their States through program legislation or
    studying the issue.\23\ Oregon was the first State to launch a Work and
    Save program, followed by California and Illinois. These programs have
    had tremendous success. As of April 30, 2021, assets under management
    between these three States exceeded $250 million, with more than
    346,000 funded accounts and more than 34,000 employers registered.\24\
    The momentum is not slowing down, and other States continue to pursue
    enactment and implementation of programs. Last year, even during the
    pandemic, Colorado and New Mexico passed full program legislation. This
    year, Virginia and Maine passed new program legislation, New York and
    Illinois passed significant program improvement bills dramatically
    increasing future participation rates, and California successfully
    defeated a lawsuit. States with program legislation like Vermont,
    Maryland, and Connecticut continue to work towards implementing a full
    and comprehensive program. Meanwhile, efforts are underway in a number
    of additional States, including, North Carolina, Pennsylvania,
    Wisconsin, and Delaware.
    ---------------------------------------------------------------------------
        \23\ https://www.aarp.org/ppi/state-retirement-plans/savings-
    plans/.
        \24\ https://cri.georgetown.edu/wp-content/uploads/2020/05/
    Infographic-20-05.pdf.

        These retirement savings programs generally operate much like 529
    college savings plans and are operated through public-private
    partnerships. Notably, while employers facilitate payroll deductions,
    the retirement programs are not operated or overseen by employers and
    are not employer-sponsored retirement plans. Rather, employers are
    afforded the ability to offer access to a simple, plug-and-play
    retirement program to their workers, which only requires employers to
    disseminate information packets to their workers and facilitate payroll
    deductions, similar to what they must already do to remit taxes. Worker
    participation is easy and contributions are typically automatic;
    however, worker participation remains voluntary, as they always retain
    the option to opt-out of the program at any time. How much a worker
    saves, if at all, is entirely up to them, as are investment decisions.
    Workers choose if they want to participate, how much they want to
    contribute, and the way in which they invest their money. When a worker
    ---------------------------------------------------------------------------
    changes jobs, their accounts are portable and can be taken with them.

        Work and Save programs are designed to be self-sustaining and
    participant-funded--what an individual contributes to their account is
    what they get out of it, plus or minus investment gains and losses.
    These are not employer pension programs--States play the role of
    aggregating smaller employers who otherwise would have to sponsor, pay
    for, and manage a retirement plan, including choosing the investments
    and providers and incurring fiduciary responsibility. Work and Save
    programs can ultimately help U.S. taxpayers as well. By affording
    workers access to a simple way to save for retirement, fewer households
    will need to rely on social services, ultimately foregoing additional
    expenditures by the government. The U.S. could save an estimated $33
    billion on public assistance programs between 2018 and 2032 if lower-
    income retirees save enough to increase their retirement income by just
    $1,000 more per year.\25\
    ---------------------------------------------------------------------------
        \25\ https://mcspolicycenter.umaine.edu/wp-content/uploads/sites/
    122/2017/03/final-aarp-report.pdf.
    ---------------------------------------------------------------------------
                    policies to increase retirement savings
        In addition to our State work, Federal policies that further
    encourage automatic payroll deduction savings for workers who lack
    retirement coverage should be enacted. AARP has supported various
    efforts--at both the Federal and State levels--to ensure individuals
    nationwide are covered by an automatic retirement savings system. AARP
    has been a long-time supporter of Federal Automatic IRA legislation,
    most recently proposed in the Senate by Senator Whitehouse. We believe
    State programs should work in tandem with Federal legislation to be
    most effective at offering enhanced coverage and more appropriate
    retirement investments. AARP has emphasized that Federal legislation
    and regulations regarding retirement security should continue to
    encourage and allow for State enactment and implementation of these
    programs.

        AARP also is supportive of the legislative efforts initiated by
    Senators Cardin and Portman and Chairman Neal and Ranking Member Brady,
    known as SECURE 2, and looks forward to working with the Congress to
    harmonize and update any final bill (the Retirement Security and
    Savings Act, S. 1770, and the Securing a Strong Retirement Act, H.R.
    2954). Among other changes, the bills would extend greater coverage to
    more part-time workers and automatically enroll workers in new employer
    retirement savings plans once they have been in business for 3 years
    and employ more than 10 employees. As previously noted, automatic
    payroll deduction is a proven method of increasing coverage and
    participation.

        AARP urges Congress to improve coverage for the 27 million part-
    time workers who generally are not covered by retirement savings plans.
    This is especially important for older workers and caregivers who often
    shift from full-time to part-time work or return to the workforce less
    than full-time due to caregiving responsibilities. Moreover, women are
    far more likely to work part- time than men--two-thirds of part-time
    workers are women.\26\ AARP supports Senator Murray's and Rep.
    Underwood's Women's Pension Protection Act, Reps. Neal and Brady's
    Securing a Strong Retirement Act and Senators Cardin and Portman's
    Retirement Security and Savings Act, all of which would offer coverage
    to part-time workers after 2 years of employment.
    ---------------------------------------------------------------------------
        \26\ Bureau of Labor Statistics, Labor Force Statistics from the
    Current Population Survey, Household Data Annual Averages, Table 8:
    Employed and unemployed full- and part-time workers by age, sex, race,
    and Hispanic or Latino ethnicity (January 18, 2019), available at
    https://www.bls.gov/cps/cpsaat08.htm.

        In addition to extending coverage to more workers, Congress should
    also act to encourage greater savings for those who participate in
    workplace retirement plans. While defined benefit plans are generally
    designed to provide more adequate retirement benefits to longer service
    employees, defined contribution plans--like 401(k) plans--do not always
    lead to adequate retirement savings. The 2006 Pension Protection Act
    permitted employers to enroll employees automatically at a three
    percent contribution level, but this has proven to be too low to fund a
    secure retirement.\27\ AARP supports increasing the default
    contribution level to five or six percent, provided individuals always
    have the ability to select a different level. Retirement plan sponsors
    should also offer automatic escalation of employee contributions.
    ---------------------------------------------------------------------------
        \27\ https://www.cnbc.com/2017/08/02/the-problem-with-too-low-401k-
    contribution-rates.html.

        AARP supports improvements to the Saver's Tax Credit, and we
    appreciate Chairman Wyden's initiative to improve the credit. Created
    in 2001, the Saver's Credit is available to low- and moderate-income
    taxpayers who contribute to a retirement savings plan. Unfortunately,
    the Saver's Credit is woefully underutilized. From 2006 through 2014,
    between 3.25 percent and 5.33 percent of eligible filers claimed the
    credit, and the average value of the credit ranged from $156 to $174
    over this time period. A series of changes--some small and others more
    substantial--would enable more of the tax credit's target population to
    benefit from the Saver's Credit to help build significant retirement
    resources. One beneficial change for low- and moderate-income savers
    would be to make the Saver's Credit refundable. This reform would
    especially reward saving among Latinos, who are least likely to be
    covered by a workplace retirement plan and are more likely to earn low
    incomes.\28\ Other ways to strengthen the Saver's Credit are to raise
    the income thresholds and reduce the phase-out of the credit to create
    more value and reach more moderate-income filers.
    ---------------------------------------------------------------------------
        \28\ http://publications.unidosus.org/bitstream/handle/123456789/
    888/32551_file_Retirement
    _security_brookings_Fact_Sheet_Final.pdf.

        AARP would also like to firmly address the issue of retirement plan
    disclosures. Along with fiduciary duty, retirement plan disclosure is a
    fundamental consumer protection of ERISA. Workers not only need current
    plan information, but often need past records 30-40 years into the
    future when benefits are due. ERISA and the tax code require
    information to be disclosed to workers about the actions they need to
    take and the benefits they are earning. We agree with many critics of
    current disclosure documents that they should be shorter, simpler and
    more timely. We support efforts to streamline and improve retirement
    plan documents and disclosures. We also understand that changes in
    ---------------------------------------------------------------------------
    technology allow for more electronic disclosure.

        However, we strongly oppose efforts to primarily provide all
    required disclosures electronically through generally time-limited
    website postings. Employers already may automatically provide
    electronic disclosures to workers who typically work with computers,
    but most plan participants prefer paper delivery of retirement
    information. A 2016 FINRA study showed that only 31 percent of
    respondents preferred receiving disclosures by email or through
    Internet access; the remainder preferred physical mail (49 percent) or
    in person meetings (14 percent). Older respondents preferred paper
    documents, while younger respondents preferred in person meetings.
    There was no age differential between those who preferred to receive
    disclosures by email.\29\ Moreover, the Pew Research Center found that
    a third of individuals aged 65 and older do not use the Internet, only
    half have broadband at home, and only approximately 40 percent own a
    smartphone. Among all adults, a third do not have high-speed Internet
    at home and 13 percent only own a smartphone. Disadvantaged populations
    have even less access--approximately only half of rural Americans,
    African Americans, and Americans with a high school degree or less have
    broadband Internet at home.
    ---------------------------------------------------------------------------
        \29\ FINRA, Investors in the United States 2016 at 14 (December
    2016), https://www.us
    financialcapability.org/.downloads/
    NFCS_2015_Inv_Survey_Full_Report.pdf.

        With such discrepancies in access, and a generally greater consumer
    preference for paper copies of important financial documents, it is
    crucial that important material be distributed in paper form and that
    electronic disclosure not become the default method of delivery. Full
    and meaningful disclosure is critical to retirement security and
    pension law, and Congress needs to ensure workers will receive and can
    review important retirement plan documents. A paper annual benefit
    statement, similar to the Social Security and Federal Employee
    statement of earned benefits, is essential to help employees better
    understand and successfully manage their plans and determine if they
    are on track for retirement. We applauded Chairman Wyden and Senator
    Cassidy for taking the lead on retaining paper Social Security
    statements, and an annual paper statement for both public and private
    retirement benefits is potentially a more important consumer
    protection, as workers must manage their own retirement plans. AARP
    supports default paper delivery of annual benefit disclosures and
    supports the availability of electronic disclosures when a participant
    ---------------------------------------------------------------------------
    chooses an electronic option.

        The bipartisan committee-passed House version of SECURE 2 includes
    an important requirement for an annual paper retirement earnings
    benefit statement, which AARP strongly supports, and which we urge the
    Senate bill to include as well. We are willing to work with interested
    Senators to address employee preferences and any other issues of
    concern.

        We also note the need to establish a national retirement Lost and
    Found office to help workers locate retirement accounts with previous
    employers. This has become increasingly important as more and more
    workers change jobs several times over the course of their careers.
    There are at least 21.3 million inactive 401(k) plan accounts as of
    2018, the latest year of full data from the Department of Labor Form
    5500.\30\ Senators Warren and Daines, and Reps. Bonamici, Messer,
    Banks, Neal, and Brady have introduced bipartisan bills to help workers
    find ``lost'' accounts. A Lost and Found office could help savers
    reclaim their investments and combine accounts to more appropriately
    invest their assets and lower their fees and expenses.\31\ The Pension
    Benefit Guaranty Corporation (PBGC) is starting a preliminary effort
    matching individuals with former retirement accounts. Several other
    countries with similar types of retirement systems also are setting up
    such low-cost matching programs.
    ---------------------------------------------------------------------------
        \30\ https://hicapitalize.com/resources/the-true-cost-of-forgotten-
    401ks/.
        \31\ https://www.brookings.edu/wp-content/uploads/2020/10/
    Retirement-Security-Project-Dashboards-Oct-2020.pdf.

        AARP is also continuing to examine provisions related to multiple/
    pooled retirement plans for employers, which were established in SECURE
    1, including a new proposed expansion to 403(b) non-profit plans. AARP
    supported pooled plans in large part because the SECURE Act required
    the Department of Labor to issue rules for the operation of these
    plans, including a model plan. However, while DOL several times
    solicited public comments, it has not yet issued any rules. As a
    result, some firms have registered to sell pooled plans, but without
    rules, neither the plans, nor employers or consumers know how they
    should operate or if they are operating fairly. Congress should ensure
    adequate guidance for pooled plans, including for non-profit 403(b)
    retirement providers, who are interested in adopting pooled plans.
    Relatedly, any legislation should consider the U.S. Supreme Court's
    review of 403(b) plan fiduciary compliance with ERISA, which is under
    review this term (Hughes v. Northwestern University). AARP urges the
    committee to strengthen the requirements for pooled plans and ensure
    that any covered plans are governed by clear fiduciary standards for
    ---------------------------------------------------------------------------
    all plan providers.

        AARP also looks forward to working with the committee and
    interested members on a wide range of promising and needed additional
    retirement improvement ideas. As retirement savings has become more
    individualized and technology improved, new ways to create and maintain
    accounts over a lifetime are emerging. Retirement experts are just
    starting to understand the many ways in which economic and racial
    disparities affect retirement savings. A larger role for participants
    in retirement system design is likely to improve coverage of
    marginalized groups and improve benefits. From the ERISA Advisory
    Council to individual plan retirement committees, a greater role for
    covered employees and retirees would be beneficial to the system.
    Regular agency reporting on what works and better interagency
    coordination also should be considered. The committee also should
    ensure that spouses are always protected and fully apprised of their
    benefit rights. Additionally, workers should always have full legal
    protections to their benefits, including de novo legal review.
               ensure fiduciary and account retention protections
        For the millions of Americans who have access to a workplace
    savings plan and started to save for their retirement, Congress can do
    more to protect their hard-earned nest eggs. All tax-preferred
    retirement savings should be prudently invested, with reasonable fees
    and without conflicts of interest. While ERISA is clear that any person
    who exercises discretion over employee benefit plan assets must do so
    in a fiduciary capacity, efforts have been made to lower the important
    standards that protect retirement investors. Recently, the Securities
    and Exchange Commission (SEC) weakened financial adviser investment
    advice standards, and the Department of Labor adopted similar
    proposals. AARP strongly opposed those efforts and urges both agencies
    and Congress to restore ERISA's longstanding protections. A strong
    fiduciary standard should include the core principle that when
    providing personalized investment advice to customers, financial
    professionals must always act in the sole interests of those
    customers--whether they be employers acting on behalf of workers or the
    workers themselves. That fiduciary standard should be uniform for all
    financial professionals and should apply to all types of accounts to
    rectify the existing confusion among investors in the marketplace
    because of standards that are not uniform. These rules are especially
    important when workers terminate employment and help protect workers
    who may be considering rollovers from their ERISA protected savings to
    often less protected individual retirement investments.

        Congress should also discourage pre-retirement cash-outs of
    retirement funds and instead encourage account portability and stable
    lifetime income streams, such as periodic withdrawal options and fixed
    lifetime annuities at retirement age. Too many workers cash out their
    savings when they change jobs or experience financial emergencies.
    While this may provide short-term relief, cash-outs create significant
    risk for diminished financial security for retirees and their spouses
    in the future. Cash-outs related to emergencies could be reduced if
    individuals could save in more liquid accounts or have greater access
    to accounts that have been created through regular payroll
    deduction.\32\ Research shows that individuals with emergency savings
    accounts are 2.5 times more likely to be confident in their long-term
    financial goals.\33\ Employer-facilitated emergency savings programs--
    some of which leverage existing retirement savings vehicles--are
    growing in popularity.\34\ In a recent AARP survey, 87 percent of
    working adults said they support ``laws that make it easier for
    employers to offer a safe and simple way for employers to save for
    emergencies.''\35\
    ---------------------------------------------------------------------------
        \32\ https://www.nber.org/system/files/working_papers/w26498/
    w26498.pdf.
        \33\ Harvey, Catherine S. Unlocking the Potential of Emergency
    Savings Accounts. Washington, DC: AARP Public Policy Institute, October
    2019, https://doi.org/10.26419/ppi.00084.001.
        \34\ https://www.ebri.org/content/emergency-fund-focused-employers-
    goals-motivations-and-challenges.
        \35\ Brown, S. Kathi. How Financial Experiences During the Pandemic
    Shape Future Outlook, Washington, DC: AARP Research, April 2021,
    https://doi.org/10.26419/res.00450.001.

        In addition, most defined contribution plans do not accept former
    account rollovers or permit contributions to be made to portable
    accounts to help workers consolidate savings. Most DC plans also do not
    offer fixed annuities or periodic payment options to help ensure that
    retirees have more adequate distribution options and do not outlive
    their money. AARP looks forward to working with the committee and other
    groups to encourage asset preservation, portability, and to provide
    ---------------------------------------------------------------------------
    low-cost distribution and spend-down options that meet workers' needs.

        Finally, AARP commends the Congress for earlier this year enacting
    important legislation to protect the earned benefits of millions of
    workers and retirees counting on multiemployer pensions for their
    retirement security. We commend Chairman Wyden and the many committee
    members who focused their attention on this issue. While most
    multiemployer pension plans are well funded, over 100 plans--due to
    industry changes and market downturns, among other reasons--do not have
    enough assets and contributing employers to pay out full, earned
    pensions. Many retirees have already been devastated by significant
    reductions to their earned benefits, and over 1 million retirees and
    their families were at substantial risk of losing needed retirement
    income. While this was a difficult problem with no easy solution, the
    legislative support was critical to protecting the benefits of workers
    and retirees who had worked hard, earned their benefits, and were put
    at risk through no fault of their own.

        AARP would again like to thank the committee for considering the
    challenges and needs for a secure retirement and for the opportunity to
    share our policy priorities to improve the retirement savings of
    Americans and their families. We stand ready to work with the committee
    to improve Americans' retirement security.

                                     ______

              Questions Submitted for the Record to David Certner
                     Question Submitted by Hon. Mike Crapo
        Question. The CARES Act and other legislation has allowed workers
    and retirees to withdraw money from their retirement accounts at times
    they need it the most.

        How do we balance the need to prevent leakage with the reality that
    retirement accounts are sometimes the only place some people may
    believe they can turn to in order to meet short-term liquidity needs?

        Answer. Tax-preferred retirement plans were established to ensure
    workers accumulate additional retirement income to supplement Social
    Security in retirement. For most workers, there are always competing
    current needs, making it all the more difficult to set aside savings
    for the future. That is why AARP generally supports policies to
    discourage ``cash-outs'' or ``leakage'' or other premature access to
    retirement funds. Most workers are already falling short of the savings
    they will need to maintain their standard of living in retirement--
    allowing early access to retirement funds simply trades off problems of
    today for greater problems in the future.

        Having said that, we recognize that there are critical needs that
    do arise. The pandemic was hopefully a once-in-a-generation event that
    created a broad emergency need for many. However, for most emergencies,
    AARP prefers workers use tools currently available--such as plan loan
    provisions which provide the ability to borrow from your plan with the
    opportunity to pay yourself back. In addition, workers should be
    encouraged to set aside additional funds for emergencies with the
    understanding that retirement money is for the future--easy access to
    retirement funds undermines the long-term need to save for the future
    and the need to both plan for today as well as save for tomorrow.

                                     ______

                    Questions Submitted by Hon. Steve Daines
        Question. I am an original cosponsor of the Legacy IRA Act,
    introduced by Senators Cramer and Stabenow, that would expand the IRA
    charitable rollover to further incentivize charitable giving by
    seniors.

        From AARP's perspective, can you speak to the value of private
    philanthropy to the nonprofit sector, and the benefits of an option
    that provides senior donors, especially middle-income seniors, with
    retirement income?

        Does AARP support this legislation?

        Answer. AARP supports efforts to encourage private philanthropy,
    including efforts to appropriately encourage charitable giving through
    the tax code, to help address many of the unmet needs in our society.
    While we have not yet taken a formal position on expanding the IRA
    charitable rollover, it appears to be generally consistent with AARP
    views on charitable giving and improving retirement income for seniors.
    We would be happy to look into this legislation in more detail.

                                     ______

                    Prepared Statement of Hon. Mike Crapo,
                           a U.S. Senator From Idaho
        Thank you, Mr. Chairman, and thank you for holding this important
    bipartisan hearing.

        Private retirement saving and retirement security are issues in the
    Finance Committee's jurisdiction that have a history of bipartisan
    cooperation, and I expect this time will be no different. The purpose
    of this hearing is to hear testimony on how we can build on that
    bipartisan track record.

        In 2015, under then-Chairman Hatch, I co-chaired the Finance
    Committee's Savings and Investment Tax Working Group with Senator
    Brown. That working group examined a host of proposals to increase
    access to retirement plans, increase participation in plans, and
    preserve retirement savings. Many of the findings from the working
    group--including open multiple-employer plans and provisions to help
    long-term, part-time workers--were the precursor to RESA and ultimately
    the SECURE Act, which became law in December 2019.

        At the same time, retirement savings were growing and the economy
    was booming following the pro-growth, pro-worker policies enacted as
    part of the 2017 tax reform law. However, the pandemic put a great deal
    of economic stress on workers and retirees, and some had no choice but
    to withdraw money from their retirement accounts to make ends meet.

        As the economy continues to bounce back, we have a chance to build
    on the success of the SECURE Act in a bipartisan way. House Ways and
    Means Committee Chairman Neal and Ranking Member Brady have already
    started the process. In the Senate, we are also making significant
    progress on this issue thanks to the leadership of Senator Portman and
    Senator Cardin.

        Other members--both those who sit on this committee and those who
    do not--have been working in a bipartisan way on retirement proposals,
    which I expect we will hear more about today. The range of ideas put
    forth to improve the retirement system are all important, but my focus
    today is on three points that are the most pressing for Idahoans and
    Americans across the country.

        First and foremost, Congress should enact policies that encourage
    workers to save so they can enjoy a secure retirement. One survey
    conducted by the Department of Labor found that while 71 percent of
    civilian workers had access to retirement benefits, the participation
    rate for that same group was only 55 percent. This survey was conducted
    only months after the SECURE Act was enacted, so I will be interested
    to see updated studies and surveys in the future, but the concern
    remains about whether enough workers are saving for retirement.

        Second, I frequently hear from small business owners in Idaho who
    tell me how expensive and cumbersome the rules are to offer their
    employees a retirement plan. These employers want to provide retirement
    benefits, but it is just not economically feasible. I am interested in
    hearing about what Congress can do to make it easier and cheaper for
    the smallest businesses to offer retirement plans for their employees.

        Third, our economy is constantly evolving. People are working
    longer, workers are changing jobs more often, and the number of ``gig
    workers'' is on the rise. Our retirement system must adapt with this
    changing landscape so every worker has a chance to save for a secure
    retirement. There is no better time for the Finance Committee to
    consider further retirement legislation that will meet these needs.

        Mr. Chairman, I look forward to working with you and all the
    members of the committee as we consider a so-called ``SECURE 2.0''
    package.

        To our panel of witnesses, I appreciate your willingness to share
    your expertise with us this morning, and I look forward to hearing from
    all of you.

        Thank you, Mr. Chairman.

                                     ______

                     Prepared Statement of Brian H. Graff,
            Chief Executive Officer, American Retirement Association
        Thank you, Chairman Wyden, Ranking Member Crapo, and the other
    members of the Senate Finance Committee, for holding a hearing to
    examine our workplace retirement savings plan system and for the
    opportunity to discuss with you how we can improve that system. My name
    is Brian Graff, and I am the chief executive officer of the American
    Retirement Association (ARA).

        The ARA is the coordinating entity for its five underlying
    affiliate organizations representing the full spectrum of America's
    private retirement system--the American Society of Enrolled Actuaries
    (ASEA), the American Society of Pension Professionals and Actuaries
    (ASPPA), the National Association of Plan Advisors (NAPA), the National
    Tax-Deferred Savings Association (NTSA), and the Plan Sponsor Council
    of America (PSCA). Combined, the ARA represents over 30,000 retirement
    plan professionals. The ARA's members and the organizations they are
    affiliated with support 95 percent of all the defined contribution
    plans, such as 401(k) plans, in the United States. The ARA and its
    underlying affiliate organizations are diverse in the roles they play,
    but united in their dedication to the success of America's private
    retirement system.

        ARA's mission is to help American workers bolster their retirement
    security by facilitating well-designed workplace retirement savings
    plans. We do that by both educating and informing retirement benefits
    professionals, and by advocating for policies that give every working
    American the opportunity to achieve a comfortable retirement.
           workplace plans are the foundation for a secure retirement
        The workplace retirement savings plan has been a success for those
    that have access to them. These plans provide long-term economic growth
    and build financial security for the middle class. Nearly 60 percent of
    American households--some 74.5 million had access to a workplace plan
    in 2020. At the end of the first quarter in 2021, defined contribution
    retirement plans--the most common being the 401(k) plan--had $9.9
    trillion in assets.\1\ Household retirement savings--including assets
    accumulated through those retirement plans plus all other types of
    retirement plans represents 59 percent of the non-bank financial
    capital provided to the equity and bond markets.\2\
    ---------------------------------------------------------------------------
        \1\ Investment Company Institute, Quarterly Retirement Market Data,
    June 16, 2021, available at: https://www.ici.org/statistical-report/
    ret_21_q1.
        \2\ Oxford Economics, Another Penny Saved: The Economic Benefits of
    Higher US Household Savings, June 2014, available at: http://
    www.oxfordeconomics.com/anotherpennysaved.

        The middle class is the primary beneficiary of these plans. Nearly
    two-thirds (64 percent) of active participants in 401(k) plans have an
    adjusted gross income of less than $100,000 per year.\3\ One-third (33
    percent) of participants have an income less than $50,000.\4\ The
    critical factor that determines whether these moderate-income workers
    save for their retirement is whether they have access to a retirement
    savings plan at work. Data shows that more than 70 percent of workers
    earning $30,000 to $50,000 will save in a plan when given the
    opportunity at work, but fewer than 7 percent save on their own through
    an IRA.\5\ In other words, moderate income workers are 12 times more
    likely to save for their retirement if they have access to some type of
    payroll deduction retirement savings program through their work.
    ---------------------------------------------------------------------------
        \3\ Judy Xanthopoulos, Ph.D. of Quantria Strategies, analysis of
    Internal Revenue Service, Statistics of Income, Individual Income Tax,
    and IRA Studies, 2017 Tax Year.
        \4\ Ibid.
        \5\ IRS tabulations and Vanguard, How America Saves, 2018.

        The Senate Finance Committee's continued support of expanding
    retirement plan coverage and simplifying retirement plan rules will
    increase retirement savings and build even further on the success of
    the workplace retirement plan system. An analysis by Oxford Economics
    in 2014, projected that increasing retirement savings one to five
    percentage points, including increasing the number of working Americans
    saving, was projected to increase the Nation's long-term economic
    growth by a full 3 percent--$3,500 per person--over the next 25
    years.\6\ In other words, an increase in access, and the resulting
    increase in retirement savings, produces not only individual wealth,
    but ultimately benefits the greater economy.
    ---------------------------------------------------------------------------
        \6\ Oxford Economics, Another Penny Saved: The Economic Benefits of
    Higher U.S. Household Savings, June 2014, available at: http://
    www.oxfordeconomics.com/anotherpennysaved.
    ---------------------------------------------------------------------------
                              who is left behind?
        Despite these positive results, far too many Americans still lack
    access to a retirement plan at work and thus lack an equitable
    opportunity to achieve a comfortable retirement. This retirement plan
    coverage gap, and the corresponding lack of retirement savings, is
    particularly pronounced in the Black and Latinx communities. In fact,
    according to a recent research report, 52 percent of Black Americans
    and 68 percent of Latinx Americans do not currently have access to a
    workplace retirement plan.\7\ By contrast, only 40 percent of White
    Americans lack access to a retirement plan at work.\8\
    ---------------------------------------------------------------------------
        \7\ Richard W. Johnson, Urban Institute Fellow, How Can
    Policymakers Close the Racial Gap in Retirement Security?, October
    2020, available at: https://www.urban.org/research/publication/how-can-
    policymakers-close-racial-gap-retirement-security/view/full_report.
        \8\ Ibid.

        Since so many Black and Latinx workers do not have access to a
    retirement plan, it should be no surprise that a majority of Black and
    Latinx families do not have any retirement account savings. Fifty-six
    percent of Black families and 67 percent of Latinx families have zero
    retirement savings assets compared with 35 percent of White
    families.\9\
    ---------------------------------------------------------------------------
        \9\ Monique Morrissey, Economic Policy Institute, The State of
    American Retirement Savings, December 2019, available at: https://
    www.epi.org/publication/the-state-of-american-retirement-savings/.

        Some of this gap can be attributed to the size of the organizations
    for which these communities tend to work. According to the Department
    of Labor's Bureau of Labor Statistics, only 53 percent of employees at
    smaller businesses (firms with less than 50 workers) have access to a
    workplace retirement plan, compared to 69 percent of those at firms
    with more than 50 workers and 83 percent of those at firms with more
    than 100 workers.\10\
    ---------------------------------------------------------------------------
        \10\ Department of Labor, Bureau of Labor Statistics, Employee
    Benefits in the United States News Release, September 2020, available
    at: https://www.bls.gov/news.release/archives/ebs2_
    09242020.htm.

    [GRAPHIC] [TIFF OMITTED] T2821.001

                             .epswhat can be done?
        Expanding coverage with auto-enrollment is the key to addressing
    racial inequities in retirement savings. Data shows that when moderate
    income workers are auto-enrolled in a workplace retirement plan there
    is no racial disparity in retirement savings participation with Black,
    Latinx, and White Americans all at about 80 percent.\11\
    ---------------------------------------------------------------------------
        \11\ 401(k) Plans in Living Color, A Study of 401(k) Savings
    Disparities Across Racial and Ethnic Groups, The Ariel/Aon Hewitt
    Study, 2012.

        In recent years, State and local governments have taken steps to
    close the retirement plan coverage gap in their jurisdictions with the
    enactment of laws that have created government facilitated automatic
    IRA programs. Chairman Wyden's home State of Oregon was a trailblazer
    here, becoming the first State in the Nation to formally launch such a
    ---------------------------------------------------------------------------
    program when OregonSaves came online on July 1, 2017.

        A key policy feature of most of these automatic IRA programs is a
    requirement that businesses over a certain size provide access to some
    type of retirement plan to their employees. If employers do not already
    offer a workplace retirement plan, or do not want to adopt one
    available to them in the private marketplace, they can enroll their
    employees in the State or local program. To date, 10 states--including
    Oregon--have enacted such programs.\12\
    ---------------------------------------------------------------------------
        \12\ See the Center for Retirement Initiatives at Georgetown
    University for a complete list of these programs found at: https://
    cri.georgetown.edu/.

        The ARA applauds the work and success of these State and local
    programs but believes a Federal policy would better assure the
    retirement plan coverage gap can be addressed consistently throughout
    the entire country. In this regard, it is not our intent to displace
    the great work of State and local governments that have already enacted
    a program. Senator Whitehouse has introduced the Automatic IRA Act (S.
    2370, 116th Congress) that would create a national requirement for
    businesses with 10 or more employees to adopt at minimum an automatic
    IRA plan. Similar legislation has been introduced in the past by
    Congressman Neal, Chairman of the House Ways and Means Committee. We
    believe the approach in both pieces of legislation could significantly
    close the current retirement plan coverage gap while imposing
    practically no burden on employers. This approach leverages existing
    private sector solutions in the marketplace instead of causing a
    massive disruption by replacing the entire existing retirement plan
    ---------------------------------------------------------------------------
    system with a government run program.

        The ARA enthusiastically supports Chairman Wyden's legislation, the
    Encouraging Americans to Save Act (S. 2452, 117th Congress), which
    shares a key provision in Senator Cardin's and Senator Portman's
    bipartisan Retirement Security and Savings Act (S. 1770, 117th
    Congress), specifically designed to incentivize and supplement the
    retirement savings of moderate-income workers. The bill, recently
    reintroduced in this Congress, expands and enhances the existing
    Saver's Credit by turning it from a tax credit of which only some can
    take advantage into a government matching contribution of up to $1,000
    a year for workers who save in a retirement account. The bill also
    enhances and simplifies the new Saver's Match to make the full 50
    percent match available to individuals earning up to $32,500 and
    families earning up to $65,000.

    [GRAPHIC] [TIFF OMITTED] T2821.002

        .epsWith the increased income thresholds under this legislation,
    over 120 million American workers would now be eligible for the new
    Saver's Match incentive for retirement savings.\13\ This includes
    millions of new gig workers in this country as well as government
    workers, like public school teachers, many of whom are not eligible for
    matching contributions. This expanded Saver's Match would both
    encourage saving and help moderate income earners build assets by
    providing an immediate, meaningful return on personal retirement
    contributions.
    ---------------------------------------------------------------------------
        \13\ Estimates prepared by Judy Xanthopoulos, Ph.D. of Quantria
    Strategies, based on IRS, SOI W-2 Data.

        The potential results of Congress tackling the two biggest
    challenges in the retirement savings policy space--closing the
    retirement coverage gap and directly contributing to and incentivizing
    the retirement savings of moderate-income workers--are extraordinary.
    Estimates show that enactment of the combination of the Automatic IRA
    Act and the Encouraging Americans to Save Act would create 51 million
    new individuals now saving for retirement \14\ and would add an
    additional $6.2 trillion in retirement savings over a 10-year
    period.\15\ Nearly all--98 percent--of these 51 million new savers earn
    less than $100,000 per year.\16\
    ---------------------------------------------------------------------------
        \14\ Ibid.
        \15\ Employee Benefit Research Institute's Retirement Security
    Projection Model--version 3671.
        \16\  Estimates prepared by Judy Xanthopoulos, Ph.D. of Quantria
    Strategies, based on IRS, SOI W-2 Data.
    ---------------------------------------------------------------------------
            closing the racial wealth gap through retirement savings
        Moreover, these two vital retirement savings proposals would
    greatly benefit the Black and Latinx communities, creating 5.8 million
    new Black retirement savers and 8.4 million new Latinx savers that earn
    less than $100,000 per year.\17\ For Black and Latinx Americans earning
    under $30,000, this includes a 74 percent and a 76 percent increase in
    retirement plan participation rates, respectively. For those Black and
    Latinx Americans earning between $30,000 and $50,000, the increases are
    56 percent and 60 percent, respectively.\18\
    ---------------------------------------------------------------------------
        \17\ Ibid.
        \18\ Ibid.

        [GRAPHIC] [TIFF OMITTED] T2821.003

        .epsWhy is retirement savings important? Retirement savings allows
    for a cushion against unexpected financial shocks. Retirement savings
    opens doors for small business creation. Retirement savings is
    accumulated wealth which leads to generational wealth. Ultimately,
    retirement savings is an essential piece to closing the racial wealth
    ---------------------------------------------------------------------------
    gap.

        I encourage the Senate Finance Committee, and, ultimately,
    Congress, to implement into law the Automatic IRA Act and the
    Encouraging Americans to Save Act. Besides these two important
    policies, other legislative items have been introduced that would
    support and expand the workplace retirement savings system.
                    student loan retirement matching program
        The ARA strongly supports Chairman Wyden's Retirement Parity for
    Student Loans Act (S. 1443, 117th Congress) which allows plan sponsors
    to make an employer contribution to the retirement plan account that
    matches a percentage of an employee's student loan payments. The latest
    version of this legislation addresses a concern that the ARA identified
    regarding how this new retirement plan design feature could negatively
    impact the average deferral percentage (ADP) test that 401(k) plans
    must satisfy. Since that problem has been addressed, small and medium-
    sized businesses will now not have to worry that this new and
    innovative retirement benefit puts their retirement plan testing at
    risk.
                     emergency savings in retirement plans
        The Federal Reserve found that nearly 4 in 10 adults in 2019 would
    have difficulty covering a $400 unexpected expense using cash or its
    equivalent,\19\ a situation that has likely grown worse for significant
    portions of the population due to the economic impact of the COVID-19
    pandemic.
    ---------------------------------------------------------------------------
        \19\ Board of Governors of the Federal Reserve System, Report of
    the Economic Well-Being of U.S. Households in 2019: May 2020.

        The ARA supports proposals--like Senator Lankford's and Senator
    Bennet's Enhancing Emergency and Retirement Savings Act (S. 1870, 117th
    Congress)--to create a new category of retirement plan distribution
    that would allow workers who have a balance in these accounts to
    readily access their money in the case of a personal financial
    ---------------------------------------------------------------------------
    emergency without tax penalty and a minimal amount of paperwork.

        This proposal leverages the existing workplace defined contribution
    retirement plan system to address emergency savings shortfalls. This
    would encourage increased participation in retirement plans especially
    among moderate income workers since those workers will know that they
    can access a portion of their savings in the case of a financial
    emergency.

        This approach is simple (no new or separate accounts), includes a
    tax benefit to encourage saving, and does not undermine long-term
    retirement savings. Employers are already familiar with processing such
    requests since 401(k) plans have built in rules allowing access to
    savings on account of hardships--and these funds are protected through
    the Employee Retirement Income Security Act (ERISA).

        The legislation would allow for one emergency distribution per
    calendar year of up to $1,000 from the individual's account balance in
    the plan and requires that the withdrawn funds be paid back to the plan
    before an additional emergency distribution from that same plan is
    allowed. The amount can be recontributed within a 3-year period to any
    eligible plan to which a rollover contribution can be made.

        The ARA and its members have concerns with other approaches that
    push for employers to create and automatically enroll employees into an
    entirely new and separate emergency savings account program. The ARA
    believes that this sidecar approach would not only undermine retirement
    savings, but create an unnecessary administrative burden for employers,
    and would potentially expose the employer to more liability.
             small employer retirement plan tax credit enhancements
        The 2019 SECURE Act significantly increased the small business
    pension plan startup tax credit to a maximum annual cap of $5,000, but
    still limited it to 50 percent of any administrative expenses incurred
    in the first 3 tax years of a new retirement plan.

        Section 102 of House Ways and Means Committee Chairman Neal's and
    Ranking Member Brady's Securing a Strong Retirement Act (H.R. 2954)
    (a.k.a. SECURE 2.0) increases the existing small employer pension plan
    start-up credit for employers with 50 or fewer employees to 100 percent
    of administrative retirement plan expenses for the first 3 tax years of
    a new retirement plan. The dollar cap would continue to apply.

        Section 102 also adds a new tax credit to subsidize employer
    contributions made to a new retirement plan (other than a defined
    benefit plan). The Employer Contribution Credit is equal to the
    applicable percentage of the amount contributed by the employer up to a
    per-employee cap of $1,000. The applicable percentage is equal to 100
    percent in the first tax year for a new plan, 75 percent in the second
    year, 50 percent in the third year, 25 percent in the fourth year. The
    full additional Employer Contribution Credit is limited to employers
    with 50 or fewer employees and phased out for employers with between 51
    and 100 employees.

        The ARA supports these commonsense incentives that will encourage
    small businesses to adopt a robust retirement benefit for their
    workers.
                             pooled employer plans
        Another key provision in the 2019 SECURE Act allows two or more
    unrelated employers to join a multiple or pooled employer plan. The
    provision includes important consumer protection safeguards requiring
    the service provider of such an arrangement to take responsibility for
    the proper operation of the pooled plan. Allowing unrelated employers
    to pool their assets into one plan creates economies of scale that can
    reduce administrative burdens and lower both employer and plan
    participant cost, making this type of arrangement attractive for small
    business owners who might otherwise not consider offering a program.

        Senator Grassley's, Senator Hassan's, and Senator Lankford's
    Improving Access to Retirement Savings Act (S. 1703, 117th Congress)
    has thoughtfully included two provisions that address technical issues
    with respect to these so-called ``open'' pooled employer plans,
    building upon the improvements made to these arrangements in the 2019
    SECURE Act. The first provision would allow 403(b) plans that are
    generally sponsored by charities and public educational organizations,
    to participate in open multiple employer plans as corporate plans can
    currently. This provision includes important language requiring the
    Department of Treasury and the Department of Labor to educate non-
    profit plan sponsors on their fiduciary obligations. The second
    provision would allow employers who wish to join an existing multiple
    employer plan to receive the small employer pension plan startup
    credit. These provisions would improve access to high-quality low-cost
    retirement plans for the benefit of small business rank-and-file
    workers.
               other useful retirement plan tools and rule fixes
    New Required Beginning Dates for Required Minimum Distributions
        The 2019 SECURE Act provided greater flexibility in retirement
    planning by moving back the age that individuals are required to begin
    taking distributions from their tax-favored retirement accounts from
    age 70\1/2\ to age 72. The 2021 SECURE 2.0 Act moves back those ages
    even further to age 73 starting on January 1, 2022, to age 74 starting
    on January 1, 2029, and to age 75 starting on January 1, 2032. A
    similar provision is also included in Senator Cardin's and Senator
    Portman's Retirement Security and Savings Act (S. 1770, 117th
    Congress). These new required beginning dates will allow individuals to
    hold on to their retirement assets longer should they wish to account
    for a longer expected lifespan in retirement.
    Family Attribution Rule Fixes
        The ARA strongly supports Congressman Panetta's and Congressman
    Arrington's Family Attribution Modernization Act (H.R. 2796, 117th
    Congress) that is also included in the 2021 SECURE 2.0 Act. This
    critical modification updates old tax rules to not only reflect the
    modern economy, but it removes needless barriers to small business
    retirement plan formation, particularly for women business owners.
    Specifically, the legislation addresses two inequities in the stock
    attribution rules that impact certain tests a retirement plan must
    complete each year to remain qualified: (1) it removes attribution for
    spouses with separate and unrelated businesses who reside in community
    property States, and (2) it removes attribution between parents with
    separate and unrelated business who have minor children.
    Discretionary Amendments
        Senator Grassley's, Senator Hassan's, and Senator Lankford's
    Improving Access to Retirement Savings Act (S. 1703, 117th Congress)
    includes an important provision--also contained in the 2021 SECURE 2.0
    Act--that gives employers more time to adopt beneficial discretionary
    retirement plan amendments--specifically up until the due date of the
    employer's tax return. This new deadline to adopt a beneficial
    discretionary amendment is consistent with the deadline to adopt a new
    retirement plan that was provided for in the 2019 SECURE Act and gives
    employers with existing retirement plans the flexibility to make their
    retirement plans more generous to rank and files workers after the end
    of the year.
    Financial Factors in Selecting Retirement Plan Investments
        The ARA has long believed that retirement plan participants and
    beneficiaries are best served when the Employee Retirement Income
    Security Act (ERISA) principles governing the selection of retirement
    plan investments by plan fiduciaries are clear. ERISA fiduciaries'
    obligations of prudence and exclusive purpose are at the heart of
    ERISA's protections of retirement plans and participants, including
    plan investment selection. The ARA believes that ERISA requirements for
    fiduciaries selecting plan investments should neither promote the
    sacrifice of investment returns or assumption of greater investment
    risks as a means of promoting collateral social policy goals--nor
    should they preclude consideration of benefits other than investment
    return.

        To that end, the ARA supports Senator Smith's Financial Factors in
    Selecting Retirement Plan Investments Act (S. 1762, 117th Congress).
    This legislation clarifies ERISA fiduciary obligations to make it clear
    that a plan fiduciary may consider environmental, social, and
    governance (ESG) factors in the selection of retirement plan
    investments and provides that ESG investments are permitted as
    qualified default investment alternatives in ERISA-covered retirement
    plans. It establishes the principle in ERISA that ESG investments
    should not be discouraged or treated differently than other retirement
    plan investment options.
    Federally Declared Disaster Distributions
        Every year tens of thousands of Americans are victims of disasters
    from floods, tornadoes, hurricanes, forest fires, or more recently a
    global health pandemic. But because there are not permanent rules on
    the use of retirement funds by individuals impacted by these
    situations, victims are dependent upon congressional action after the
    occurrence of each disaster. The ARA strongly supports permanent
    retirement plan tax relief measures that would automatically apply once
    a Presidential disaster declaration is issued. ARA applauds and
    supports Senators Menendez and Cassidy's legislation that would make
    eligibility for these distributions in these circumstances permanent.
    Electronic Disclosure
        The ARA strongly believes that electronic disclosure be the default
    method of communication with retirement plan participants and
    beneficiaries. Electronic delivery encourages participants to engage
    with their investments, which results in better outcomes, including
    higher deferral rates and improved retirement preparedness. According
    to the Investment Company Institute's survey of a cross section of
    401(k) recordkeepers conducted in the winter of 2017-2018, the average
    contribution rate of participants who interacts with their plan website
    averaged 7.8 percent of salary versus just 5.8 percent of salary for
    those who did not interact with the plan's website. However, we are
    aware of legislation in the House of Representatives developed in
    response to a Department of Labor regulation released in 2020. The
    legislation is counter to the DOL regulation and would only serve to
    further complicate plan sponsors' ability to efficiently operate a
    retirement plan. We propose a compromise that would streamline all
    existing regulatory rules on the mechanics behind who receives
    disclosures and how an individual receives disclosures, but the default
    would be electronic except for one paper benefit statement provided
    annually. We would like to work with Congress and other stakeholder
    groups on this proposal in order to provide plan sponsors and
    participants certainty on how disclosures are distributed in the
    future.
                                   conclusion
        The ARA appreciates the Senate Finance Committee's focus on the
    ongoing challenges that American families face in achieving a secure
    retirement. We thank Congress for taking a major step forward to
    improve the workplace retirement system with the enactment of the
    SECURE Act at the end of 2019. We look forward to working with Congress
    as it moves forward with further improvements to the system in this
    Congress.

                                     ______

              Questions Submitted for the Record to Brian H. Graff
                     Questions Submitted by Hon. Mike Crapo
        Question. Small business owners in Idaho tell me how expensive it
    is to offer their employees a retirement plan. The smallest businesses,
    which may only have 5-10 employees, some of whom may work part-time,
    can really benefit from tax incentives like the startup credit. I hear
    that ongoing compliance with complex ERISA and tax code rules drive
    much of the cost.

        Would streamlining these rules make it easier--and therefore
    cheaper--for small employers to comply?

        Answer. Yes. The good news is that former Senate Finance Committee
    Chairman Orrin Hatch included such a proposal in his retirement bill,
    the SAFE Retirement Act of 2013 (S. 1270, 113th Congress, https://
    www.congress.gov/bill/113th-congress/senate-bill/1270). Section 201 of
    that bill creates a ``Starter 401(k)'' wage deferral-only super simple
    safe harbor 401(k) plan. This proposal was also incorporated into House
    Ways and Means Committee Chairman Richard Neal's Automatic Retirement
    Plan Act (H.R. 4523, 115th Congress, https://www.congress.gov/bill/
    115th-congress/house-bill/4523).

        The plan allows employees to save up to $8,000 per year in a tax-
    preferred account--more than in an IRA--but does not involve the
    administrative burden or expense of a traditional 401(k) plan. For
    example, this plan does not require any employer contributions or
    complicated nondiscrimination testing and employees are automatically
    enrolled. In other words, the ``Starter 401(k)'' is perfect for a small
    or start-up business that is not in a position to contribute to a plan
    but wants to help its employees save for retirement.

        Question. How should Congress approach this challenge?

        Answer. Congress should immediately enact this new plan design into
    law. The American Retirement Association strongly supports passage of
    the Automatic Retirement Plan Act, but, in addition, would support a
    stand-alone measure, such as section 201 of the SAFE Retirement Act of
    2013.

        Question. In your testimony, you mentioned the importance of making
    it easier to help small employers offer retirement plans. I agree with
    you that making it easier for small employers is essential to closing
    the coverage cap.

        Do the proposals discussed in the July 28th hearing accomplish that
    goal? If yes, which provisions or proposals are the most important? If
    not, what else could be done?

        Answer. The most effective way to close the coverage gap is to
    require businesses to offer the opportunity for their employees to save
    for retirement through payroll deduction. Senator Whitehouse's
    Automatic IRA Act (S. 2370, 116th Congress, https://www.congress.gov/
    bill/116th-congress/senate-bill/2370) creates such a national
    requirement for businesses with 10 or more employees. Covered
    businesses would be required to at minimum automatically enroll
    employees into a payroll deduction IRA arrangement. House Ways and
    Means Committee Chairman Richard Neal has introduced similar
    legislation. Implementing these proposals will significantly close the
    current retirement plan coverage gap while imposing practically no
    burden on employers.

        Enhancing the small employer retirement plan tax credit is also
    critical. The 2019 SECURE Act significantly increased the small
    business pension plan startup tax credit to a maximum annual cap of
    $5,000, but still limited it to 50 percent of any administrative
    expenses incurred in the first 3 tax years of a new retirement plan.

        The bipartisan Securing a Strong Retirement Act (H.R. 2954, 117th
    Congress, https://www.congress.gov/bill/117th-congress/house-bill/2954)
    (a.k.a. SECURE 2.0) increases the existing small employer pension plan
    start-up credit for employers with 50 or fewer employees to 100 percent
    of administrative retirement plan expenses for the first 3 tax years of
    a new retirement plan. The dollar cap would continue to apply. SECURE
    2.0 also adds a new tax credit to subsidize employer contributions made
    to a new retirement plan. These common-sense incentives will encourage
    small businesses to adopt a robust retirement benefit for their
    workers.

        Expanding and enhancing the existing Saver's Credit will encourage
    workers to participate in these retirement plans. Chairman Wyden's
    Encouraging Americans to Save Act (S. 2452, 117th Congress, https://
    www.congress.gov/bill/117th-congress/senate-bill/2452), which shares a
    key provision in Senator Cardin's and Senator Portman's bipartisan
    Retirement Security and Savings Act (S. 1770, 117th Congress, https://
    www.congress.gov/bill/117th-congress/senate-bill/1770), is specifically
    designed to incentivize and supplement the retirement savings of
    moderate-
    income workers. These proposals transform the Saver's Credit from a tax
    credit of which only some can take advantage into a government matching
    contribution of up to $1,000 a year for workers who save in a
    retirement account. The bill also enhances and simplifies the new
    Saver's Match to make the full 50 percent match available to
    individuals earning up to $32,500 and families earning up to $65,000.

        Estimates show that enactment of the combination of the Automatic
    IRA Act and the Encouraging Americans to Save Act would create 51
    million new individuals now saving for retirement and would add an
    additional $6.2 trillion in retirement savings over a 10-year period.
    Nearly all--98 percent--of these 51 million new savers earn less than
    $100,000 per year.

        Question. The bipartisan SECURE Act in 2019 expanded retirement
    plan coverage for long-term, part-time workers. The U.S. workforce has
    changed and will continue to change over time, and the pandemic is just
    the most recent demonstration of changing dynamics.

        What impact would the proposal to further expand retirement plan
    coverage for long-term, part-time employees have on employers and
    employees?

        Answer. The American Retirement Association supports the expansion
    of retirement plan coverage to long-term, part-time employees.
    Provisions in both the bipartisan 2021 SECURE 2.0 bill and the
    Retirement Security and Savings Act would reduce the period of service
    requirement for long-term part-time employees from 3 to 2 years.

        The 2019 SECURE Act excludes the counting of periods of service
    prior to 2021 for purpose of determining the eligibility of long-term
    part-time employees to contribute to the plan. However, it does not
    explicitly exclude the counting of prior periods of service for vesting
    purposes. Recent IRS guidance (Notice 2020-68, https://www.irs.gov/pub/
    irs-drop/n-20-68.pdf) to implement the SECURE Act stated that because
    of this statutory language omission, all prior service of long-term
    part-time employees must be considered for vesting. Although employers
    are not required to provide long-term part-time employees with employer
    contributions, some employers may want to be more generous so as to not
    treat them differently that full-time employees. This IRS
    interpretation unfairly and negatively impacts those employers wanting
    to be more generous.

        The American Retirement Association supports a statutory
    clarification to the 2019 SECURE Act so that the exclusion of periods
    of service before the 2021 plan year also applies for purpose of
    counting vesting service. This way, periods of service for both
    eligibility and vesting will be counted the same way. Before the 2019
    SECURE Act was enacted, there was no need to maintain the service and
    hour records of employees not eligible to participate in the plan, so
    many more generous employers will have trouble complying with the
    recent IRS guidance.

        Question. Automatic escalation features would clearly increase
    retirement savings, but for some small employers, it may not be
    feasible to offer such a feature.

        Can you comment on the role automatic escalation features play in
    retirement savings and how small employers can use these features?

        Answer. Since 1998, employers have been permitted to automatically
    enroll newly hired employees into a 401(k). In 2000, automatic
    enrollment was extended to current workers. The 2006 Pension Protection
    Act (PPA) created clear automatic enrollment and automatic escalation
    safe harbors for employers.

        According to the Plan Sponsor Council of America's 2019 Annual
    Survey of Profit Sharing and 401(k) Plans, 60.2 percent of plans had
    automatic enrollment, but that percentage drops to 34.8 percent for
    employers with less than 50 plan participants. From the same survey,
    32.7 percent of plans had an automatic escalation feature that
    automatically increases the default deferral rates over time (typically
    at 1 percent of pay per year) including 34.2 percent of employers with
    less than 50 plan participants. So, if small employers have an
    automatic enrollment feature in their plan, they also typically have an
    automatic escalation feature as well.

        While these automatic features are effective, the bigger problem is
    that, according to the DOL's Bureau of Labor Statistics, only 53
    percent of workers at businesses with less than 50 workers have access
    to a workplace retirement plan, compared to 69 percent of workers at
    businesses with 50-100 workers, and 83 percent of workers at businesses
    with more than 100 workers. We need to focus on getting small
    businesses to adopt retirement plans first.

        Question. In your written statement, you mentioned pooled employer
    plans--or ``PEPs''-- which were enacted as part of the SECURE Act. I
    hear a lot of enthusiasm about these plans, and I understand that as of
    January 1st, pooled plan providers can begin to offer PEPs.

        Can you comment on how PEP implementation is going?

        Answer. Many retirement plan service providers have unveiled
    various pooled employer plan (PEP) products this year. In a PEP, the
    plan sponsor role is outsourced to a professional third party known as
    the Pooled Plan Provider (PPP). Because the PPP is the plan sponsor,
    the PPP is also the designated plan administrator and named fiduciary,
    two very important legal roles in determining who has fiduciary
    responsibility for the plan. The PPP role is likely to be filled by
    third-party administrators (TPAs), recordkeepers, registered investment
    advisors (RIAs) or some other financial services firm. The PPP must
    acknowledge their fiduciary responsibilities in writing and ensure all
    participating employers are complying with their obligations and that
    the plan is properly bonded. All of these requirements are further
    monitored by registration requirements with the U.S. Department of
    Labor (DOL).

        The SECURE Act laid a solid foundation upon which to build PEPs,
    but there remains a need for regulatory guidance. Most important will
    be the need for the DOL to address potential conflicts of interest when
    a service provider takes on the PPP role and then hires themselves to
    take on other roles in the plan for compensation. This scenario is
    likely to occur in many PEPs where a recordkeeper serves as a PPP and
    hires themselves as the plan administrator or an RIA serves as the PPP
    and hires themselves as the discretionary investment manager. Conflicts
    could also arise if the PPP includes proprietary investment products in
    the PEP. These scenarios could be addressed with DOL guidance on
    reasonable arrangements and proper disclosures, but that exemption does
    not currently exist.

        Question. What else needs to be done for these plans to become more
    widespread?

        Answer. Senator Grassley's, Senator Hassan's, and Senator
    Lankford's Improving Access to Retirement Savings Act (S. 1703, 117th
    Congress, https://www.
    congress.gov/bill/117th-congress/senate-bill/1703) has thoughtfully
    included two provisions that address technical issues with respect to
    pooled employer plans, building upon the improvements made to these
    arrangements in the 2019 SECURE Act. The first provision would allow
    403(b) plans that are generally sponsored by charities and public
    educational organizations, to participate in open multiple employer
    plans as corporate plans can currently. This provision includes
    important language requiring the Department of Treasury and the
    Department of Labor to educate non-profit plan sponsors on their
    fiduciary obligations. The second provision would allow employers who
    wish to join an existing multiple employer plan to receive the small
    employer pension plan startup credit. Besides this important
    legislation, the market needs time to develop the products and for plan
    sponsors to become aware of the products that are available.

        Question. In your written statement, you mentioned the family
    attribution rules that affect retirement plans in community property
    States. As you know, Idaho is a community property State, so I am
    interested to hear more.

        Please elaborate on how these rules affect small business owners in
    Idaho.

        Answer. Under the tax code, certain related businesses must be
    aggregated when performing the coverage and nondiscrimination tests.
    The aggregation rules are generally based on the degree of common
    ownership of the businesses. For example, if an individual owns 100
    percent of two separate businesses, they must be aggregated for
    purposes of the tests.

        In determining the level of ownership in a business the tax laws
    have certain attribution rules whereby an individual is deemed to own
    stock held by other individuals or entities.

        As a general rule, an individual is attributed any ownership
    interest held by his or her spouse. There is an exception to this rule.
    A spouse is not deemed to own the stock of his or her spouse if: (1)
    the individual does not have direct ownership in the spouse's business;
    (2) the individual is not a director or employee, and does not
    participate in the management of the spouse's business; (3) no more
    than 50 percent of the spouse's business's gross income for a taxable
    year is derived from passive investments (e.g., royalties and rents);
    and (4) the spouse's ownership interest is not subject to disposition
    restrictions running in favor of the individual or the minor children
    of the individual and the spouse (e.g., the business owner cannot be
    required to offer a right of first refusal to his or her spouse or
    their children before selling the business to a third party).

        In a community property State, spouses are automatically considered
    to own half of the property acquired during the marriage, except under
    certain limited circumstances. The result is that the first criteria
    (no direct ownership in each other's business) is not satisfied and
    there would be stock attribution among the spouses.

        The application of this rule can create situations where a business
    owner is not able to establish a plan for her employees solely because
    she resides in a community property State.

        The ARA strongly supports Congressman Panetta's and Congressman
    Arrington's Family Attribution Modernization Act (H.R. 2796, 117th
    Congress, https://www.
    congress.gov/bill/117th-congress/house-bill/2796) that is also included
    in the 2021 SECURE 2.0 bill. The Family Attribution Modernization Act
    updates old tax rules to reflect the modern economy and removes
    needless barriers to small business retirement plan formation,
    particularly for women business owners. Specifically, the legislation
    addresses two inequities in the stock attribution rules: (1) it removes
    attribution for spouses with separate and unrelated businesses who
    reside in community property States, and (2) it removes attribution
    between parents with separate and unrelated business who have minor
    children.

                                     ______

                     Question Submitted by Hon. John Thune
        Question. An IRS report from 2019 indicated that the independent
    contractor workforce increased nearly 50 percent between 2001 and 2016.

        As the number of individuals choosing to participate in the gig
    economy increases, either as a full-time job or a way to supplement
    income, do you believe existing retirement plans, like pooled employer
    plans for example, adequately accommodate independent contractors in
    their ability to save for retirement?

        Answer. It is unclear whether gig workers are eligible to join a
    pooled employer plan (PEP), so this is another area for DOL to provide
    further PEP clarification and guidance.

                                     ______

                     Questions Submitted by Hon. Todd Young
        Question. As I mentioned during my opening statement, only 40
    percent of Indiana's workforce participates in an employer-provided
    retirement plan. In fact, just half of all Hoosier workers are offered
    such a plan in the first place.

        During our conversation, you mentioned that two of the major
    hurdles small businesses face in offering employer-provided retirement
    plans are (1) administrative costs and (2) the limited flexibility
    around costs involved with employer contributions. I was proud to
    support the bipartisan SECURE Act last Congress which eased some of the
    costs related to setting up such plans, especially for small
    businesses.

        The second hurdle you had mentioned--giving small businesses more
    flexibility--is an area in which I have taken great interest, as we
    discussed. In particular, my Retirement Security Flexibility Act would
    address shortcomings in current contribution safe harbor provisions by
    empowering employers to auto-enroll employees in plans and auto-
    escalate employee contributions to help employees accumulate savings
    more quickly, while also easing burdensome contribution matching
    requirements for small employers.

        During the hearing you had shared ideas similar to those present in
    this legislation. Would you agree that relaxing the minimum
    contribution limits for the smallest employers would encourage such
    employers to offer retirement plans to their employees and ultimately
    increase retirement savings among its workers?

        Answer. Yes. The American Retirement Association support's your
    Retirement Security Flexibility Act (S. 2602, 117th Congress, https://
    www.congress.gov/bill/117th-congress/senate-bill/2602) to create an
    additional automatic contribution 401(k) plan safe harbor for small
    employers. This additional safe harbor would give small employers more
    flexibility for employer contributions than is provided in the existing
    401(k) plan safe harbor arrangements.

        And as I mentioned to you during the hearing, an even simpler
    approach is the ``Starter 401(k)'' proposal in former Chairman Orrin
    Hatch's SAFE Retirement Act. The ``Starter 401(k)'' allows employees to
    save up to $8,000 per year in a tax-preferred account--more than in an
    IRA--but does not involve the administrative burden or expense of a
    traditional 401(k) plan. For example, this plan does not require any
    employer contributions or complicated nondiscrimination testing and
    employees are also automatically enrolled.

        Question. Many Americans are vulnerable to sudden and unexpected
    expenses. The annual Federal Reserve Report on the Economic Well-being
    of U.S. Households revealed that roughly 40 percent of Americans are
    unable to cover a $400 expense. While the COVID-19 Economic Impact
    Payments temporarily alleviated this problem, it appears that increased
    consumer spending has largely eliminated short-term gains made in
    savings. I am working with Senator Booker to reintroduce a number of
    bills that would help incentivize emergency savings, including by
    setting aside a portion of one's tax refund into a rainy day fund and
    enabling workers to set up short-term savings accounts through their
    employers.

        How important is it that emergency savings issues are addressed
    alongside broader retirement savings reform?

        Answer. It is very important that emergency savings issues get
    addressed, since the lack of emergency savings is a significant barrier
    preventing Americans from setting aside long-term savings for a more
    comfortable retirement.

        To give American workers a peace of mind that they can access funds
    set aside in a retirement account for an unexpected financial
    emergency, the American Retirement Association supports Senator
    Lankford's and Senator Bennet's Enhancing Emergency and Retirement
    Savings Act (S. 1870, 117th Congress, https://www.congress.gov/bill/
    117th-congress/senate-bill/1870). This bill creates a new category of
    retirement plan distribution that would allow workers who have a
    balance in these accounts to readily access their money in the case of
    a personal financial emergency without tax penalty and a minimal amount
    of paperwork.

        This proposal leverages the existing workplace defined contribution
    retirement plan system to address emergency savings shortfalls. This
    would encourage increased participation in retirement plans especially
    among moderate income workers since those workers will know that they
    can access a portion of their savings in the case of a financial
    emergency.

        This approach is simple (no new or separate accounts), includes a
    tax benefit to encourage saving, and does not undermine long-term
    retirement savings. Employers are already familiar with processing such
    requests since 401(k) plans have built-in rules allowing access to
    savings on account of hardships--and these funds are protected through
    the Employee Retirement Income Security Act (ERISA).

        The ARA and its members have concerns with other approaches that
    push for employers to create and automatically enroll employees into an
    entirely new and separate emergency savings account program. The ARA
    believes that this sidecar approach would not only undermine retirement
    savings, but create an unnecessary administrative burden for employers,
    and would potentially expose the employer to more liability.

        Question. What are the trade-offs of allowing emergency savings to
    be drawn from retirement accounts, as many did during the pandemic?

        Answer. The obvious trade-off is that workers who draw down their
    retirement accounts for emergency or other eligible hardship
    distributions will have less money saved for their retirement. The
    Coronavirus Aid, Relief, and Economic Security (CARES) Act allowed
    eligible retirement savers to take a coronavirus-related distribution
    (CRD). Individuals affected by the coronavirus were able to withdraw up
    to $100,000 from their retirement plan penalty free until December 30,
    2020. This is the first time these emergency distribution provisions
    were put into place on a national scale.

        At the time of its passage, some were concerned that this bill
    would open the floodgates to a large percentage of workers cashing out
    years of retirement savings. Fortunately, this did not happen.
    According to an analysis of Vanguard 401(k) plan recordkeeping data,
    more than 94 percent of plan participants did not access their
    retirement savings, and instead stayed the course. Less than 6 percent
    of participants have withdrawn assets, with the typical participant
    accessing about $13,300. Recovery from such an early distribution can
    be achieved with marginal increases to savings and sufficient time to
    retirement.

        Question. How do we ensure Americans have the freedom of using
    their savings to cover immediate needs while preserving the integrity
    of their long-term retirement accounts?

        Answer. This a critical balance. The Enhancing Emergency and
    Retirement Savings Act only allows for one emergency distribution per
    calendar year of up to $1,000 from the individual's account balance in
    the plan and requires that the withdrawn funds be paid back to the plan
    before an additional emergency distribution from that same plan is
    allowed. The amount can be recontributed within a three-year period to
    any eligible plan to which a rollover contribution can be made.

        These reasonable restrictions also highlight the importance of
    automated features in retirement plans. In addition to the savings
    benefits of automatic enrollment, automated plan design will provide
    many employees with an additional source of emergency money.

                                     ______

               Questions Submitted by Hon. Catherine Cortez Masto
        Question. Northern Nevada communities are facing the effects of
    devastating wildfires--a threat that has grown in intensity over the
    years. Though Nevada has been spared the major structural damage that
    other Western communities have seen recently, Nevadans must be equipped
    with the tools they need to keep their families safe during disasters
    such as access to emergency savings. Chairman Wyden has supported
    legislation that would enable families affected by catastrophic
    wildfires and other disasters to withdraw funds from their retirement
    accounts without penalty for disaster-related expenses. Congress has
    regularly relaxed penalties for folks impacted by major disasters on an
    ad hoc basis, just as we did during the pandemic, yet families
    shouldn't have to come to Congress in the darkest hour of their lives
    asking for tax relief.

        Can you elaborate on the importance of allowing families to access
    these funds as emergency savings under extraordinary circumstances?

        Answer. It is critically important. I absolutely agree with your
    assessment. Every year tens of thousands of Americans are victims of
    major disasters, and Congress on occasion has allowed these victims to
    use their own retirement funds through special distribution and loan
    rules to help them cope and recover from the disaster. But because
    there are not permanent rules in the tax code for these situations,
    victims are dependent upon ad hoc congressional action to get increased
    access to their retirement funds after the occurrence of each disaster.

        For example, in 2005, Congress created these special retirement
    plan rules for Hurricane Katrina victims. However, Congress provided no
    such relief for Hurricane Sandy victims. This disparate treatment is
    unfair and even if Congress eventually provides the relief in many
    cases the special rules are put in place too late to be useful. Without
    permanent relief, the general recovery process in the aftermath of a
    disaster is slowed.

        Fortunately, Senator Cassidy and Senator Menendez recently
    introduced the Disaster Retirement Savings Act (S. 2583, 117th
    Congress, https://www.congress.gov/bill/117th-congress/senate-bill/
    2583) that would make these sensible disaster relief rules permanent.
    The ARA strongly supports permanent retirement plan tax relief measures
    that would automatically apply once a Presidential disaster declaration
    is issued. ARA applauds and supports Senators Cassidy and Menendez's
    legislation that would make eligibility for these distributions in
    these circumstances permanent and urges Congress to promptly enact this
    bill into law.

        Question. How does that ability impact workers' decision to save
    for retirement in the first place?

        Answer. If American workers fear that they will be unable to or
    unfairly penalized for accessing their savings, they will be less
    likely to save in these types of retirement accounts in the first
    place. Proposals like the Enhancing Emergency and Retirement Savings
    Act and the Disaster Retirement Savings Act strike the proper balance
    to ensure Americans have the ability to use their savings to cover
    emergency needs while preserving their long-term retirement savings.

        Question. Nevada follows community property rules, which suggest
    that families have joint ownership of an enterprise run by one spouse.
    I understand this has created challenges for small business owners
    looking to start a retirement plan.

        Can you explain why this is occurs? How do we fix it?

        Answer. Under the tax code, certain related businesses must be
    aggregated when performing the coverage and nondiscrimination tests.
    The aggregation rules are generally based on the degree of common
    ownership of the businesses. For example, if an individual owns 100
    percent of two separate businesses, they must be aggregated for
    purposes of the tests.

        In determining the level of ownership in a business the tax laws
    have certain attribution rules whereby an individual is deemed to own
    stock held by other individuals or entities.

        As a general rule, an individual is attributed any ownership
    interest held by his or her spouse. There is an exception to this rule.
    A spouse is not deemed to own the stock of his or her spouse if: (1)
    the individual does not have direct ownership in the spouse's business;
    (2) the individual is not a director or employee, and does not
    participate in the management of the spouse's business; (3) no more
    than 50 percent of the spouse's business's gross income for a taxable
    year is derived from passive investments (e.g., royalties and rents);
    and (4) the spouse's ownership interest is not subject to disposition
    restrictions running in favor of the individual or the minor children
    of the individual and the spouse (e.g., the business owner cannot be
    required to offer a right of first refusal to his or her spouse or
    their children before selling the business to a third party).

        In a community property State, spouses are automatically considered
    to own half of the property acquired during the marriage, except under
    certain limited circumstances. The result is that the first criteria
    (no direct ownership in each other's business) is not satisfied and
    there would be stock attribution among the spouses.

        The application of this rule can create situations where a business
    owner is not able to establish a plan for her employees solely because
    she resides in a community property State.

        The ARA strongly supports Congressman Panetta's and Congressman
    Arrington's Family Attribution Modernization Act (H.R. 2796, 117th
    Congress, https://www.
    congress.gov/bill/117th-congress/house-bill/2796) that is also included
    in the 2021 SECURE 2.0 bill. The Family Attribution Modernization Act
    updates old tax rules to reflect the modern economy and removes
    needless barriers to small business retirement plan formation,
    particularly for women business owners. Specifically, the legislation
    addresses two inequities in the stock attribution rules: (1) it removes
    attribution for spouses with separate and unrelated businesses who
    reside in community property States, and (2) it removes attribution
    between parents with separate and unrelated business who have minor
    children.

                                     ______

         Prepared Statement of Hon. Tobias Read, Oregon State Treasurer
                                  introduction
        Chairman Wyden, Ranking Member Crapo, and members of the committee,
    thank you for the opportunity to address the committee on the topic of
    retirement security.

        My name is Tobias Read, and I have the honor of serving as Oregon's
    State Treasurer. At the Oregon State Treasury, we focus on promoting
    the financial security of all Oregonians. We manage a roughly $100
    billion investment portfolio, issue the State's bonds, serve as the
    central bank for State agencies and local governments, and administer
    savings programs for individuals and families.

        Before I was elected State Treasurer, I served in the State
    legislature. In 2015, I co-sponsored the legislation that led to the
    creation of the Oregon Retirement Savings Program, also known as
    OregonSaves. The Oregon State Treasury is tasked with implementing
    OregonSaves, and my experience with OregonSaves is why I am here to
    testify before you today.

        We created the first-in-the-Nation OregonSaves program in response
    to our Nation's retirement savings crisis. According to the World
    Economic Forum, the retirement savings gap in America is estimated to
    be at least $28 trillion.\1\ At the same time, more than half of the
    private sector workforce in the United States lacks access to an
    employer-sponsored retirement savings plan at work. In Oregon alone,
    with a working age population of 1.8 million, there were an estimated 1
    million
    private-sector workers without such access. And that matters, because
    research by the AARP shows that workers are 15-times more likely to
    save if there is an option to do so at work.\2\
    ---------------------------------------------------------------------------
        \1\ https://www.nirsonline.org/wp-content/uploads/2017/06/
    retirementsavingscrisis_final.pdf.
        \2\ https://www.aarp.org/content/dam/aarp/ppi/2017-01/
    Retirement%20Access%20Race%20
    Ethnicity.pdf.

        That's why everyone should be happy to see the efforts of Oregon
    and other States to expand savings options to more people. Empowering
    more people to invest in their own futures is vital to the financial
    ---------------------------------------------------------------------------
    well-being of individuals and families alike.

        The program is working. I am pleased to report that OregonSaves is
    a success, and it is still just getting started. Tens of thousands of
    people are already participating and most of these Oregonians had never
    saved before. Over 100,000 Oregonians have accounts with OregonSaves
    and participants have collectively saved over $123 million dollars for
    their retirement.
                              what is oregonsaves?
        OregonSaves is an easy, automatic way for Oregonians to save for
    retirement at work. Workers at an employer that does not offer a
    qualified retirement plan can automatically enroll and start saving
    into their own personal Roth IRA. OregonSaves is also a public-private
    partnership. The program is overseen by the State and managed by a
    private program administrator with extensive experience in the
    financial services industry, similar to how 529 plans are structured.

        Oregon employers that do not offer a retirement savings option are
    required to offer OregonSaves to their workers. Participating workers
    contribute to their IRA with every paycheck, and those IRAs are tied to
    the worker and not the job, ensuring that what a worker saves is
    portable and will always be their money and under their control.
    Workers can opt out if they want, but most are staying in--about 3 of
    every 4 eligible workers.

        Based on early demographic data, two-thirds of workers age 35-44
    choose to participate in OregonSaves when they work at a facilitating
    employer.\3\ This means OregonSaves is laying a foundation for a long-
    term culture shift, in which saving early and throughout your career
    becomes the norm.
    ---------------------------------------------------------------------------
        \3\ http://crr.bc.edu/wp-content/uploads/2018/12/IB_18-22.pdf.
    ---------------------------------------------------------------------------
                               how does it work?
        The program fills an important gap by expanding access to workers
    who have traditionally been unable to contribute to workplace
    retirement accounts. Workers, such as hair stylists or those in
    construction, generally work for themselves or for small businesses
    that lack employer-sponsored plans. For these workers, making long-term
    financial plans--including for retirement--often takes a back seat.

        The program is currently registering employers with 5 or more
    workers. The State-wide rollout will continue in waves through 2022,
    which is the timeline for small businesses with four or fewer workers.
    However, many employers see the benefits of OregonSaves and aren't
    waiting to register. Employers of any size can enroll at any time ahead
    of their registration date, with thousands having already chosen to do
    so.

        The program is also open for voluntary enrollment by individuals,
    including the self-employed, gig economy workers, and those whose
    employers do not facilitate OregonSaves.

        The participation rate of eligible workers has remained steady at
    around 72 percent since we launched, consistent with the market
    research analysis completed in 2016,\4\ which estimated opt-out rates
    of 20 to 30 percent. Workers automatically enrolled in OregonSaves
    utilize a standard set of options designed to reduce the stress and
    decision paralysis often ascribed to individuals enrolling in
    retirement savings plans. The standard savings rate and account type
    for OregonSaves is 5 percent of gross pay into a Roth IRA. Other states
    (CA, IL) initially set their standard savings rate at 3 percent, for
    fear that a higher initial percentage would reduce participation in the
    program. Our results show the higher percentage has not affected
    participation. The average savings rate is currently around 5.5
    percent, and workers are contributing an average of $140 per month.
    ---------------------------------------------------------------------------
        \4\ https://www.oregon.gov/retire/SiteAssets/Pages/Newsroom/
    ORSP%20Market%20Analysis%
    2013JULY2016.pdf.

        We chose a Roth IRA as the standard account type because workers
    can withdraw their contributions at any time without penalty. This is
    an important design feature for new savers, many of whom lack emergency
    savings to weather financial shocks such as car repairs or medical
    ---------------------------------------------------------------------------
    bills.

        In fact, at the beginning of the pandemic when many of our
    participants were laid off when workplaces were required to close,
    their OregonSaves accounts were able to provide some financial
    stability some savers.

        Additional standard design features include depositing the first
    $1,000 saved into a capital preservation fund. This serves a dual
    purpose: first, it keeps our participants away from market volatility
    in the early months when they are new to the program. Second, it
    ensures that if a worker is automatically enrolled and decides soon
    thereafter to withdraw from the program, they can quickly access all
    contributed funds. Contributions above $1,000 automatically flow into a
    target date fund based on the participant's estimated retirement age.
    The Board has recently made some changes in how the capital
    preservation feature operates that will occur later this year.

        Finally, the standard design includes an automatic escalation of 1
    percent on January 1st of each year until the contribution rate reaches
    10 percent. We're happy to report that 94.6 percent of savers that
    experienced an auto-escalation in 2021 took no action, allowing that
    increase in their contribution rate. In fact, 102 participants used the
    reminder as an opportunity to increase their savings rate even further.
    What this means in numbers--more than 32,000 OregonSaves participants
    had their savings rate auto-escalated this year, and of those, more
    than 10,000 were auto-escalated for the second time and almost 4,000
    for the third time.
                             employer facilitation
        From the beginning, Treasury was aware that the success of
    OregonSaves relied heavily on our relationship with employers. We
    constructed the program to limit the requirements on employers as much
    as possible and are constantly considering ways to decrease the time
    employers spend facilitating the program. Employer interaction with the
    program includes the steps outlined below.

        First, registration or exemption. All Oregon employers receive
    notices from the OregonSaves program in the months leading up to their
    registration date. For employers that already offer a qualified
    retirement plan, these notices simply prompt them to go online and
    certify themselves as exempt. In practice, we have seen a small number
    of employers use these program notices as a prompt to set up their own
    qualified retirement plan instead of facilitating OregonSaves. We see
    this as an exciting development, both for workers, who will have access
    to better benefits, and for private industry.

        In addition to the self-exemption process, we have determined two
    other ways to certify that an employer is exempt. If an employer files
    a Federal form 5500 and our staff is able to positively match the
    business on the form 5500 with the Oregon business, we will send a
    notice of presumed exemption from the program.
                                 public support
        The public overwhelmingly supports OregonSaves. Employers say it is
    easy to sign up workers, and based on a recent public survey by DHM,\5\
    the level of support has actually increased in the first year. That
    poll found an astounding 82 percent of people support OregonSaves.
    ---------------------------------------------------------------------------
        \5\ https://www.aarp.org/content/dam/aarp/research/
    surveys_statistics/econ/2018/oregon-retirement-savings-
    oregonsaves.doi.10.26419-2Fres.00248.001.pdf.

        They know it is the right approach, and that it will improve
    savings, making Oregon stronger, today and in the long run. Or as John,
    an employee at Provoking Hope in McMinnville told us, ``I'm 30 and now
    just thinking about my future. For the first time in my life, I'm
    thinking ahead. Where I'm at today is a 180 [degree] turn--I never even
    had a bank account before. I'm grateful these types of programs are
    available to get people on the right track.''
                federal law and interaction with state programs
        OregonSaves and the other State-based auto IRA programs are
    constantly seeking better ways to serve employers and program
    participants. We believe the following changes at the Federal level
    would help achieve our program goals of reduced burden on employers and
    a better product for our participants:

            Passage of the Encouraging Americans to Save Act (EASA): EASA
            creates a Federal matching credit for contributions to an IRA,
            and as written will allow participants in OregonSaves to
            qualify for the matching credit. This is an extremely important
            step in addressing the retirement savings crisis. Additionally,
            because savings in ABLE accounts would also be eligible for the
            match, we see this as an important incentive that will help
            broaden Oregonians' participation in saving for future
            disability related costs.

            Creating a robust 5500 database. As previously mentioned, we
            currently use Form 5500 data to presume employers exempt from
            the program. While helpful, that data is not as robust as we
            originally anticipated. Our match rate was approximately 11.5
            percent when comparing our data with the Form 5500 filings.
            Upon further research, we believe part of the issue is that
            subsidiary companies are not listed in a way that can be easily
            searched and retrieved. If a more robust database existed,
            OregonSaves and the other State programs could more easily
            exempt employers that offer a qualified retirement plan,
            meaning we can reduce the administrative burden on exempt
            employers and focus our efforts and resources on those
            businesses who need to facilitate.

            Allowing minors to use OregonSaves. Under the age of majority
            (18 or 21, depending on the State) an IRA is a custodial
            account that a custodian (typically a parent) holds on behalf
            of a minor child. The account is transitioned into the child's
            name at the age of majority. We recommend changing this
            requirement and allowing minors as young as 16 to open their
            own accounts and hold the money in their own names. This would
            allow State-based programs to auto-enroll minors working at
            facilitating employers and get young workers in the habit of
            saving early in their working lives.

            Exemption from future Federal legislation. When considering
            Federal legislation that would overlap or create national-level
            retirement savings programs, we would ask for an exemption to
            allow State-based programs to continue where they already
            exist.
                                   conclusion
        OregonSaves is already succeeding and achieving the goal of
    improved access to retirement savings. Workers and businesses across
    Oregon express strong support and agree about the need for the program.

        The success of OregonSaves will have long-term positive
    implications for the savers and for Oregon. Thousands of Oregonians
    have already set aside significant amounts in the hope of greater
    retirement security. Every person is different and their retirement
    needs will vary, but OregonSaves and the ability to save is already
    improving our business climate, and is already increasing the long-term
    financial stability of thousands of Oregonians.

                                     ______

             Questions Submitted for the Record to Hon. Tobias Read
                     Questions Submitted by Hon. Mike Crapo
        Question. As you know, ERISA provides Federal protection for
    workers participating in most retirement plans sponsored by private
    businesses. The law assigns a fiduciary duty to sponsoring employers to
    ensure that plan decisions are made solely in the interest of
    participants. ERISA also provides a grievance procedure for workers to
    claim benefits and participant rights to take legal action and to
    receive damages. The prevalent State-facilitated model of payroll
    deduction IRAs means that most of these programs do not have ERISA
    protections.

        Does it concern you that these programs do not have ERISA
    protections?

        Answer. Workers participating in OregonSaves are protected by
    robust fiduciary safeguards comparable to, and sometimes exceeding,
    those of ERISA plans. Our program is supervised by a State-appointed
    board which, as State Treasurer, I chair. The Board is a fiduciary with
    a statutory duty to manage OregonSaves for the exclusive benefit of
    participants under a strict ``prudent expert'' standard. The Board's
    duties include selecting investments and service providers and keeping
    fees low. In addition, participants enjoy the transparency mandated by
    the Oregon Public Meetings Law and the Oregon Public Records Law, a
    protection that ERISA plan participants do not have. It is my
    understanding that the other State auto IRA programs provide similar
    levels of strong fiduciary protection and governance as OregonSaves.

        Question. For private-sector retirement plans, the employer has a
    fiduciary responsibility to oversee the expenses associated with
    investments and any fees charged to the plan or participants.

        Who bears the responsibility in a State-run retirement program to
    select, monitor, and understand the fees?

        Answer. As mentioned in my previous response, the OregonSaves Board
    is a fiduciary, owing participants an ERISA-like duty of care in
    selecting and monitoring a prudent array of investments and keeping
    investment and administration fees low. ORS 178.205(2)(c); ORS
    178.210(1)(q). The Board has retained a third-party investment expert
    (Sellwood Consultants) which, in addition to the State Treasury staff,
    assists the Board in fulfilling its duties.

                                     ______

         Prepared Statement of Aliya Robinson, Senior Vice President,
        Retirement and Compensation Policy, The ERISA Industry Committee
        Chairman Wyden, Ranking Member Crapo, and members of the Senate
    Finance Committee, thank you for the opportunity to testify before the
    committee on behalf of The ERISA Industry Committee (ERIC) on how to
    Congress can help to continue building bipartisan legislation to help
    American workers save for retirement. ERIC's voice is unique as the
    only national association that advocates exclusively for large
    employers on health, retirement, and compensation public policies at
    the Federal, State, and local levels. ERIC's member companies are
    leaders in every industry sector and provide comprehensive retirement
    and health benefits to tens of millions of active and retired workers
    and their families across the country. As such, ERIC has a strong
    interest in policies that impact employers' ability to provide cost-
    effective retirement programs and the ability of employees to receive
    such benefits and enjoy a secure retirement.

        ERIC member companies are working hard to keep their businesses
    viable, protect workers and their jobs, and tailor employee benefits to
    the needs of their workforce, even enhancing them to address needs
    during the pandemic, as allowed by law. Each member company has
    different workforce needs, but changes in The Employee Retirement
    Income Security Act of 1974, as amended (ERISA) would help all of them
    support their workers and their workers' retirement security. ERIC
    appreciates the efforts of this committee to provide much-needed aid to
    retirement plan participants and plan sponsors in the SECURE Act in
    2019 and to address COVID-19 pandemic-related concerns in the
    Coronavirus Aid, Relief, and Economic Security (CARES) Act and in the
    American Rescue Plan Act of 2021.

        ERIC member companies want to expand saving opportunities for
    workers and optimize resources for retirement savings. We look forward
    to working with this committee as the country recovers from the
    pandemic and focuses on these longer-term needs.

        An essential part of the recovery from the pandemic is to increase
    retirement security. Providing opportunities for greater savings into
    retirement plans play a significant role in increasing retirement
    security for workers--particularly those who have suffered recent
    financial stress. To expand retirement savings for workers, ERIC
    recommends the enactment of the following provisions:

            Increase the age for required minimum distributions to age 75.
            Treat student loan payments as elective deferrals for the
    purpose of employer matching contributions.
            Provide a safe harbor for the recovery of retirement plan
    overpayments.
            Allow for emergency savings accounts as part of retirement
    savings plans.
            Provide additional savings opportunities for those close to
    retirement by increasing catch-up limits in plans.
            Modify the definition of a Highly Compensated Employee (HCE)
    to encourage the inclusion of employees who meet the definition but are
    not on an executive or management level.
            Expand cafeteria plans to allow participants additional pre-
    tax benefit options such as student loan repayment, disability
    insurance, long-term care insurance, longevity insurance, and
    retirement planning services.
            Strengthen Retiree Health Care by extending Internal Revenue
    Code section 420.

        Employers voluntarily offer retirement plans for their workers,
    expending significant resources to provide retirement benefits. As
    such, ERIC urges Congress to pass legislation that will allow these
    employers to optimize resources by eliminating unnecessary
    administrative burdens.Specifically, we recommend the enactment of the
    following provisions:

            Simplify reporting and disclosure requirements by eliminating
    redundant and unnecessary disclosures.
            Maintain electronic disclosure as a default distribution.
            Establish an Office of Retirement Savings Lost and Found
    within the Pension Benefit Guaranty Corporation (PBGC) that would serve
    as a repository for information about all lost retirement accounts
    accessible through a searchable online database.
            Prevent raising single-employer PBGC premiums to pay for non-
    retirement legislation.
            Protect ERISA preemption in efforts to increase retirement
    coverage.

        Below, we provide further details on our recommended provisions to
    increase retirement security and reduce administrative burdens on plan
    sponsors. We note when the recommendations have previously been
    introduced.

        Increase the age for required minimum distributions to age 75.\1\
    The required minimum distribution (RMD) rules are aimed at preventing
    individuals from using their qualified plans and IRAs to accumulate
    significant assets for future generations. However, the current RMD
    rules too rigidly affect smaller account balances and the flexibility
    needed to provide effective annuity-like income distribution options
    that support more successful retirement outcomes. Therefore, we support
    increasing the required beginning date from 70\1/2\ to age 75.
    ---------------------------------------------------------------------------
        \1\ Retirement Security and Savings Act--Section 108, https://
    www.congress.gov/bill/117th-congress/senate-bill/1770/text; Securing a
    Strong Retirement Act of 2020--Section 105, https://www.congress.gov/
    bill/117th-congress/house-bill/2954/text--increases the required
    beginning date to either age 73, 74, or 75 depending on the individuals
    age at the time of distributions.

        Treat student loan payments as elective deferrals for the purpose
    of employer matching contributions. Many Americans are interested in
    obtaining higher education and are burdened with the cost of attending
    school. Nearly 44 million people owe $1.7 trillion in Federal student
    debt, making it difficult for some to save for retirement.\2\ Employers
    are interested in helping these employees save for their futures by
    establishing student loan matching programs. In 2018, the IRS issued a
    Private Letter Ruling (PLR-131066-17) allowing a 401(k) plan sponsor to
    contribute to a 401(k) plan on behalf of plan participants who pay down
    student loan debt but do not necessarily contribute to the employer's
    401(k) plan.\3\ Since the PLR applies only to the employer who receives
    the letter, congressional action is necessary to allow other employers
    to support their workers in this way. To solve this matter through
    legislative action, Congress should pass the Securing a Strong
    Retirement Act, which includes Chairman Wyden's Retirement Parity for
    Student Loans Act (S. 1443).\4\ The legislation would permit 401(k),
    403(b), SIMPLE and governmental 457(b) retirement plans to make
    matching contributions to workers as if their student loan payments
    were salary reduction contributions. As such, recent graduates who
    cannot afford to save money beyond their student loan repayments would
    no longer have to forego the employer match and can start to build
    retirement savings while paying down their student loan debt.
    ---------------------------------------------------------------------------
        \2\ ``Consumer Credit--G-19,'' Federal Reserve, https://
    www.federalreserve.gov/releases/g19/current/default.htm.
        \3\ ``Private Letter Ruling (PLR-131066-17),'' Internal Revenue
    Service, https://www.irs.gov/pub/irs-wd/201833012.
        \4\ Retirement Security and Savings Act; Securing a Strong
    Retirement Act of 2020.

        Provide a safe harbor for the recovery of retirement plan
    overpayments. Plan sponsors have a fiduciary obligation to ensure that
    retirement plans are adequately funded and that every participant
    receives the benefits that have been promised. Overpaying benefits to
    certain plan participants can undermine these efforts. On the other
    hand, plan sponsors do not want to burden retirees with paying back
    amounts that were mistakenly overpaid, especially de minimis amounts.
    However, it is unclear whether plan sponsors can forego the recoupment
    of benefit overpayments without violating their fiduciary duties. As
    such, ERIC supports legislation that would provide a safe harbor to
    allow well-funded plans to forego recoupment of overpayments that were
    not the fault of the retiree.\5\
    ---------------------------------------------------------------------------
        \5\ Retirement Security and Savings Act--Section 322, https://
    www.congress.gov/bill/117th-congress/senate-bill/1770/text; Securing a
    Strong Retirement Act of 2020--Section 301, https://www.congress.gov/
    bill/117th-congress/house-bill/2954/text. We note that the IRS has
    recently issued guidance in this area as well in Revenue Procedure
    2021-30. While we appreciate this effort, we believe that providing a
    legislative solution will avoid potential changes in different
    administrations.

        Allow for emergency savings accounts as part of retirement savings
    plans. Short-term financial needs and risks create significant
    financial stress for employees, undermine their productivity, and
    interfere with their retirement savings. According to a report by
    Bankrate.com, 26 percent of all Americans have no emergency savings,
    and people between 30 and 49 are more likely than any other age group
    to have no emergency savings.\6\ On top of this, the Urban Institute
    computes that the value of Americans' retirement accounts has shrunk
    from over $18 trillion in 2019 to roughly $14 trillion in 2020.\7\
    Clearly, there is a need to encourage both emergency and retirement
    savings. ERIC believes that it is crucial to recognize the holistic and
    lifetime nature of financial well-being (including retirement) and
    strengthen the connections between short-term financial concerns and
    adequate savings for retirement.
    ---------------------------------------------------------------------------
        \6\ Carlozo, Lou, ``How Does Your Emergency Fund Compare? New Stats
    Reveal Americans' Rainy Day Savings Habits,'' Money Under 30, December
    18, 2019, https://www.moneyunder30.
    com/compare-average-emergency-fund-savings.
        \7\ Farrell, Chris, ``Analysis: The Pandemic Is Making America's
    Reitrement Cirsis Worse. Here's What You Can Do, PBS News Hour, April
    30, 2020, https://www.pbs.org/newshour/economy/analysis-the-pandemic-
    is-making-americas-retirement-crisis-worse-heres-what-you-can-do.

        As such, ERIC supports The Enhancing Emergency and Retirement
    Savings Act of 2021, which would provide up to $1,000 from a retirement
    savings account to be used for personal emergencies.\8\ Allowing
    participants access to savings for emergencies will encourage
    participation in retirement programs--particularly for those who may be
    hesitant to ``lock away'' money in case they will need it later. Plan
    sponsors and service providers have been actively developing tools to
    educate workers on the importance of saving and retirement readiness
    through financial wellness programs and other measures. We believe this
    legislation complements the private sector efforts by providing
    additional ways for employees to handle their financial
    responsibilities.
    ---------------------------------------------------------------------------
        \8\ Enhancing Emergency and Retirement Savings Act of 2021, https:/
    /www.congress.gov/bill/117th-congress/senate-bill/1870/
    text?q=%7B%22search%22%3A%5B%221870%22%5D%7D&r=2
    &s=1.

        Provide additional savings opportunities for those close to
    retirement by the increasing catch-up limits in plans. In balancing
    short-term and long-term financial needs, it is important to give
    workers greater flexibility about exactly which year they make elective
    deferrals. For example, older workers should have the opportunity to
    make higher elective deferrals to 401(k) plans than is possible under
    current law in recognition that: (i) in some earlier years, they and
    their families may have had important financial needs they reasonably
    prioritized ahead of elective deferrals, and (ii) a dollar contributed
    at a younger age will generate a larger retirement benefit at
    ---------------------------------------------------------------------------
    retirement age than a dollar contributed at a later age.

        Therefore, we support legislation that increases the catch-up
    amount for those who are close to retirement.\9\
    ---------------------------------------------------------------------------
        \9\ Retirement Security and Savings Act--Section 120, https://
    www.congress.gov/bill/117th-congress/senate-bill/1770/text; Securing a
    Strong Retirement Act of 2020--Section 107, https://www.congress.gov/
    bill/117th-congress/house-bill/2954/text.

        In addition, we believe that workers of all ages should be provided
    with some flexibility in making elective deferrals to 401(k) plans
    during times of unpaid leave. The catch-up contributions would be in
    the amount that would have been allowed if payments were continued
    during that time. Furthermore, upon making the catch-up contribution,
    the participant should receive all matching contributions that would
    ---------------------------------------------------------------------------
    have been otherwise made.

        Modify the definition of a Highly Compensated Employee to encourage
    the inclusion of employees who meet the definition but are not on an
    executive or management level. A vital component of these
    nondiscrimination rules is the definition of an employer's HCEs. This
    definition must achieve an appropriate policy balance--enough of the
    employer's leadership/management employees should be HCEs so that the
    employer will have a strong incentive to maintain a qualified plan that
    also benefits significant Non-Highly Compensated too many of them will
    be inappropriately limited in the contributions they can make or
    receive under the plan, particularly in a 401(k) plan.

        Not surprisingly, employers' workforces reflect the economic,
    business, geographic, and labor contexts within which they operate. The
    current coverage and nondiscrimination rules were initially developed
    based primarily on what is perhaps the most common, straightforward
    employer and workforce structure--a single organization operating in a
    single business line with a workforce characterized from a compensation
    distribution perspective by a pyramid image (i.e., small group of
    employees at the ``high-paid top'' of the pyramid with increasingly
    larger groups of employees as compensation decreases from the ``high-
    paid top'' toward the ``lowest-paid base'' of the pyramid). However,
    many companies have moved away from this pyramid model. Instead, the
    workforce structure is flatter, with a significant number of highly
    paid employees at the base with only another layer or two of decision-
    makers above the base. In 1996, Congress adopted a modification to the
    HCE definition to better recognize employers with a high proportion of
    highly paid employees without undercutting the critical coverage and
    nondiscrimination policies. The change allows an employer to limit the
    employees treated as HCEs because they had compensation above the
    statutory compensation threshold ($125,000 for 2019) compared to those
    employees who were also in the top-paid 20 percent of all the
    employer's employees by compensation.\10\ While this change is helpful,
    it requires another update to keep pace with changing workforce
    structures. For some employers with certain workforce structures, in
    certain high-compensation industries (e.g., technology or financial
    services), and in certain high cost-of-living locations, even the top-
    paid 20 percent HCE option will result in a larger HCE group than is
    appropriate. To further improve the HCE definition to address these
    situations, we propose that an employer be permitted to limit the
    employees earning over the annual compensation HCE threshold who are
    treated as HCEs for the current year to the top-paid ten percent group
    of employees by compensation.
    ---------------------------------------------------------------------------
        \10\ The Small Business Job Protection Act of 1996, Pub. Law 104-
    188, section 1431, https://www.congress.gov/bill/104th-congress/house-
    bill/3448.

        Expand cafeteria plans to allow participants additional pre-tax
    benefit options such as student loan repayment, disability insurance,
    long-term care insurance, longevity insurance, and retirement planning
    services. Cafeteria plans can be effective vehicles for employers to
    offer and employees to address key short-term financial needs and
    risks. They are also used to purchase key insurance benefits such as
    disability insurance, long-term care insurance, longevity insurance,
    and retirement planning services. These benefits and coverages could be
    bought under the cafeteria plan on a pre-tax basis. As such, ERIC
    supports making these benefits qualified benefit options for cafeteria
    ---------------------------------------------------------------------------
    plans.

        Strengthen retiree health care by extending Internal Revenue Code
    section 420. We urge Congress to extend section 420 of the Internal
    Revenue Code (the ``Code''), which will continue bipartisan legislation
    that encourages continued funding and vesting of employer-provided
    retiree welfare benefits.\11\ section 420 allows employers with
    generously overfunded pension benefits and group life insurance
    coverage) for the plans' retirees without jeopardizing the security of
    the underlying pension promise. These retiree welfare transfers benefit
    both employers and retirees. They provide a funding source for retiree
    welfare benefits (which, unlike pensions, are not subject to funding
    requirements) and also effectively require the employer to continue to
    provide the underlying retiree welfare benefits for a stated number of
    years after the transfer, making section 420 the only provision in
    ERISA or the Code that statutorily vests retiree welfare benefits.
    section 420 was originally enacted in 1990 on a temporary basis and is
    currently set to expire at the end of 2025. It has been subject to
    numerous extensions, on a bipartisan basis, in advance of its then-
    scheduled expiration.\12\ These transfers are good retirement policy
    and good fiscal policy and should be extended.\13\
    ---------------------------------------------------------------------------
        \11\ Section 405(a) of S. 1770, the Retirement Security and Savings
    Act of 2021, as introduced by Senators Cardin (D-MD) and Portman (R-OH)
    and co-sponsored by Senators Hassan (D-NH) and Collins (R-ME), would
    extend section 420 for 6 years, from the end of 2025 to the end of
    2031.
        \12\ Most recently, section 420 was extended in the Surface
    Transportation and Veterans Health Care Choice Improvement Act of 2015
    (the ``2015 Act''), Pub. L. No. 114-41, Sec. 2007 (2015). At that time,
    section 420 was scheduled to expire at the end of 2021 but was extended
    to the end of 2025. The 2015 act had overwhelming bipartisan support
    (it received votes of 91-4 in the Senate and 385-34 in the House) and
    was signed into law by President Obama.
        \13\ Notably, extending section 420 also raises revenue (transfers
    for retiree welfare benefits replace deductible corporate payments for
    these same benefits), allowing funding of a variety of spending and
    other priorities. The 2015 act, which extended section 420 for 4 years,
    raised $172 million over the 10-year budget window.

        Simplify reporting and disclosure requirements by eliminating
    redundant and unnecessary disclosures. The tax code and ERISA include
    many rules requiring and governing the reports, disclosures, and
    notices that employers and qualified plans must provide to employees
    and participants. We believe that these communications are complex,
    burdensome, and costly and are less informative or effective for
    employees and participants than they should be. ERIC agrees with
    proposals that direct the DOL, Treasury, and the PBGC to issue
    regulations to consolidate and simplify the existing ERISA and tax
    reports, notices, disclosures, and other information relating to
    deferred compensation, pension, profit-sharing, and other retirement
    plans.\14\ In developing these regulations, the agencies should consult
    with the appropriate stakeholders and organizations (including
    sponsors, plans, administrators, recordkeepers, communication experts,
    and others) to identify problems, areas of possible improvement, and
    approaches to improvement. The agencies should review the efficacy and
    ability to combine summary plan descriptions, summary annual reports,
    summary of material modifications, single employer annual funding
    notices, fee disclosures, QDIA/safe harbor notices, section 402(f)
    rollover notices, participant account statements, securities-related
    disclosures, distribution options (including lifetime annuity estimate
    disclosures, choices around risk transfer transactions), and other
    communications to employees and participants.
    ---------------------------------------------------------------------------
        \14\ Retirement Security and Savings Act--Section 301, https://
    www.congress.gov/bill/117th-congress/senate-bill/1770/text; Securing a
    Strong Retirement Act of 2020--Section 304, https://www.congress.gov/
    bill/117th-congress/house-bill/2954/text.

        Maintain electronic disclosure as a default distribution. ERIC's
    member companies invest considerable time and expense providing and
    improving communications to participants, beneficiaries, and others and
    have found that electronic communications offer significant advantages
    to plan sponsors, administrators, participants, and beneficiaries.
    Therefore, we were very supportive of the changes made by the DOL that
    allow plan sponsors to provide electronic delivery as the default
    option for providing retirement plan notices. This regulation
    significantly delivery systems and move into the 21st century, and
    importantly allowed them to target delivery more appropriately offer
    notices and information more quickly, and provide beneficiaries an
    opportunity to act on information provided with embedded links, website
    access, etc. Consequently, one point of concern in recent legislation
    is the attempt to roll back recent advances in electronic delivery
    flexibility.\15\ We encourage Congress to allow plan sponsors to
    provide retirement notices in the same manner as other notices and
    information, including those provided by the government. At the very
    least, if Congress decides that an annual disclosure is necessary, it
    should be a short and generic notice--i.e., a ``postcard notice''--
    which can be provided more easily and quickly than an annual benefit
    statement.
    ---------------------------------------------------------------------------
        \15\ Securing a Strong Retirement Act of 2020--Section 313(b)(2),
    https://www.congress.gov/bill/117th-congress/house-bill/2954/text.

        Establish an Office of Retirement Savings Lost and Found within the
    Pension Benefit Guaranty Corporation (PBGC). ERIC's member companies
    care significantly about the participants and beneficiaries in their
    employer-
    sponsored plans. They put tremendous resources and funds into these
    retirement plans and want each participant to benefit fully from these
    plans. As such, plan sponsors want all participants to be found and
    receive their hard-earned retirement benefits. ERIC member companies
    work hard to find all participants but there are still missing
    retirement plan participants and recalcitrant participants who remain
    out of contact or stubbornly refuse to commence their benefits (or cash
    checks once received). This challenge has been compounded by the
    termination of the IRS and Social Security Letter Forwarding Program.
    This challenge is also expected to grow, given that today's workers
    tend to switch jobs more frequently.\16\ Although plans of all sizes
    deal with missing participant issues, ERIC's large employer members are
    especially likely to face these challenges because their plans tend to
    be larger and more complex with more significant acquisition histories
    (including acquisitions where a plan has inherited incomplete records).
    ---------------------------------------------------------------------------
        \16\ Also, auto-enrollment usage has increased due to the 2006
    Pension Protection Act and successfully brought many more participants
    into the employer-provided system. However, the increased number of
    plan participants also increases the challenges associated with missing
    and unresponsive participants.

        ERIC's members are, therefore, incredibly supportive of solutions
    that address this issue. An Office of Retirement Savings Lost and Found
    would serve as a repository for all ``lost'' retirement accounts
    accessible through a searchable online database,\17\ that participants
    could utilize to find former employers and determine whether they have
    retirement accounts from which they could receive distributions. Such a
    database would be beneficial in ensuring that participants receive the
    benefits that they have earned and, thereby, decrease the number of
    missing participants.
    ---------------------------------------------------------------------------
        \17\ Retirement Security and Savings Act--Section 323, https://
    www.congress.gov/bill/117th-congress/senate-bill/1770/text; Securing a
    Strong Retirement Act of 2020--Section 306, https://www.congress.gov/
    bill/117th-congress/house-bill/2954/text.

        Stop unnecessary and harmful PBGC premium increases that are
    implemented as part of a budget gimmick and outside of established
    policy procedures. Congress mandated that PBGC's mission is ``to
    encourage the continuation and maintenance of voluntary private pension
    plans,'' but increased premiums drive employers away from the defined
    benefit system. In rapid succession, and without input from the
    committees of jurisdiction or a policy justification for the $86/person
    in 2021--an increase of $55/participant over 14 years, compared to an
    increase of only $30 over the previous 32 years. In addition, Congress
    subjected these rates to annual increase by indexing them to inflation.
    Congress raised PBGC premiums even though neither PBGC nor the
    administration called for an increase, and the single-employer program
    was already adequately funded. As a result of these needless increases
    made in the dead of night, many plan sponsors are deciding to exit the
    system by dropping or freezing their defined benefit plans, or
    disallowing benefits for new workers. In 2018, there were 5.5 million
    fewer participants in the
    single-employer system than in 2014. And the ever-increasing PBGC
    premiums are one of the reasons employers are terminating these
    plans.\18\ For those employers that are not completely terminating,
    others have decided to de-risk either by offering lump sums or
    purchasing annuities for select groups, which lowers their PBGC
    premiums but deprives these individuals of ERISA's protections.\19\ By
    the PBGC's own estimates, the PBGC's trust fund for the single-employer
    system does not pose any immediate or long-term threat of default. In
    fact, the PBGC's 2020 Annual Report shows that the single-employer
    program is overfunded by $15.5 billion and is projected to have a $46.3
    billion surplus by 2029. Any increase in PBGC premiums at this point
    would be entirely unrelated to PBGC's or participant needs.\20\
    Therefore, we urge Congress to pass legislation that prevents
    increasing single-employer PBGC premiums without a full and fair
    review.\21\
    ---------------------------------------------------------------------------
        \18\ See ``PBGC Single-Employer Premiums and Their Impact on Plan
    Sponsorship,'' American Academy of Actuaries, October 2020, available
    at https://www.actuary.org/sites/default/files/2020-10/
    PBGCPremiumsIB.pdf.
        \19\ See the 2018 Annual Report of the Participant and Plan Sponsor
    Advocate citing Mercer's study on de-risking, available at https://
    www.pbgc.gov/sites/default/files/pbgc_advocate_report
    _2018.pdf.
        \20\ PBGC's 2020 Annual Report at https://www.pbgc.gov/sites/
    default/files/pbgc-annual-report-2020.pdf. In fact, decrease in such
    premiums is very much needed to prevent a downward spiral in which
    healthy companies are effectively forced out of the system, leaving
    PBGC with less-healthy companies to support it, which are the very
    companies that are at risk for needing the PBGC's support.
        \21\ See The Pension and Budget Integrity Act of 2019 which creates
    a budget point of order for any provision that increases single-
    employer pension program premiums payable to the PBGC.

        Expand the ability of plans to self-correct plan errors. Plan
    sponsors and administrators should be permitted to play a more
    significant role in identifying and correcting plan errors, including
    excess, insufficient, and missed contributions, compensation and
    service, accrued benefit, and other determinations and calculations. In
    particular, employers should be allowed greater opportunities to self-
    correct routine, common operational, and plan document mistakes without
    the need for the incurrence of fees and Federal agency oversight and
    approval. To this end, expanding the Employee Plans Compliance
    Resolution System (EPCRS) and the Voluntary Fiduciary Correction
    Program (VFCP) would increase compliance and reduce the cost of plan
    administration without adversely affecting participants' benefits.\22\
    ---------------------------------------------------------------------------
        \22\ Retirement Security and Savings Act--Section 115, https://
    www.congress.gov/bill/117th-congress/senate-bill/1770/text; Securing a
    Strong Retirement Act of 2020--Section 307, https://www.congress.gov/
    bill/117th-congress/house-bill/2954/text.

        Protect ERISA preemption in efforts to increase retirement
    coverage. The ability of large employers to follow a single set of
    Federal rules is critical to their ability to provide benefits to their
    workers, families, and retirees across the country. As different States
    have set up retirement programs for their private citizens, ERIC has
    been vigilant in protecting ERISA preemption and ensuring that
    employers who voluntarily provide retirement benefits can do so on a
    uniform basis.\23\ ERIC does not oppose State efforts to provide
    retirement plan options to for workers without access to an employer-
    provided retirement plan but opposes any attempt to mandate reporting
    or other obligations on companies that offer a federally regulated
    retirement plan. ERIC has successfully worked with all State retirement
    programs to ensure that our member companies are not burdened by
    reporting requirements that infringe upon ERISA's preemption laws. We
    will continue advocating on the Federal, State, and local levels to
    protect large employers' ability to design and administer retirement
    plans unique to their workforces without mandates that violate Federal
    law.
    ---------------------------------------------------------------------------
        \23\ In 2017, ERIC filed a lawsuit requesting that the Oregon
    Retirement Savings Board halt the reporting requirement because it
    violates ERISA preemption, https://www.eric.org/
    uploads/doc/legal/ERIC%20v%20Oregon%20Retirement%20Savings%20Board.pdf.
    ERIC and OregonSaves reached a settlement agreement by which ERIC
    members are automatically exempt from the reporting requirements of the
    OregonSaves employer exemption process.

        You will note that many of these provisions that ERIC supports and
    recommends were included in the Retirement Security and Savings Act by
    Senators Cardin and Portman.\24\ ERIC applauds the leadership of these
    members of Congress in recognizing the continued need to focus on
    retirement security. Some newer measures and modifications are needed
    to ensure that workers in all industries and in all workplaces can
    fully achieve retirement security.
    ---------------------------------------------------------------------------
        \24\ Many of these provisions are also included in the Securing a
    Strong Retirement Act of 2021 (SSRA) which was introduced by Ways and
    Means Committee Chairman Neal and Ranking Member Brady in the House.

        ERIC and our large employer plan sponsors look forward to
    continuing to work with you and other interested parties to advance
    these measures and explore additional provisions that can be included
    to further promote retirement security for working Americans. Thank you
    for the opportunity to share our ideas. If you have any questions, do
    not hesitate to contact meat arobinson@eric.org or by calling 202-789-
    ---------------------------------------------------------------------------
    1400.

                                     ______

              Questions Submitted for the Record to Aliya Robinson
                     Questions Submitted by Hon. Mike Crapo
        Question. An essential part of the recovery from the pandemic is to
    increase retirement security. Providing opportunities for greater
    savings into retirement plans play a significant role in increasing
    retirement security for workers--particularly those who have suffered
    recent financial stress.

        Of the proposals discussed in the hearing on July 28th, which of
    them are most important for simplifying or clarifying the rules
    governing retirement plans from an employer perspective?

        Answer. Simplify notices and disclosures. The tax code and ERISA
    include many rules requiring and governing the reports, disclosures,
    and notices that employers and qualified plans must and may provide to
    employees and participants. We believe that these communications are
    complex, burdensome and costly and, therefore, are less informative or
    effective for employees and participants than they should be. ERIC
    agrees with proposals that direct the DOL, Treasury, and the PBGC to
    issue regulations to consolidate and simplify the existing ERISA and
    tax reports, notices, disclosures, and other information relating to
    deferred compensation, pension, profit sharing, and other retirement
    plans.\1\ In developing these regulations, the agencies should consult
    with the appropriate stakeholders and organizations (including
    sponsors, plans, administrators, recordkeepers, communication experts,
    and others) to identify problems, areas of possible improvement, and
    approaches to improvement. The agencies should review the efficacy and
    ability to combine summary plan descriptions, summary annual reports,
    summary of material modifications, single employer annual funding
    notices, fee disclosures, QDIA/safe harbor notices, section 402(f)
    rollover notices, participant account statements, securities-related
    disclosures, distribution options (including lifetime annuity estimate
    disclosures, choices around risk transfer transactions), and other
    communications to employees and participants.
    ---------------------------------------------------------------------------
        \1\ Retirement Security and Savings Act--Section 301, https://
    www.congress.gov/bill/117th-congress/senate-bill/1770/text; Securing a
    Strong Retirement Act of 2020--Section 304, https://www.congress.gov/
    bill/117th-congress/house-bill/2954/text.

        Provide a safe harbor for the recovery of retirement plan
    overpayments. Plan sponsors have a fiduciary obligation to ensure that
    retirement plans are adequately funded and that every participant
    receives the benefits that have been promised. Overpaying benefits to
    certain plan participants can undermine these efforts. On the other
    hand, plan sponsors do not want to burden retirees with paying back
    amounts that were mistakenly overpaid, especially de minimis amounts.
    However, it is unclear whether plan sponsors can forego the recoupment
    of benefit overpayments without violating their fiduciary duties. As
    such, ERIC supports legislation that would provide a safe harbor to
    allow well-funded plans to forego recoupment of overpayments that were
    not the fault of the retiree.\2\
    ---------------------------------------------------------------------------
        \2\ Retirement Security and Savings Act--Section 322, https://
    www.congress.gov/bill/117th-congress/senate-bill/1770/text; Securing a
    Strong Retirement Act of 2020--Section 301, https://www.congress.gov/
    bill/117th-congress/house-bill/2954/text. We note that the IRS has
    recently issued guidance in this area in Revenue Procedure 2021-30.
    While we appreciate this effort, we believe that providing a
    legislative solution will avoid potential changes in different
    administrations.

        Establish an Office of Retirement Savings Lost and Found within the
    Pension Benefit Guaranty Corporation (PBGC). Another area of needed
    ---------------------------------------------------------------------------
    clarifications pertains to missing participants.

        ERIC's member companies care significantly about the participants
    and beneficiaries in their employer-sponsored plans. They put
    tremendous resources and funds into these retirement plans and want
    each participant to benefit fully from these plans. As such, plan
    sponsors want all participants to be found and receive their hard-
    earned retirement benefits.

        ERIC member companies work hard to find all participants, but there
    are still missing retirement plan participants and recalcitrant
    participants who remain out of contact or stubbornly refuse to commence
    their benefits (or cash checks once received). This challenge has been
    compounded by the termination of the IRS and Social Security Letter
    Forwarding Program. This challenge is also expected to grow, given that
    today's workers tend to switch jobs more frequently.\3\ Although plans
    of all sizes deal with missing participant issues, ERIC's large
    employer members are especially likely to face these challenges because
    their plans tend to be larger and more complex with more significant
    acquisition histories (including acquisitions where a plan has
    inherited incomplete records).
    ---------------------------------------------------------------------------
        \3\ Also, auto-enrollment usage has increased due to the 2006
    Pension Protection Act and successfully brought many more participants
    into the employer-provided system. However, the increased number of
    plan participants also increases the challenges associated with missing
    and unresponsive participants.

        ERIC's members are, therefore, incredibly supportive of solutions
    that address this issue. An Office of Retirement Savings Lost & Found
    would serve as a repository for all ``lost'' retirement accounts
    accessible through a searchable online database,\4\ that participants
    could utilize to find former employers and determine whether they have
    retirement accounts from which they could receive distributions. Such a
    database would be beneficial in ensuring that participants receive the
    benefits that they have earned and, thereby, decrease the number of
    missing participants.
    ---------------------------------------------------------------------------
        \4\ Retirement Security and Savings Act--Section 323, https://
    www.congress.gov/bill/117th-congress/senate-bill/1770/text; Securing a
    Strong Retirement Act of 2020--Section 306, https://www.congress.gov/
    bill/117th-congress/house-bill/2954/text.

        Maintain electronic disclosure as a default distribution. ERIC's
    member companies invest considerable time and expense providing and
    improving communications to participants, beneficiaries, and others and
    have found that electronic communications offer significant advantages
    to plan sponsors, administrators, participants, and beneficiaries.
    Therefore, we were very supportive of the changes made by the DOL that
    allow plan sponsors to provide electronic delivery as the default
    option for providing retirement plan notices. This regulation
    significantly eased administrative burdens for plan sponsors by
    allowing them to modernize their notice delivery systems and move into
    the 21st century, and importantly allowed them to target delivery more
    appropriately, offer notices and information more quickly, and provide
    beneficiaries an opportunity to act on information provided with
    embedded links, website access, etc. Consequently, one point of concern
    in recent legislation is the attempt to roll back recent advances in
    electronic delivery flexibility.\5\ We encourage Congress to allow plan
    sponsors to provide retirement notices in the same manner as other
    notices and information, including those provided by the government. At
    the very least, if Congress decides that an annual disclosure is
    necessary, it should be a short and generic notice--i.e., a ``postcard
    notice''--which can be provided more easily and quickly than an annual
    benefit statement.
    ---------------------------------------------------------------------------
        \5\ Securing a Strong Retirement Act of 2020--Section 313(b)(2),
    https://www.congress.gov/bill/117th-congress/house-bill/2954/text.

        Expand the ability of plans to self-correct plan errors. Plan
    sponsors and administrators should be permitted to play a more
    significant role in identifying and correcting plan errors, including
    excess, insufficient, and missed contributions, compensation and
    service, accrued benefit, and other determinations and calculations. In
    particular, employers should be allowed greater opportunities to self-
    correct routine, common operational, and plan document mistakes without
    the need for the incurrence of fees and Federal agency oversight and
    approval. To this end, expanding the Employee Plans Compliance
    Resolution System (EPCRS) and the Voluntary Fiduciary Correction
    Program (VFCP) would increase compliance and reduce the cost of plan
    administration without adversely affecting participants' benefits.\6\
    ---------------------------------------------------------------------------
        \6\ Retirement Security and Savings Act--Section 115, https://
    www.congress.gov/bill/117th-congress/senate-bill/1770/text; Securing a
    Strong Retirement Act of 2020--Section 307, https://www.congress.gov/
    bill/117th-congress/house-bill/2954/text.

        Question. People may be reluctant to tie their money up in
    retirement plans in case they will need that money to cope with a
    future emergency. Emergencies like the COVID pandemic and wildfires
    ---------------------------------------------------------------------------
    have highlighted that concern.

        How can Congress help balance providing flexibility while
    encouraging savings and guarding against too much leakage out of
    retirement savings?

        Answer. Employers and employees report that short-term financial
    needs and risks create significant financial stress for employees,
    undermine their productivity, and interfere with their retirement
    savings. ERIC believes that it is important to recognize the holistic
    and lifetime nature of financial well-being (i.e., including
    retirement) and thus to strengthen the connections between short-term
    financial concerns and adequate savings for retirement. Allowing
    defined contribution plans to permit participants to withdraw or use
    limited, pre-tax elective deferrals for critical short-term financial
    needs, such as emergency savings funds, without imposing an early
    distribution tax penalty can promote retirement security.

        Consequently, we support the Enhancing Emergency and Retirement
    Savings Act of 2021 introduced by Senators Jim Lankford and Michael
    Bennet. This legislation would allow employees in employer-sponsored
    retirement accounts to withdraw up to $1,000 a year to pay for
    necessary personal or family emergency expenses. ERIC supports this
    legislation as a way to further promote emergency savings and
    retirement security for Americans.

        Question. Studies show and testimony at last week's hearing
    reinforced the idea that when workers are enrolled in their employer's
    retirement plan by default, participation and retention in those plans
    increase. Your organization represents large employers, which
    undoubtedly have a lot of experience with this feature.

        Would you share your thoughts and experience on how important
    automatic enrollment is to your members' plans?

        Answer. Automatic enrollment is beneficial for ERIC member
    companies in preparing their workforce for retirement and is a valuable
    tool in their retirement plan designs. According to Vanguard's 2021
    report, workers that are automatically enrolled in retirement plans
    have 57 percent higher savings rates. ERIC supports incentives for
    employers to offer a more generous automatic enrollment plan and
    receive a safe harbor from certain retirement plan rules.\7\
    ---------------------------------------------------------------------------
        \7\ Retirement Security and Savings Act--Section 102, https://
    www.congress.gov/bill/117th-congress/senate-bill/1770/text.

        Question. Do you think there are lessons that smaller employers can
    ---------------------------------------------------------------------------
    learn from this experience?

        Answer. Large employers often pave the way for new benefit
    designs--including the use of automatic enrollment. Small employers can
    also benefit from utilizing automatic enrollment and can learn from
    America's largest employers. As demonstrated above, large employers
    have shown that the use of automatic enrollment can significantly
    increase retirement enrollment and retirement savings.

        Question. Treasury's recent Revenue Procedure 2021-30 modifies its
    Employee Plans Compliance Resolution System, or ``EPCRS.'' For example,
    the Revenue Procedure provides guidance on the recoupment of
    overpayments; it eliminates the anonymous submission procedure under
    the Voluntary Correction Program and adds a free and anonymous pre-
    submission conference procedure; it extends the correction period for
    significant failures under the Self-Correction Program and expands the
    ability to correct errors by plan amendment; and it extends the
    availability of the safe harbor correction method for certain elective
    deferral failures related to automatic contribution features.

        Can you comment on the importance of the EPCRS?

        What else should be improved, if anything?

        Answer. As stated above, we believe that providing plan sponsors
    and administrators with a greater role in identifying and correcting
    plan errors can significantly ease administrative burdens and simplify
    plan administration. In particular, employers should be allowed greater
    opportunities to self-correct routine, common operational and plan
    document mistakes without the need for the incurrence of fees and
    Federal agency oversight and approval. We appreciate that Revenue
    Procedure 2021-30 expands EPCRS in this manner.

        In addition, we are very pleased that in Revenue Procedure 2021-30
    the IRS encourages employers ``to avoid seeking recoupment of benefit
    overpayments made to participants and beneficiaries'' and adds two new
    retirement correction methods for employers to utilize: the funding
    exception correction method and the contribution credit correction
    method. The clarification of plan sponsors' duties with respect to the
    recoupment of pension overpayments is an important step. We encourage
    Congress to make this step permanent by including similar provisions in
    legislation. Consequently, we support the inclusion of provisions for
    the recoupment of pension overpayments in the Retirement Security and
    Savings Act.\8\
    ---------------------------------------------------------------------------
        \8\ Section 322, https://www.congress.gov/bill/117th-congress/
    senate-bill/1770/text.

        Question. In some cases, workers are not able to save as much for
    retirement when they are younger. That is why catch-up contributions
    are so important--so that workers close to retirement can contribute
    more to their retirement accounts to make up for earlier years when
    their contributions may have been lower. Your written statement
    mentioned your organization's support for expanding catch-up
    ---------------------------------------------------------------------------
    contributions to include time of unpaid leave.

        Would you please elaborate on how this could help workers in Idaho?

        Answer. Approximately 20 percent of all workers take unpaid leave
    during a year.\9\ If this 20 percent is applied to Idaho's 9 million
    employees,\10\ there are approximately 1.8 million employees in Idaho
    who take unpaid leave in a year. Each year, these employees must
    forfeit making contributions to their retirement plans. If catch-up
    contributions are permitted for these periods of unpaid leave, then
    almost 2 million employees in Idaho will be able to increase their
    retirement security.
    ---------------------------------------------------------------------------
        \9\ U.S. Bureau of Labor Statistics, Workers' Access to and Use of
    Leave from Their Jobs in 2017-18, p. 9, https://www.bls.gov/spotlight/
    2020/workers-access-to-and-use-of-leave/home.
    htm.
        \10\ U.S. Bureau of Labor Statistics, https://www.bls.gov/eag/
    eag.id.htm#eag_id.f.1.

        These catch-up contributions would be in the amount that would have
    been allowed if payments were continued during that time. Furthermore,
    upon making the catch-up contribution, the participant should be able
    to receive all matching contributions that would have been otherwise
    made. This flexibility will allow for more parents and family members
    who take unpaid leave to not be at a disadvantage in their retirement
    ---------------------------------------------------------------------------
    savings.

                                     ______

                     Questions Submitted by Hon. Tim Scott
        Question. One of the best ways to improve retirement security for
    working families is to make it easier for people who change jobs to
    move their savings to their new employer's 401(k).

        Right now, it can be hard to move your savings and many people end
    up just cashing out. The difficulty of moving accounts and the lure of
    viewing a cash out as a windfall, leads people to just cash out their
    retirement accounts rather than preparing for the future.

        Under the previous administration, I led an effort, with strong
    bipartisan support, to promote retirement plan auto-portability as a
    means of reducing plan leakage and bolstering retirement security,
    particularly for Americans who change jobs relatively often, Americans
    with low-account balances, and Americans from underserved communities
    and communities of color.

        Unfortunately, this cash out problem hits African Americans
    particularly hard because they are 62 percent more likely to cash out
    over time.

        In response to our efforts during the last administration, the
    Department of Labor took the regulatory actions needed to facilitate
    auto-portability.

        I hope to build on this legacy of success in the coming years,
    increasing access to auto-portability in order to open the door to
    opportunity and long-term prosperity for more working Americans.

        Fortunately, we're making progress toward universal portability.
    Many members of this committee have been very supportive of auto
    portability, so as we consider legislation, I hope, Mr. Chairman, that
    we will prioritize creating incentives to ensure that every plan is
    plugged into the auto portability network.

        Please answer the following with specificity: I know your members
    are committed to helping reduce the number of cash-outs, and they want
    to help people keep track of their savings and consolidate their
    accounts. Can you talk a little bit about the obstacles and experiences
    of small accounts?

        Answer. ERIC appreciates your work to create universal portability
    and agrees that the loss of small accounts negatively impacts overall
    retirement security. Small account balances can cause employees to
    leave the accounts dormant, which requires plan sponsors to use
    significant time and effort in locating missing participants. Some
    large plan sponsors use multiple resources in trying to locate
    participants and even hire additional staff to aid in their search.
    Various service providers and financial institutions currently help
    plans to find missing participants or hold the assets of missing
    participants in IRAs. However, many terminating plans have difficulty
    finding IRA providers that will accept small accounts, particularly
    those valued at less than $1,000. Therefore, universal portability can
    aggregate small accounts into larger amounts that can be accepted by
    IRA providers.

        In addition, ERIC supports the creation of a pension lost and found
    database to track qualified plan accounts.\11\ Giving participants the
    ability to find their missing accounts, which often tend to be small
    balances, will go a long way in solving the missing participant problem
    and increasing retirement security.
    ---------------------------------------------------------------------------
        \11\ A pension registry proposal was introduced by Senators
    Elizabeth Warren and Steve Daines in the Retirement Savings Lost and
    Found Act of 2020 and included in the Retirement Security and Savings
    Act of 2021--Section 323.

                                     ______

                     Questions Submitted by Hon Todd Young
        Question. Senator Booker and I will soon reintroduce legislation
    that would create a Federal commission on retirement security to study,
    and advise Congress on, the most pressing issues related to the private
    retirement system. Of course, many of the longstanding and well-
    understood issues Americans face with respect to retirement security
    were exacerbated by the pandemic as workers were displaced from their
    jobs and had to draw from their retirement savings to cover immediate
    expenses. As we work toward economic recovery, it is vital that our
    private retirement system is sustainable and ready to support future
    generations of American retirees.

        What kinds of new challenges does the private retirement system
    face as we emerge from the pandemic?

        Answer. ERIC member companies are working hard to keep their
    businesses viable, to keep workers employed, and to tailor their
    benefits to the needs of their workforce, often enhancing them to
    address needs during the pandemic, as allowed by law. Each member
    company has a different situation, but changes in ERISA would help all
    of them support their workers and their workers' retirement security.
    To further support the financial and retirement security of workers and
    retirees emerging from the pandemic, ERIC encourages Congress to
    implement the following proposals.

        Allow for emergency savings accounts as part of retirement savings
    plans. The COVID pandemic created financial stress for many people and
    left them unable to set aside enough savings for unplanned expenses.
    While we are encouraged that the pandemic will end, many Americans will
    continue to struggle to save for the future and an emergency savings
    fund will help. ERIC believes that it is crucial to recognize the
    holistic and lifetime nature of financial well-being (including
    retirement) and strengthen the connections between short-term financial
    concerns and adequate savings for retirement.

        As such, ERIC supports the Enhancing Emergency and Retirement
    Savings Act of 2021, which would provide up to $1,000 from a retirement
    savings account to be used for personal emergencies.\12\ Allowing
    participants access to savings for emergencies will encourage
    participation in retirement programs--particularly for those who may be
    hesitant to ``lock away'' money in case they will need it later. We
    believe this legislation complements the private sector efforts by
    providing additional ways for employees to handle their financial
    responsibilities.
    ---------------------------------------------------------------------------
        \12\ Enhancing Emergency and Retirement Savings Act of 2021,
    https://www.congress.gov/bill/117th-congress/senate-bill/1870/
    text?q=%7B%22search%22%3A%5B%221870%22%5D%7D&r=2
    &s=1.

        Treat student loan payments as elective deferrals for the purpose
    of employer matching contributions. Many Americans are interested in
    obtaining higher education and are burdened with the cost of attending
    school. Nearly 44 million people owe $1.7 trillion in Federal student
    debt, making it difficult for some to save for retirement.\13\
    Employers are interested in helping these employees save for their
    futures by establishing student loan matching programs. In 2018, the
    IRS issued a Private Letter Ruling (PLR-131066-17) allowing a 401(k)
    plan sponsor to contribute to a 401(k) plan on behalf of plan
    participants who pay down student loan debt but do not necessarily
    contribute to the employer's 401(k) plan.\14\ Since the PLR applies
    only to the employer who receives the letter, congressional action is
    necessary to allow other employers to support their workers in this
    way. To solve this matter through legislative action, Congress should
    pass the Securing a Strong Retirement Act, which includes Chairman
    Wyden's Retirement Parity for Student Loans Act (S. 1443).\15\ The
    legislation would permit 401(k), 403(b), SIMPLE and governmental 457(b)
    retirement plans to make matching contributions to workers as if their
    student loan payments were salary reduction contributions. As such,
    recent graduates who cannot afford to save money beyond their student
    loan repayments would no longer have to forego the employer match and
    can start to build retirement savings while paying down their student
    loan debt.
    ---------------------------------------------------------------------------
        \13\ ``Consumer Credit--G-19,'' Federal Reserve, https://
    www.federalreserve.gov/releases/g19/current/default.htm.
        \14\ ``Private Letter Ruling (PLR-131066-17),'' Internal Revenue
    Service, https://www.irs.gov/pub/irs-wd/201833012.
        \15\ Retirement Security and Savings Act; Securing a Strong
    Retirement Act of 2020.

        Provide additional savings opportunities for those close to
    retirement by the increasing catch-up limits in plans. Increasing
    catch-up contributions will also help plan participants in recovering
    from the pandemic. In general, it is important to give workers greater
    flexibility about exactly which year they make elective deferrals. For
    example, older workers should have the opportunity to make higher
    elective deferrals to 401(k) plans than is possible under current law
    in recognition that in some earlier years, they and their families may
    have had important financial needs they reasonably prioritized ahead of
    elective deferrals. This need is exacerbated for those that have had
    financial struggles during the pandemic. Allowing them to provide
    additional contributions at a later time when their finances are more
    secure will be critical to retirement security. Therefore, we support
    legislation that increases the catch-up amount for those who are close
    to retirement.\16\
    ---------------------------------------------------------------------------
        \16\ Retirement Security and Savings Act--Section 120, https://
    www.congress.gov/bill/117th-congress/senate-bill/1770/text; Securing a
    Strong Retirement Act of 2020--Section 107, https://www.congress.gov/
    bill/117th-congress/house-bill/2954/text.

        Question. Do you believe that a bipartisan Federal commission
    studying pressing issues related to the private retirement system could
    ---------------------------------------------------------------------------
    assist Congress in developing solutions?

        Answer. The creation of a retirement security commission will
    certainly benefit Congress in highlighting new policy solutions from
    various experts. Because members of the commission will include former
    and current members of Congress appointed by both House and Senate
    leadership, the commission's report will provide a bipartisan analysis
    that is important to address all private retirement issues. ERIC looks
    forward to working with the Commission to create recommendations on how
    to best build upon the success of the current private retirement plan
    system.

        Question. Establishing an employer-sponsored retirement plan is
    costly and burdensome, particularly for small businesses, but the
    ongoing management of those plans is equally onerous. Taken together,
    the time and money requisite to provide a plan is simply too much for
    some businesses that would otherwise be happy to offer it for their
    employees.

        What can Congress do to streamline compliance requirements for
    employer-
    sponsored retirement plans?

        Answer. Simplify reporting and disclosure requirements by
    eliminating redundant and unnecessary disclosures. The tax code and
    ERISA include many rules requiring and governing the reports,
    disclosures, and notices that employers and qualified plans must
    provide to employees and participants. We believe that these
    communications are complex, burdensome, and costly and are less
    informative or effective for employees and participants than they
    should be. ERIC agrees with proposals that direct the DOL, Treasury,
    and the PBGC to issue regulations to consolidate and simplify the
    existing ERISA and tax reports, notices, disclosures, and other
    information relating to deferred compensation, pension, profit sharing,
    and other retirement plans.\17\ In developing these regulations, the
    agencies should consult with the appropriate stakeholders and
    organizations (including sponsors, plans, administrators,
    recordkeepers, communication experts, and others) to identify problems,
    areas of possible improvement, and approaches to improvement. The
    agencies should review the efficacy and ability to combine summary plan
    descriptions, summary annual reports, summary of material
    modifications, single employer annual funding notices, fee disclosures,
    QDIA/safe harbor notices, section 402(f) rollover notices, participant
    account statements, securities-related disclosures, distribution
    options (including lifetime annuity estimate disclosures, choices
    around risk transfer transactions), and other communications to
    employees and participants.
    ---------------------------------------------------------------------------
        \17\ Retirement Security and Savings Act--Section 301, https://
    www.congress.gov/bill/117th-congress/senate-bill/1770/text; Securing a
    Strong Retirement Act of 2020--Section 304, https://www.congress.gov/
    bill/117th-congress/house-bill/2954/text.

        Maintain electronic disclosure as a default distribution. ERIC's
    member companies invest considerable time and expense providing and
    improving communications to participants, beneficiaries, and others,
    and have found that electronic communications offer significant
    advantages to plan sponsors, administrators, participants, and
    beneficiaries. Therefore, we were very supportive of the changes made
    by the DOL that allow plan sponsors to provide electronic delivery as
    the default option for providing retirement plan notices. This
    regulation significantly eased administrative burdens for plan sponsors
    by allowing them to modernize their notice delivery systems, move into
    the 21st century, and offer significant advantages to plan sponsors,
    ---------------------------------------------------------------------------
    administrators, participants, and beneficiaries including:

            Time efficiency. Electronic communications get to recipients
    faster than paper communications. The time difference ranges from a few
    days to more than two weeks.
            Interactive capability. Interactive features make many
    electronic communications more user-friendly than paper communications.
    For example, most electronic documents have search features and can
    include hyperlinks to relevant background information.
            Privacy. A secure electronic system offers more privacy
    protection than paper communications. For example, when a document is
    delivered by mail, there is no way to control who reads it. Usernames
    and passwords protect against unauthorized access.
            Keeping track of updates. A well-managed website can alleviate
    the burden of saving paper documents and keeping personal files up to
    date. A website can provide immediate access to the most up-to-date
    relevant documents.
            Cost efficiency. Providing communications electronically
    reduces the cost of preparation and distribution.
            Environment. Use of electronic media saves paper.

        Consequently, one point of concern in recent legislation is the
    attempt to roll back recent advances in electronic delivery
    flexibility.\18\ We encourage Congress to allow plan sponsors to
    provide retirement notices in the same manner as other notices and
    information, including those provided by the government. At the very
    least, if Congress decides that an annual disclosure is necessary, it
    should be a short and generic notice--i.e., a ``postcard notice''--
    which can be provided more easily and quickly than an annual benefit
    statement.
    ---------------------------------------------------------------------------
        \18\ Securing a Strong Retirement Act of 2020--Section 313(b)(2),
    https://www.congress.gov/bill/117th-congress/house-bill/2954/text.

        Expand the ability of plans to self-correct plan errors. Plan
    sponsors and administrators should be permitted to play a more
    significant role in identifying and correcting plan errors, including
    excess, insufficient, and missed contributions, compensation and
    service, accrued benefit, and other determinations and calculations. In
    particular, employers should be allowed greater opportunities to self-
    correct routine, common operational, and plan document mistakes without
    the need for the incurrence of fees and Federal agency oversight and
    approval. To this end, expanding the Employee Plans Compliance
    Resolution System (EPCRS) and the Voluntary Fiduciary Correction
    Program (VFCP) would increase compliance and reduce the cost of plan
    administration without adversely affecting participants' benefits.\19\
    ---------------------------------------------------------------------------
        \19\ Retirement Security and Savings Act--Section 115, https://
    www.congress.gov/bill/117th-congress/senate-bill/1770/text; Securing a
    Strong Retirement Act of 2020--Section 307, https://www.congress.gov/
    bill/117th-congress/house-bill/2954/text.

        Question. Do you believe that proposals like my Retirement Security
    Flexibility Act would help incentivize more employers to offer plans,
    ---------------------------------------------------------------------------
    and more employees to participate in such plans?

        Answer. ERIC does believe that the changes included in the
    Retirement Security Flexibility Act will encourage the increased
    creation of and participant in retirement plans. The purpose of the
    safe harbor design is to achieve the desired nondiscrimination goals
    without the administrative burden and compliance risks associated with
    the statutory actual deferral percentage (ADP) and actual contribution
    percentage (ACP) tests. Removing the testing requirements provides an
    incentive for employers to implement safe harbor features. Given the
    success of the safe harbor model, it makes sense to expand the
    availability of the safe harbor to provide for increased retirement
    savings.

                                     ______

                     Prepared Statement of Hon. Ron Wyden,
                           a U.S. Senator From Oregon
        Before anybody ever heard of COVID-19, it was already far too
    difficult for Americans to save for a dignified retirement. According
    to the National Institute on Retirement Security, as of 2018, more than
    100 million working-age Americans had no pension or any retirement
    assets.

        The pandemic economic crash made saving even harder. A recent
    survey on the impact of the pandemic conducted by AARP found that among
    those fortunate enough to have retirement accounts, nearly a quarter
    had to dip into those savings or quit contributing altogether just to
    pay the bills.

        Taken together, that means a sizable majority of American workers
    fall into one of two camps--either they can't afford to save at all, or
    they've got hardly any financial cushion when times get tough.

        More recently, those Americans were reminded about long-running
    retirement rip-offs by ultra-wealthy individuals advised by the
    priciest accountants and lawyers. One report included details on a
    multi-billion-dollar IRA. It's enough to make your head explode if
    you're a teacher or a restaurant manager without a rainy-day fund, much
    less a well-fed retirement account.

        It's clear to me that this is another case of double-standard
    economics. The system doesn't do nearly enough to help working people
    of modest means get ahead, but individuals at the top are able to game
    the rules to abuse taxpayer-subsidized accounts with their pricey
    accountants and lawyers. This is increasing the already existing
    inequality between retirement haves and have-nots to an extreme level.

        The Finance Committee--which has a history of bipartisan progress
    when it comes to helping Americans save--ought to look at ways to
    address these issues in the months ahead. I want to tick through a few
    proposals I believe will help.

        First, last week, along with Senator Bennet, Senator Casey, and
    Senator Menendez, I introduced the Encouraging Americans to Save Act to
    get more help to the working people who need it so badly. Under that
    proposal, the credit would be opened up to millions of Americans with
    modest incomes who never had access before. It would become a matching
    contribution that would go directly into a retirement account. It has
    the potential to be a game changer for people in Oregon and all across
    the country who do not have the ability to save much or anything at all
    today.

        Second, our tax code ought to help young people get started saving
    earlier in their careers. Too many Americans are unable to save at work
    because they're paying off mountains of student loan debt. That's why
    in April I reintroduced the Retirement Parity for Student Loans Act.
    Under my proposal, workers who make student loan payments would qualify
    to get a ``matching'' payment from their employer into a retirement
    savings plan like a 401(k). Their student loans shrink and their nest
    egg grows--that's a win-win.

        Third, this committee ought to make it easier for people to move
    their retirement accounts and continue saving when they change jobs. In
    2021, hardly anybody in America stays with one employer for their
    entire career. However, it is a pain in the neck to move your
    retirement savings. Many Americans just give up and cash out their
    savings, losing out on a whole lot of earnings that would build up over
    time. The rules essentially penalize Americans for routine job changes
    in the modern economy, so the system ought to change.

        Finally, it's long past time to crack down on mega-IRAs, which the
    GAO documented as a problem years and years ago. The fact is, from the
    beginning, IRAs were about retirement security for typical families.
    They were never meant to become another tax dodge for billionaires, but
    this abuse is not new. The GAO conducted a landmark study on this issue
    at my request back in 2014 using information lawfully available to it
    from 2011 taxpayer returns. GAO found then that nearly 8,000 taxpayers
    had aggregate IRA account balances in excess of $5 million. These
    massive IRAs have only gotten bigger and more prevalent since then. JCT
    gave me data lawfully available to it yesterday that shows in 2019
    almost 25,000 taxpayers had aggregate IRA account balances of over $5
    million; 497 of those taxpayers have aggregate IRA account balances
    over $25 million, with an average aggregate account balance of over
    $150 million each. It's clearly an unfair loophole that must be closed,
    and there ought to be bipartisan agreement on this.

        So there's a lot for the committee to discuss. Members on both
    sides will have a lot of strong ideas of their own to discuss today. As
    I said at the outset, this is a subject on which the Finance Committee
    has a long track record of bipartisan progress, including a bill made
    up of dozens of ideas from both sides in 2016. After a lot of work,
    that bill became law a few years later. I hope today's hearing is a
    launching pad for the committee to develop another bipartisan
    retirement package in the months ahead.

                                     ______

                                 Communications

                                  ----------

                           American Benefits Council

                          1501 M Street, NW, Suite 600

                              Washington, DC 20005

                                  202-289-6700

                             Facsimile 202-289-4582

                        www.americanbenefitscouncil.org

                                  May 18, 2021

    The Honorable Ben Cardin            The Honorable Rob Portman
    509 Hart Senate Office Building     448 Russell Senate Office Building
    Washington, DC 20510-2002           Washington, DC 20510-3506

    Dear Senator Cardin and Senator Portman:

        We are writing on behalf of the American Benefits Council to thank
    you for your historic leadership with respect to retirement policy over
    many years. The retirement years of millions of Americans have been
    made more secure by your work.

        We support the reintroduction of the Retirement Security and
    Savings Act. Your longstanding commitment to bipartisan retirement
    policy has set a pattern which has endured and produced much helpful
    legislation that built on a tremendously successful system making it
    stronger and broadening its availability to and use by more Americans.
    Your successful leadership and efforts to pass the Setting Every
    Community Up for Retirement Enhancement (SECURE) Act of 2019 are but
    one example of this commitment.

        The American Benefits Council is a Washington, DC-based employee
    benefits public policy organization. The Council advocates for
    employers dedicated to the achievement of best-in-class solutions that
    protect and encourage the health and financial well-being of their
    workers, retirees and families. Council members include over 220 of the
    world's largest corporations and collectively either directly sponsor
    or support sponsors of health and retirement benefits for virtually all
    Americans covered by employer-provided plans.

        As the country responds to the challenges it faces, it is important
    to continue our work on enhancing retirement security. Retirement
    savings plays a critical role in helping workers and their families
    achieve financial security and supports economic and job growth. As we
    build our economy back from the pandemic, part of that effort needs to
    include even greater attention to the role of retirement programs that
    have been jeopardized by that crisis and were at risk for many
    Americans even before the pandemic.

        We commend you on the introduction of this bipartisan bill, which
    includes many priorities for the retirement community and the Council,
    including:

            The ability to self-correct inadvertent plan errors without a
    submission to the IRS.

            An increase in the age at which required minimum distributions
    must commence to 75.

            Permitting employers to match student loan repayments.

            Eliminating unnecessary disclosure burdens with respect to
    employees who are not participating in a plan.

            Enhanced catch-up contributions.

            Critical pension plan reforms, including correction of funding
    mortality tables and fixing a burdensome glitch in the PBGC premium
    regime.

        We so much appreciate the thoughtfulness that underlies the
    provisions of this bill and we know how much they would enhance
    Americans' retirement security. We look forward to continued
    discussions on retirement policy issues, including the challenges in
    reuniting employees with their benefits as this process moves forward.

        Thanks to your leadership, millions more Americans will be able to
    retire with dignity.

        Sincerely,

        Lynn D. Dudley
        Senior Vice President
        Global Retirement and Compensation Policy

                                     ______

        The American Benefits Council (the ``Council'') thanks Chair Wyden
    and Ranking Member Crapo and all members of the committee for holding
    the hearing, ``Building on Bipartisan Retirement Legislation: How Can
    Congress Help?'' Your work and that of the committee has been
    instrumental in the great bipartisan strides we have made in this area.
    We appreciate your leadership in further improving retirement outcomes
    for American workers and their families.

        The private retirement system has helped millions of Americans
    achieve retirement security. According to a post-election poll
    conducted by Public Opinion Strategies in the 2020 presidential
    election, a majority of voters trust employers the most in helping them
    achieve a secure retirement and a majority of voters believe that the
    standards for employer-provided benefits should be established at the
    federal level. The Setting Every Community Up for Retirement
    Enhancement (SECURE) Act enacted in 2019 was a major step forward in
    meeting the challenges faced by Americans in achieving a secure
    retirement. In addition, the American Rescue Plan Act enacted earlier
    this year included vital funding reform that provided much needed
    stabilization to single-employer pension plans. Even with those changes
    being enacted, the system can be further improved and strengthened and
    there are numerous existing bipartisan legislative proposals--several
    of which are discussed below--that we believe can help achieve that
    result.

    [GRAPHIC] [TIFF OMITTED] T2821.004

        .epsThe American Benefits Council is a Washington, DC-based
    employee benefits public policy organization. The Council advocates for
    employers dedicated to the achievement of best-in-class solutions that
    protect and encourage the health and financial well-being of their
    workers, retirees and their families. Council members include over 220
    of the world's largest corporations as well as organizations serving
    employers of all sizes. Collectively our members directly sponsor or
    administer health and retirement benefits for virtually all Americans
    covered by employer-
    sponsored plans.

     Key Bipartisan Proposals for Improving Retirement Security

        There are many retirement policy proposals that are worthy of
    discussion. We are highlighting several that Council members have
    identified as important reforms that build on the SECURE Act and
    significantly help American workers better prepare for retirement. Many
    of the proposals below are included in both the Retirement Security and
    Savings Act of 2021 (S. 1770, the ``Cardin/Portman'' bill) and the
    Securing a Strong Retirement Act of 2021 (H.R. 2954, the ``Neal/Brady''
    bill, as approved by the House Ways and Means Committee). Some
    proposals not included in the bills should be considered as well. Some
    of the proposals are additionally found in other legislation, such as
    the Retirement Parity for Student Loans Act (S. 1443, the ``Wyden
    student loan'' bill) and the Retirement Savings Lost and Found Act (S.
    1730, the ``Warren/Daines missing participants'' bill).

    Self-Correction Procedures

        Plan sponsors should generally be permitted to self-correct
    inadvertent plan violations under the IRS' Employee Plans Compliance
    Resolution System (EPCRS) without a submission to the IRS or a fee
    payable to the IRS. This will help employees because errors can be
    corrected more quickly and more efficiently. Under a proposal included
    in the Cardin/Portman bill and the Neal/Brady bill, all inadvertent
    plan violations could be self-corrected under EPCRS without a
    submission or fee to the IRS, provided that this rule would not apply
    if the IRS discovers the violation on audit and the employer has not at
    that point taken actions that demonstrate a commitment to correct the
    violation. These bills, which we strongly support, would also make
    improvements to the self-correction process that would make self-
    correction a more reliable and effective process.

        Recent IRS guidance expands the inadvertent errors that may be
    self-corrected without a submission to the IRS but does not achieve the
    full goals of the bills, which would allow substantially all
    inadvertent errors to be self-corrected. We highly recommend Congress
    take this additional step to make self-correction as broadly available
    as possible.

     Reducing Barriers to Saving Through Student Loan Repayment Programs

        The burden of student loan debt serves as an unfortunate barrier to
    saving for retirement. Given the benefit of compound interest, putting
    money away early in one's career--especially through an employer-
    provided plan with matching contributions and low fees--can have a
    powerful effect on one's retirement savings account balance at
    retirement age. But student debt prevents many individuals, especially
    in their 20s and 30s, from saving optimally for retirement.

        Many employers are interested in helping employees save for
    retirement despite student tuition or debt obligations and are
    considering a variety of innovative approaches to do so. We urge
    Congress to support these programs with policies that embrace
    innovation.

        For example, the Council supports proposals that would make it
    easier for employers to provide matching contributions to 401(k)
    retirement plans based on an employee's student loan payments. Such a
    provision is included in the Wyden student loan bill. The Wyden student
    loan proposal is also included in Cardin/Portman, Neal/Brady and the
    Retirement Parity for Student Loans Act of 2021 (H.R. 2917). Measures
    like these that would leverage the tax laws and behavioral economics
    would go a long way toward reducing barriers to retirement savings
    particularly for younger workers. Just like saving early, enacting
    supportive policy as soon as possible will have a positive effect on
    retirement outcomes.

        We are supportive of other proposals to give employers greater
    flexibility in helping their employees with student loan debt including
    making permanent provisions that make it easier for employers to pay
    down student loans for their employees without triggering taxable
    income for their employees, up to an annual limit of $5,250 on the
    total of such repayments as well as other educational assistance.

    PEP and ``Group of Plan'' Reforms

        Policymakers are constantly searching for ways to improve
    retirement plan coverage and Council members believe that the best way
    to do so is to build on the employer-based system. Open multiple
    employer plans (called ``pooled employer plans,'' or PEPs) present a
    significant opportunity to do so. Much was accomplished in the
    enactment of the SECURE Act but additional reforms can make PEPs even
    more effective in expanding coverage, reducing costs, ensuring
    consistent participation and providing a solid retirement. We note the
    following proposals:

            Provide the same PEP advantages to charities, churches and
    public educational institutions: Currently, the PEP provisions in the
    SECURE Act do not cover 403(b) plans, which are widely used by
    charities, churches and public educational organizations (the only
    entities permitted to maintain such plans). We support the expansion in
    Neal/Brady and the Improving Access to Retirement Savings Act (S. 1703)
    of the PEP provisions to cover 403(b) plans, so that these entities can
    enjoy the same new economies of scale being made available to taxable
    employers.

            Service Crediting: Under a MEP that is not a PEP (a ``closed
    MEP''), if an employee works for one employer in the MEP and then moves
    to another employer in the MEP, the employee's service with the first
    employer counts with the second employer and vice versa.

                PEPs: The service crediting rule makes sense in
    the context of a closed MEP where employees are moving among closely
    related employers. But in the context of a PEP, it does not make sense.
    For example, why should a hardware store in Maine have to make a new
    employee immediately eligible and immediately vested based on prior
    service by the same employee for a barber shop in Nevada, just because
    the two employers participate in the same PEP?

                Statute and policy: The statute is not clear on
    whether the MEP rule applies to PEPs. In our view, it should not. From
    a policy perspective, the growth of PEPs and the expansion of coverage
    would be inhibited if the MEP rule applied to PEPs.

                    If small employers know that, for example, they may
    need to treat new hires as immediately eligible and immediately vested
    that could mean fewer small employers join PEPs, undermining the extent
    of the coverage expansion. This is because the potential additional
    expenses of applying the service crediting rules across the entire PEP
    could erase cost savings obtained elsewhere for the PEP through
    economies of scale and tracking service crediting based on an
    employee's previous employers does little to advance administrative
    simplicity and cost savings.

                    Similarly, many employers would likely be concerned to
    learn that, under a PEP, a short-term employee who left after a couple
    of years could become 100% vested later by reason of working for an
    unrelated employer. Again, this has cost implications.

            Trustee duties: SECURE requires the trustee of a PEP ``to be
    responsible for collecting contributions'' to the PEP.

                Different business models: Based on the input
    we have received, there are different business models that may be used
    with respect to the collection of contributions to the PEP. Under one
    business model, the trustee would be responsible for collecting
    contributions. Under a second business model, the PEP would use a
    directed trustee, which would not have any fiduciary expertise or any
    administrative system that could be used to enforce or oversee the
    collection of contributions. If the trustee in this second business
    model were forced to take on this responsibility, it would have to
    establish new systems to perform a new function, which would trigger
    unnecessary costs and delays in implementing PEPs.

                Flexibility would expand coverage: We believe
    that it is important to accommodate both business models, so that PEP
    coverage can be expanded to the greatest extent. Accordingly, we ask
    that that Congress treat PEPs in the same way as all other types of
    plans. PEPs should be permitted to assign contribution collection
    responsibility to the entity best suited to this task, which will often
    be the pooled plan provider. This legislative solution would simply
    permit the collection process to be assigned to other fiduciaries,
    which would facilitate the use of the fiduciary with the most
    experience and expertise in this regard.

            Groups of plans that are permitted to file a single Form 5500
    under Section 202 of the SECURE Act: Under current law, generally, a
    Form 5500 for a defined contribution plan must contain an opinion from
    an independent qualified public accountant as to whether the plan's
    financial statements and schedules are fairly presented (referred to
    below as the ``audit requirement''). However, generally, no such
    opinion is required with respect to a plan covering fewer than 100
    participants.

                A group of plans that fits within the SECURE
    provision may contain some plans that are subject to the audit
    requirement and some that are not. Under the proposed change, plans
    which are subject to the audit requirement may elect to jointly file a
    single audit as if they were part of the same plan, but the audit
    requirement and expense would not be imposed on the small plans. As an
    alternative, to further simplify the administration of the group of
    plans and to enhance security, the plan administrator may elect to
    treat all the plans in the group as one plan for purposes of the audit
    requirement--including the small plans upon which the requirement would
    otherwise not be imposed. The latter election would simplify plan
    administration by accommodating a wider variety of coverage solutions
    being developed in the marketplace.

     Improving Required Retirement Plan Reports and Disclosures

        Under current law, employer-sponsored retirement plans and IRAs are
    required to provide a variety of reports and disclosures to
    participants at various times or upon the occurrence of specified
    events. The Council believes there is a significant opportunity to
    improve both the content and the timing of required disclosures in a
    manner that provides for more effective and meaningful communications
    to participants and account owners, while also decreasing
    administrative costs for plans and IRAs.

        We support bipartisan proposals to take such steps, such as a
    proposal included in both the Cardin/Portman bill and the Neal/Brady
    bill. That proposal would direct the U.S. Treasury Department, the U.S.
    Department of Labor (DOL) and the Pension Benefit Guaranty Corporation
    (PBGC) to review the reporting and disclosure requirements and make
    recommendations to Congress to consolidate, simplify, standardize and
    improve these participant communications.

        A related issue that we urge the committee to consider is one that
    affects those plan participants who are not enrolled in the plan but
    who nevertheless are considered participants because they are eligible
    to enroll in the plan. Under current law, even non-enrolled
    participants are required to receive the same reports and disclosures
    as participants who are enrolled in the plan. Because these non-
    enrolled participants are receiving plan communications that do not
    relate to them, the Council strongly supports the proposal in both the
    Cardin/Portman bill and the Neal/Brady bill under which non-enrolled
    participants would not be required to receive the unnecessary notices
    that they receive under current law. Instead, such participants would
    receive an annual reminder of their eligibility to participate in the
    plan.

    Stop Indexing the PBGC Variable Rate Premium for Single-Employer Plans

        A bipartisan proposal aimed at addressing concerns over PBGC
    premiums, which are a factor in causing employers to fully or partially
    terminate their plan, is included in the Cardin/Portman bill. Today,
    single-employer defined benefit plans pay both a per-participant flat-
    rate premium and a variable-rate premium to the PBGC each plan year.
    Both types of premiums are currently indexed. But indexing the
    variable-rate premium does not make sense because the variable-rate
    premium is calculated based on the plan's unfunded vested benefits, an
    amount that is inherently indexed. As a result, indexing the variable-
    rate premium will eventually lead to companies owing 100%, 200% or even
    more of their underfunding to the PBGC. The Cardin/Portman bill would
    address this by eliminating the indexing of the variable-rate premium
    and freezing such rate at the 2018 premium level ($38 per $1,000 of
    unfunded vested benefits).

    Permitting Higher Catch-Up Contributions for Older Americans

        Even though most Americans understand the benefit of saving for
    retirement throughout their working years, younger workers, in
    particular, often face competing financial priorities, such as buying a
    home, paying off student loans and raising a family. These expenses can
    make it challenging for many workers to prioritize saving for
    retirement until their 40s, 50s or even 60s. In 2020, most employees
    are generally limited to making elective deferrals of $19,500 to a
    401(k), 403(b), or governmental 457(b) plan ($13,500 with respect to
    SIMPLE IRAs and SIMPLE 401(k)s). But individuals age 50 and older may
    make a ``catch-up'' contribution of an additional $6,500 ($3,000 for
    SIMPLEs). To give workers nearing retirement age an even greater
    ability to better prepare for retirement, the Council supports the
    provisions in the Cardin/Portman and Neal/Brady bills that would
    increase the catch-up contributions for certain older workers.

    Increasing the Age at Which RMDs Must Begin

        The Council believes it is important that retirees be allowed to
    retain their savings in retirement accounts as long as possible to help
    protect against the risk of retirees depleting their retirement savings
    during their lifetime. We therefore urge the committee to support
    bipartisan proposals such as those in the Cardin/Portman and Neal/Brady
    bills that would further increase the age at which participants and IRA
    account owners must begin taking RMDs to age 75.

     Reforming the Rules Regarding Inadvertent Overpayments to Participants

        The complexity of administering a retirement plan can result in a
    plan incorrectly calculating benefit payments for a participant,
    especially in a defined benefit plan. Sometimes these errors result in
    an overpayment being made to a participant. IRS correction procedures
    in some cases require plans to seek to recoup from participants a
    discovered overpayment, sometimes months or even years after the
    overpayment was made to the participant. This often causes significant
    distress for participants--many of whom were retirees--who had no idea
    that the plan incorrectly calculated their benefits. Further
    complicating matters, in many cases an overpayment was rolled over to
    an IRA or another plan because the participant believed that such
    amount was eligible for rollover treatment when, in reality, it was
    not.

        In some circumstances under EPCRS a plan sponsor may correct for an
    overpayment without seeking recoupment from the participant. Recent
    guidance improves the rules governing overpayments but does not resolve
    major challenges, such as the ability to roll over an inadvertent
    overpayment and does not provide important participant protections. The
    Council's members believe that additional steps to protect retirees
    should be taken and therefore the Council strongly supports provisions
    in the Neal/Brady and Cardin/Portman bills that would permit employers
    not to seek recoupment from the participant and would permit rollovers
    of inadvertent overpayments.

    Expansion of Electronic Disclosure of Plan Communications

        DOL regulations give plan sponsors the option to provide required
    notices and statements in an electronic format while providing
    participants with appropriate protections and the right to receive
    paper copies of notices at no charge. The Council strongly supported
    updating the means by which plan sponsors can fulfill their disclosure
    requirements. We believe that electronic communication can improve
    employee engagement and help them take more effective and timely
    action. Bipartisan proposals that restrict this option should be
    carefully measured against these goals and should be designed to
    resolve a specific problem so as not to undermine the goals.

        Similarly, we support retirement plan proposals to allow remote
    notarization with strong safeguards to protect participants and
    spouses. This was acutely necessary during the pandemic and has been
    allowed on a temporary basis and recently extended for one year. The
    success of this system--in terms of efficiency, protections and
    flexibility--on a temporary basis and its recent extension provide a
    solid basis for making this rule permanent.

    Missing Participants

        Our members devote a great deal of effort and financial resources
    to sponsoring retirement plans and to searching for those who have
    unclaimed benefits. We wholeheartedly share the goal of reuniting plan
    participants with their retirement benefits.

        In this regard, we welcomed the introduction of missing participant
    legislation in Neal/Brady, Cardin/Portman and Warren/Daines, which
    addressed the missing participant issue. The Department of Labor has
    issued guidance, in the nature of best practices, but more is needed
    because the guidance does not help employers know what should be done
    to find a missing participant. The Council believes strongly in the
    need for comprehensive guidance on plan fiduciary responsibilities with
    respect to unresponsive and missing participants.

        The bills also include a provision that would use data that
    employers are already required to report to Treasury to create a
    national, online lost and found for Americans' retirement accounts. In
    addition, the Department of Labor would be directed to develop
    standards for determining if an employer has satisfied their fiduciary
    responsibilities with respect to missing participants; in our view, all
    agencies involved should develop the standards jointly, including
    Treasury and PBGC.

        We also believe that the bills would require transfers to a new
    government program of benefits that are currently being transferred to
    automatic rollover IRAs--a private sector solution that is working
    well. We recommend modifying the government program to supplement
    private sector solutions, rather than taking them over. And it should
    be clear that once a plan does not contain any benefits on behalf of a
    participant, the plan fiduciaries should have no further duty to search
    for that participant.

        We look forward to continuing to work with Congress on these
    issues. Our members' extensive experience with missing and lost
    participants provides a valuable resource for policymakers, including
    input with respect to strategies to improve consistency among agencies
    with regulatory authority for missing and unresponsive participants.

    New ``Secure Deferral Arrangement'' Automatic Enrollment Safe Harbor

        A significant retirement policy success in recent years has been
    encouraging plan sponsors to automatically enroll their employees in a
    retirement plan at a default contribution rate and then to periodically
    increase that rate over time. But as successful as these automatic
    enrollment and automatic escalation features have been to date,
    policymakers are now looking at options to continue building on their
    success.

        Under the existing automatic enrollment safe harbor, plans are
    generally deemed as meeting certain nondiscrimination testing rules if
    certain criteria are met, including that employees are automatically
    enrolled at a contribution rate of at least 3% of compensation in the
    first year and such rate must increase by at least 1% a year until the
    contribution rate is at least 6% (but not greater than 15%) by the
    fourth year.

        The Council encourages the committee to consider proposals that
    would build upon the existing safe harbor by adding a new automatic
    enrollment safe harbor for ``secure deferral arrangements.'' A secure
    deferral arrangement would, among other features, provide for a higher
    default contribution rate in the first year (i.e., at least 6 but not
    greater than 10%) and would remove that 10% cap on default deferrals
    after the first year. Such proposals have been included in the Cardin/
    Portman bill, S. 1703 and the 2017 Neal bill.

    Emergency Savings

        The pandemic has highlighted the longstanding need for Americans to
    save for emergencies. We believe that this can be done in a way that
    protects and enhances retirement security. In that regard, we were very
    pleased by the introduction of the Enhancing Emergency and Retirement
    Savings Act of 2021 (S. 1870).

        The bill allows a retirement plan, such as a 401(k) plan, or IRA to
    be accessed for a small amount in the case of emergency without any
    penalty. As a result of knowing they have access to a modest amount in
    case of an emergency, individuals will be more likely to contribute to
    the plan or IRA and often will end up not having to make emergency
    withdrawals, thus enhancing their overall retirement security while
    improving their financial resilience.

        There are a number of ways to improve emergency savings that the
    Council supports, including programs outside of the retirement plan and
    we look forward to a continued dialogue about how to further improve
    emergency savings and strengthen personal financial security. However,
    this bill is an important step towards addressing the critical problem
    faced by many Americans by offering a solution that harnesses the
    successful 401(k) or similar plan structure that utilizes payroll
    deduction and allows for recontribution.

     Remove Limitations on Subsidies Resulting From Accumulation of
                        Retirement Assets

        Effective retirement saving can improve overall health and
    financial well-being. Individuals and families should not be penalized
    for preparing for retirement. The Council urges the committee to
    support legislation that would exclude current retirement plan assets
    and future retirement plan benefits from eligibility calculations for
    state and federal housing and food subsidies.

    ABLE Programs

        The Council also supports provisions that address the needs of
    eligible ABLE individuals. A bipartisan House bill (H.R. 4672)
    introduced by Representatives Suozzi and Wenstrup would allow such
    individuals to elect to have employer retirement contributions made to
    their ABLE program instead, which is designed to suit their unique
    needs more effectively than a retirement account.

     Parity for Cooperative and Small Employer Charity (CSEC) Organizations

        The SECURE Act, Neal/Brady and Cardin/Portman together include
    numerous very helpful tax credits as incentives for taxable companies
    to start a plan or to adopt certain pro-participant features. For
    example, the following very beneficial proposals are either in the law
    or being considered:

            The SECURE Act increased the cap on the small business start-
    up credit from $500 to $5,000.

            The SECURE Act provided a three-year $500 small business tax
    credit for adopting automatic enrollment.

            Neal/Brady would increase the start-up credit in two very
    material ways:

                Increase the credit from 50% to 100% of start-
    up costs for companies with up to 50 employees.

                Provide a contribution-based credit that could
    be worth over $100,000 over five years, depending on the size of the
    business.

            Cardin/Portman would provide a five-year tax credit for small
    businesses that adopt a new type of safe harbor automatic enrollment
    401(k) plan.

            Similar to Neal/Brady, Cardin/Portman would enhance the small
    business start-up credit by increasing it from a credit equal to 50% of
    start-up costs to a 75% credit for the smallest employers.

            Cardin/Portman would provide a three-year $500 small business
    credit for adopting automatic re-enrollment.

        Unfortunately, tax-exempt organizations do not receive any of these
    credits, so the significant help--well over $100,000 in total in some
    cases--that the credits provide is not available to tax-exempt
    employers. Moreover, tax-exempt organizations do not pay any less to
    set up a plan.

        We strongly believe that something needs to be done to level the
    playing field to treat tax-exempt organizations more fairly. We also
    recognize that addressing this issue in a comprehensive way for all
    tax-exempt organizations is a broad project that will require further
    work and consideration. But we believe that it is appropriate to start
    the legislative process with a small but important step and therefore
    support a proposal that would provide tax credits to employees in CSEC
    plans.

    A Consistent Federal Framework

        We have one key point in conclusion. The fundamental basis for an
    effective private retirement system is the ability to rely on the
    single set of national rules applicable to designing and operating
    retirement plans, especially for companies that operate in more than
    one state. These rules can be found in Section 514 of the Employee
    Retirement Income Security Act of 1974 (ERISA). There is no greater
    threat to the health of the private retirement system than a possible
    erosion of this principle of current law. We urge Congress to work with
    us to support and enforce the federal nature of the rules governing
    qualified retirement plans.

                                   * * * * *

        The ability to save for retirement is a critically important part
    of Americans' sense of economic security. Employer-provided retirement
    plans are a uniquely positive influence on one's financial well-being
    in retirement. Public policy should therefore encourage participation
    and adequate savings in these plans whenever possible.

        We thank the committee for holding this hearing and for a long
    history of dedicated bipartisan work on protecting and enhancing the
    private retirement system. We look forward to continuing to work with
    the committee on this critical endeavor.

                                     ______

                       American Council of Life Insurers

                          101 Constitution Avenue, NW

                              Washington, DC 20001

                 Statement of Susan K. Neely, President and CEO

    The American Council of Life Insurers (ACLI) is pleased to submit this
    statement for the record on ``Building on Bipartisan Retirement
    Legislation: How Can Congress Help?'' ACLI thanks Chairman Ron Wyden
    (D-OR) and Ranking Member Mike Crapo (R-ID) for holding this important
    hearing. This statement will highlight the successes of the current
    retirement system, the challenges many workers and retirees face,
    especially in light of the COVID-19 global pandemic, and public policy
    proposals supported by ACLI that would enhance and build upon the
    successes of our nation's retirement system.

    THE AMERICAN COUNCIL OF LIFE INSURERS

    The American Council of Life Insurers (ACLI) advocates on behalf of 280
    member companies dedicated to providing products and services that
    promote consumers' financial and retirement security. Financial
    security is our core business, and retirement security for all
    Americans is a critical mission. We protect 90 million American
    families with financial products that reduce risk and increase
    financial security, including life insurance, annuities, retirement
    plans, long-term care insurance, disability income insurance, dental
    and vision benefits, and other supplemental benefits. As society and
    work changes, we are committed to financial security solutions that
    protect all Americans, regardless of where and how they work, their
    stage in life, or the economic status of their household. Americans are
    living longer, and financial security into retirement is a big
    challenge facing our country. Life insurers help people retire with
    financial security, through products that are available, accessible,
    and affordable to all.

    ACLI members represent 95 percent of industry assets in the United
    States. Through a well-crafted partnership of the private solutions
    ACLI members provide, and public solutions that are necessary, we
    believe the benefits of financial security can be made available to all
    Americans. Accordingly, ACLI member companies offer insurance contracts
    and investment products and services to employment-based retirement
    plans (including defined benefit pension plans, 401(k), SIMPLE, SEP,
    403(b), and 457(b) plans) and to individuals (through IRAs and
    annuities). Three out of five small employers (those with 99 or fewer
    employees) rely on life insurer products and services in their
    employment-based retirement plan. ACLI members are also employer
    sponsors of retirement plans for their employees. And there are more
    than 15 million annuity-based IRAs held by individuals. As product and
    service providers, as well as plan sponsors, life insurers know that,
    coupled with Social Security, adequately and consistently saving for
    retirement, effectively managing assets throughout retirement and
    utilizing appropriate financial protection products ensure Americans'
    retirement and financial security.

    Americans are faced with significant financial security challenges, and
    the insurance industry is a vitally important part of how Americans are
    able to plan, save and guarantee themselves a secure retirement.\1\ In
    2020, American families received $392.3 billion in payments from
    annuities, $130 billion in payments from life insurance, $20 billion in
    disability income insurance benefits and $11.4 billion in long-term
    care insurance benefits. No other industry provides Americans with the
    level of financial guarantees provided by the life insurance industry.
    ---------------------------------------------------------------------------
        \1\ ACLI analysis of preliminary 2020 NAIC Annual Statement data.
    ---------------------------------------------------------------------------

    THE RETIREMENT SYSTEM IN AMERICA

    The retirement system for private-sector workers in America builds upon
    the contributions made to Social Security and is enhanced by
    employment-based retirement plans, individual retirement accounts,
    annuities, and other investments. Private sector savings play a vital
    role in retirement security for millions of Americans. Current tax
    incentives for pensions and retirement savings encourage employers to
    provide and maintain work-based plans and have enabled millions of
    American families to accumulate savings, thereby improving their
    retirement security. According to the Bureau of Labor Statistics, more
    than 80 percent of full-time civilian workers have access to a
    retirement plan through their employer, and of these workers, 82
    percent participate in a workplace plan.\2\ Yet, there remain workers,
    mostly those who are working part-time and those at small businesses,
    without such access. More can and should be done to ensure that
    everyone who can afford to save for retirement is saving for
    retirement.
    ---------------------------------------------------------------------------
        \2\ Bureau of Labor Statistics, National Compensation Survey:
    Employee Benefits in the United States, March 2020, https://
    www.bls.gov/ncs/ebs/benefits/2020/employee-benefits-in-the-united-
    states-march-2020.pdf.
    ---------------------------------------------------------------------------

    CHALLENGES FACING RETIREMENT SAVERS

    While the current combination of Social Security and employment-based
    and individual retirement arrangements has successfully demonstrated
    that workers can attain retirement security, the global pandemic has
    brought into sharp focus challenges Americans face with ensuring they
    have both short-term and long-term savings--both key components to
    financial health. In 2019 for example, almost 50 percent of all U.S.
    households had less than $5,300 in liquid savings that can be used for
    an emergency.\3\ This was exacerbated in 2020 as families faced
    financial crises with the economic downturn related to COVID-19. Some
    retirement savers, having little to no emergency savings, tapped their
    retirement savings through plan loans and distributions features made
    available through the Coronavirus Aid, Relief, and Economic Security
    (CARES) Act. According to Fidelity Investments, the median amount of
    coronavirus distribution was $4,800, indicating an amount of emergency
    savings deficiency for many families.
    ---------------------------------------------------------------------------
        \3\ ACLI analysis of the Federal Reserve, Survey of Consumer
    Finances, 2019.

    While workplace retirement plans with payroll-deducted contributions
    are incredibly effective at helping people save, impediments still
    exist that prevent many Americans from maximizing this important
    savings tool. Certain segments of the population have greater barriers
    to savings. Despite 80 percent of full-time civilian workers having
    access to a retirement plan in the workplace, only 40 percent of part-
    time workers enjoy access to workplace savings, in particular, gig
    economy workers and people who work for small employers.\4\
    Additionally, Federal Reserve data shows that Black and Hispanic savers
    have savings rates that lag significantly behind their white
    counterparts. These deficiencies are magnified in women. Millennials
    also tend to be less prepared for retirement than earlier generations
    at the same stage in life with 45 percent having no dedicated
    retirement savings. Almost 41 percent are burdened with student loan
    debt and may delay saving for retirement.\5\ This segment may also face
    challenges related to access to a retirement savings plan in the
    workplace. Adult caregivers are also in a challenging situation. Many
    financially assist their children, while an estimated 9.7 million adult
    children over the age of 50 care for their parents as well.\6\
    ---------------------------------------------------------------------------
        \4\ Bureau of Labor Statistics, National Compensation Survey:
    Employee Benefits in the United States, March 2020, https://
    www.bls.gov/ncs/ebs/benefits/2020/employee-benefits-in-the-united-
    states-march-2020.pdf.
        \5\ ACLI analysis of the Federal Reserve, Survey of Consumer
    Finances, 2019.
        \6\ MetLife, Mature Market Institute, The MetLife Study of
    Caregiving Costs to Working Caregivers, https://www.caregiving.org/wp-
    content/uploads/2011/06/mmi-caregiving-costs-working-caregivers.pdf.
    ---------------------------------------------------------------------------

    BOLD SOLUTIONS TO ADDRESS RETIREMENT CHALLENGES

    The passage of the Setting Every Community Up for Retirement
    Enhancement (SECURE) Act of 2019, the most comprehensive retirement
    legislation passed since the Pension Protection Act in 2006, is
    expected to prove instrumental in increasing access to retirement
    plans. The provisions within the SECURE Act built upon the current
    successful private sector system, making important enhancements to
    improve American's financial retirement security. For example, the
    SECURE Act includes provisions making it easier for employers to
    sponsor a retirement plan, encouraging employees to save, and helping
    them prepare for a secure retirement through lifetime income solutions,
    have real-world positive benefits. Increasing access for employees of
    small employers alone is anticipated to result in more than 700,000 new
    retirement savings accounts.

    To build upon the success of the SECURE Act, other effective public
    policy proposals, in addition to action by plan sponsors and providers,
    can help to address savings challenges and help Americans ensure a
    secure retirement. Policymakers should continue to seek to increase
    access to workplace retirement savings, strive for financial equality,
    and encourage essential financial protections offered by guaranteed
    retirement income products. The focus should continue to be on ways to
    help more people achieve a financially secure retirement--increasing
    savings rates, workplace access and lifetime income security for all
    Americans, all key to financial security.

    The following are policy proposals that seek to increase retirement
    security and savings that ACLI supports include:

    1. Increased Access to and Participation in Retirement Plans

    A sizable majority of full-time workers have access to a retirement
    plan in the workplace. Still, more could be done to expand access and
    coverage. While access is high for workers at larger employers, roughly
    50 percent of all workers employed by small businesses--those with
    fewer than 50 workers--have access to a workplace retirement plan.\7\
    Of those workers, only 39 percent take advantage of the plan in the
    workplace.\8\ While small businesses have access to a robust
    marketplace of product offerings, the uncertainty of revenue is the
    leading reason given by small businesses for not offering a plan,
    followed by cost, regulatory and administrative burdens and lack of
    employee demand. Congress should build upon the current
    employer-provided system and advance policy that seeks to increase
    access to workplace savings. Measures that accomplish these goals
    include:
    ---------------------------------------------------------------------------
        \7\ Bureau of Labor Statistics, National Compensation Survey 2020,
    https://www.bls.gov/news.release/ebs2.t01.htm.
        \8\ Id.

          Retirement Savings Option for All Employees: Requiring a
    universal approach for employers without a retirement plan to provide
    workers with access to payroll deducted savings through an IRA, 401(k),
    or other qualified retirement savings plan, is key to fundamentally
    expanding access to the power of workplace, payroll deducted savings.
    Employers should have the flexibility to choose to use IRAs or set up a
    401(k), or other qualified retirement savings plan. Employers should
    not be overly burdened by administrative costs in order to comply and
    workers must have the right to opt out of participation. When offered a
    retirement plan by their employer, four out of five full-time private-
    sector workers participate. Additionally, nearly 73 percent of
    employers now automatically enroll new participants into their plan.\9\
    While employees have the option to opt out, most do not. In fact, with
    new employees, participation rates nearly double to 93 percent when
    automatically enrolled, compared with 47 percent under voluntary
    enrollment.\10\ ACLI strongly supports a universal approach in which
    all employers with more than 10 employees offer a plan in the
    workplace. This would provide an estimated 27.7 million workers with
    access to an employment-based retirement plan with 20.8 million
    additional workers participating in those plans.\11\
    ---------------------------------------------------------------------------
        \9\ Willis Towers Watson, 2017 Defined Contribution Plan Survey,
    https://globenewswire.com/news-release/2018/02/26/1387421/0/en/U-S-
    employers-enhancing-defined-contribution-retirement-plans-to-help-
    improve-workers-financial-security.html.
        \10\ Jeffrey W. Clark, Jean A. Young, Vanguard, Automatic
    Enrollment: The Power of Default, https://institutional.vanguard.com/
    iam/pdf/CIRAE.pdf.
        \11\ ACLI estimates based on the National Compensation Survey:
    Employee Benefits in the United States, March 2020, National
    Compensation Survey: Employee Benefits in the United States, March
    2020.

          Increased Default Contribution Levels: Currently, employers
    typically automatically enroll employees into their retirement plans at
    three percent of their employees' salary. While automatic enrollment is
    an excellent tool to help workers contribute to their retirement plan,
    increasing the contribution percentage each year, similar to a
    provision included in the Retirement Security and Savings Act (RSSA) of
    2021, introduced in the 117th Congress by Senators Portman (R-OH) and
    Cardin (D-MD), would result in more meaningful savings levels.\12\
    ---------------------------------------------------------------------------
        \12\ Id.

          Automatic Enrollment Incentive for Small Businesses: Similar to
    automatic escalation tools, automatic enrollment has proven to be
    extremely effective in increasing participation rates, and ultimately,
    savings balances. Pending legislation would provide small businesses
    with a tax credit of $500 per year for 3 years for automatic
    enrollment.\13\ Not only would this mitigate the cost for these
    businesses, but it would ensure more workers are saving at work.
    ---------------------------------------------------------------------------
        \13\ S. 1770, The Retirement Security and Savings Act of 2021,
    introduced in the 117th Congress by Senators Portman (R-OH) and Cardin
    (D-MD). H.R. 2954, The Securing a Strong Retirement Act of 2021,
    introduced in the 117th Congress by Chairman Richard Neal (D-MA) and
    Ranking Member Kevin Brady (R-TX).

          Credit for Small Employers Providing Retirement Plans for
    Military Spouses: It is critical to address savings shortages prevalent
    among military spouses. Military spouses support their service members
    and families through relocations and deployments, frequently
    sacrificing their own career aspirations--and often their ability to
    save for their own retirement.\14\ Congress should provide a tax credit
    for small employers that: make military spouses eligible for their
    retirement plan within two months of hire; provide a matching or non-
    elective contribution to the plan; and ensure these spouses are 100
    percent vested in all employer contributions within the same time
    frame.
    ---------------------------------------------------------------------------
        \14\ S. 1770, The Retirement Security and Savings Act of 2021,
    introduced in the 117th Congress by Senators Portman (R-OH) and Cardin
    (D-MD), S. 1273, the Military Spouses Retirement Security Act,
    introduced in the 117th Congress by Senators Susan Collins (R-ME),
    Maggie Hassan (D-NH), James Lankford (R-OK), Mike Bennet (D-CO), Angus
    King (I-ME) and Steve Daines (R-MT).
    ---------------------------------------------------------------------------

    2. Incentivizing Savings for Vulnerable and At-Risk Populations

    Special consideration should be given to individuals who face unique
    challenges when it comes to retirement savings. These groups, many
    times, can benefit greatly from focused public policy initiatives to
    make their path to saving for retirement easier. These include:

          Institutionally Disadvantaged Savers: For too long, racial
    injustice and systemic inequity have excluded communities of color from
    traditional pathways to financial security and created fewer
    opportunities for financial peace of mind. Everyone, no matter their
    age, job, income level, gender or race, deserves the chance to build
    financial certainty and Congress should look for ways to collaborate
    with critical industries in order to drive solutions that address
    systemic inequities by investing in underserved communities, advancing
    financial education, and removing barriers to access.

          Low-Income Earners: While the current Saver's Credit allows low-
    and
    middle-income earners a tax credit, RSSA would significantly improve
    the incentive by expanding those eligible for the credit, making the
    credit refundable, and contributing it directly to a retirement plan or
    Roth IRA.\15\
    ---------------------------------------------------------------------------
        \15\ S. 1770, The Retirement Security and Savings Act of 2021,
    introduced in the 117th Congress by Senators Portman (R-OH) and Cardin
    (D-MD). H.R. 2954, The Securing a Strong Retirement Act of 2021,
    introduced in the 117th Congress by Chairman Richard Neal (D-MA) and
    Ranking Member Kevin Brady (R-TX).

          Part-time Workers: Part-time workers have historically had less
    access to and lower participation in retirement plans. Currently, only
    39 percent of part-time workers have access to a retirement plan at
    work.\16\ With the enactment of the SECURE Act, current law now
    requires employers to allow long-term, part-time workers with at least
    500 hours of service in 3 consecutive years to participate in their
    401(k) plans. RSSA expands eligibility to those with at least 500 hours
    of service in two consecutive years.
    ---------------------------------------------------------------------------
        \16\ Bureau of Labor Statistics, National Compensation Survey 2020,
    https://www.bls.gov/news.release/ebs2.t01.htm.

          Student Loan Borrowers: Innovative policy approaches that would
    assist employees in saving for retirement should be a top priority for
    legislators. One legislative approach ACLI supports would enable
    employers to contribute a ``match'' to an employee's 401(k), 403(b) or
    SIMPLE plan account based on the employee's student loan
    repayments.\17\
    ---------------------------------------------------------------------------
        \17\ S. 1443, the Retirement Parity for Student Loans Act of 2021,
    introduced in the 117th Congress by Senators Wyden (D-OR), Cantwell (D-
    WA), Cardin (D-MD), Whitehouse (D-RI) and Brown (D-OH). S. 1770, The
    Retirement Security and Savings Act of 2021. H.R. 2954, The Securing a
    Strong Retirement Act of 2021.

          Those Closest to or in Retirement: The way we live and work has
    been impacted by the global pandemic. Those closest to retirement need
    even more flexibility regarding how they continue to accumulate assets,
    but also, when they are obligated to begin tacking distributions. More
    and more savers are opting to stay in the workforce and public policy
    should accommodate them by increasing the required minimum distribution
    (RMD) age from 72 to 75 and allowing those 62-64 to save even more.\18\
    Savers that are close to or in retirement may want to take steps to
    ensure they do not outlive their savings. Only one vehicle can
    guarantee this, an annuity. Removing barriers to annuities provides
    savers with the option to ensure they have income for life. Qualified
    longevity annuity contracts (QLAC) help retirees ensure retirement
    solvency. Public policy should modernize the QLAC rules, by repealing
    the 25-percent account balance limit, increasing the eligible QLAC
    amount to $200,000 and making important changes to ensure spousal
    survivor rights.\19\
    ---------------------------------------------------------------------------
        \18\ S. 1770, The Retirement Security and Savings Act of 2021. H.R.
    2954, The Securing a Strong Retirement Act of 2021.
        \19\ S. 1770, The Retirement Security and Savings Act of 2021. H.R.
    2954, The Securing a Strong Retirement Act of 2021.
    ---------------------------------------------------------------------------

    3. Additional Plan Innovations

    While the SECURE Act certainly made a large impact on the retirement
    savings landscape, small changes can build upon and improve the current
    retirement system. These include:

          Expansion of the Open Multiple Employer Plans (Open MEPs)
    provision to include 403(b) plans sponsored by certain tax-exempt
    employers and public educational institutions.

          Clarification of the rules applicable to stable financial
    planning tools that can meet savers' financial needs. Currently there
    is ambiguity surrounding fiduciary liability as it relates to general
    account funds. Insurance companies offer guaranteed principal and
    interest through these conservative, insured instruments. Backed by the
    insurer's general assets, general account products often provide higher
    rates of return than other fixed return and stable value investment
    vehicles. Many employers include them among the investment options
    available to their retirement plan participants. Large sums of 401(k)
    assets are invested in these products. It is critical that Congress
    provide clarity to permit these stable, safe arrangements to continue.

          Support for legislative efforts, like the Lifetime Income for
    Employees Act, bipartisan legislation introduced in the 116th Congress
    by Representatives Don Norcross (D-NJ) and Tim Walberg (R-MI). This
    bill would remove a barrier that prohibits annuities from being offered
    as a default investment option in workplace retirement plans.\20\
    ---------------------------------------------------------------------------
        \20\ H.R. 8990, The Lifetime Income for Employees Act, introduced
    in the 116th Congress by Representatives Don Norcross (D-NJ) and Tim
    Walberg (R-MI).

          Facilitate emergency saving to ensure Americans have funds to
    cover unexpected financial challenges while protecting critical long-
    term retirement savings. Several proposals have been introduced in the
    Senate.\21\
    ---------------------------------------------------------------------------
        \21\ S. 1870, The Enhancing Emergency and Retirement Savings Act of
    2021, introduced in the 117th Congress by Senators James Lankford (R-
    OK) and Michael Bennet (D-CO). S. 1019--Strengthening Financial
    Security Through Short-Term Savings Accounts Act of 2019, introduced in
    the 116th Congress by Senators Doug Jones (D-AL), Tom Cotton (R-AR),
    Cory Booker (D-NJ) and Todd Young (R-IN).

          Reinforcement of the value and benefits associated with modern,
    electronic delivery of retirement plan documents and notices, while
    ensuring an opt-out option for plan participants. COVID-19 has
    demonstrated that access to important documents electronically is a
    critical need of Americans.

    CONCLUSION

    Providing Americans, especially vulnerable populations, with greater
    access to retirement savings tools will help them better prepare for
    retirement. Many retirees can expect to live more than 30 years or
    longer in retirement. Facilitating lifetime income solutions and
    increasing financial education empowers and educates Americans to make
    better decisions. By taking action now, Congress has an opportunity to
    help more people retire with peace of mind. ACLI urges policymakers to
    support and enhance the current retirement system. We and our members
    stand ready to assist the Congress in this worthwhile endeavor.

                                     ______

                           American Heart Association

                                National Center

                             7272 Greenville Avenue

                                Dallas, TX 75231

                         Statement of Larry D. Cannon,
              Chief Administrative Officer and Corporate Secretary

    July 26, 2021

    The Honorable Ron Wyden             The Honorable Mike Crapo
    Chair                               Ranking Member
    U.S. Senate                         U.S. Senate
    Committee on Finance                Committee on Finance
    Washington, DC 20510                Washington, DC 20510

    Dear Chairman Wyden and Ranking Member Crapo:

    The American Heart Association is proud to lead a coalition of more
    than 55 national charities and faith-based organizations who support
    the bipartisan Legacy IRA Act (S. 243), sponsored by Senators Cramer
    and Stabenow. In conjunction with the retirement hearing scheduled for
    July 28th, this coalition urges you to include the Legacy IRA Act in
    future legislation, such as the ``Securing a Strong Retirement Act of
    2021.'' A full list of coalition members is attached.

    First, thank you for your leadership to support relief for charities
    impacted by COVID-19. Nonprofits responded quickly on the frontlines
    and continue to respond. The American Heart Association developed the
    first COVID-focused registry to aggregate data and aid research on
    COVID-19, treatment protocols, and risk factors tied to adverse
    cardiovascular outcomes. In addition, the Association committed $2.5
    million in rapid response research awards to better understand the
    virus and its interaction with heart and brain systems. These
    initiatives, and others like them, would not be possible without public
    support and charitable giving.

    The Legacy IRA Act will encourage more charitable giving by enabling
    seniors to make contributions from their individual retirement accounts
    (IRA) to charities through life-income plans. Seniors are a key
    demographic as they typically make up more than 40% of the donor base
    for charities. This is an expansion of the existing IRA Charitable
    Rollover provision, which is the fastest growing area of philanthropy.

    Many nonprofits are dependent on private philanthropy, including gift
    planning. The Legacy IRA Act offers seniors another philanthropic
    option and would incentivize more giving to help charities while
    helping middle-income seniors who need a lifetime income.

    American Heart Association was pleased that a modified version of the
    Legacy IRA Act was already included in the House Ways and Means
    Committee passed ``Securing a Strong Retirement Act of 2021'' (Sec.
    310) in May. We strongly support the inclusion of the Legacy IRA Act in
    this or other legislative packages. America is stronger when everyone
    has the opportunity to give, to get involved, and to strengthen their
    communities.

    Sincerely,

    Larry D. Cannon
    Chief Administrative Officer and Corporate Secretary

         Help Seniors Increase Charitable Giving Legacy IRA Act of 2021

    The Issue

    The undersigned nonprofit organizations support legislation allowing
    middle-income seniors more flexibility to make gifts to charities
    through their individual retirement accounts (IRAs). This expansion of
    current law would increase critical charitable giving, now more
    important than ever as nonprofits lost nearly one million jobs due to
    the pandemic. Given trends over the last six months, it will take
    nearly 18 months for nonprofits to regain all of the jobs lost since
    COVID hit.

    Despite the financial and operational challenges due to COVID-19, our
    nonprofit coalition partners have continued to provide critical
    services such as health research and patient education, food
    assistance, domestic violence services, childcare, youth homeless
    shelters, and virtual cultural and arts programming.

    The Legislation

    In 2015, Congress passed the PATH Act, which included the IRA
    Charitable Rollover provision allowing individuals to make direct tax-
    free charitable gifts up to $100,000 annually from their IRA starting
    at age 70\1/2\. Since its enactment, the IRA Charitable Rollover has
    generated millions of dollars in new or increased contributions to
    local and national charities. The Legacy IRA Act builds on that success
    to expand the existing IRA Charitable Rollover, allowing seniors
    starting at age 65 to make tax-free IRA rollovers to charities through
    life-income plans (charitable gift annuity or charitable remainder
    trust).

    The Legacy IRA Act offers an opportunity for Congress to support
    middle-income seniors who have a charitable intent but need retirement
    income. Charitable donors have been setting up charitable gift
    annuities for more than 100 years, which have long been regulated by
    state insurance departments. The donor receives lifetime payments, and
    the charity receives any remainder when the donor passes away.

    The Legacy IRA Act provides seniors who have planned well for
    retirement with another giving option by allowing them to use their
    IRAs to fund a gift annuity. It is estimated that seniors have up to $5
    trillion in IRA assets. This offers a way for middle-income donors to
    combine charitable gifts with retirement income. It helps existing
    charities, as seniors typically make up more than half of their donors.

    The undersigned coalition of nearly 60 national nonprofits support the
    bipartisan Legacy IRA Act. In the 117th Congress, Senators Cramer and
    Stabenow introduced The Legacy IRA Act (S. 243). A modified version of
    the Legacy IRA Act (H.R. 2909) was introduced by Representatives Beyer
    and Kelly. This modified proposal allows for a one-time funding of life
    income gifts up to $50,000 and indexes for inflation the original IRA
    Rollover provision. H.R. 2909 was included in the bipartisan Securing a
    Strong Retirement Act of 2021 (H.R. 2954) introduced by House Ways and
    Means Committee Chairman Neal and Ranking Member Brady. The Securing a
    Strong Retirement Act of 2021 was unanimously approved by the committee
    in May 2021. This coalition strongly supports the bipartisan Legacy IRA
    Act and urges Congress to pass the legislation on its own or as part of
    a broader retirement package.

                                   Supporters

    Arab Community Center    Council on Foundations   National Association
     for Economic and                                  of College and
     Social Services                                   University Business
     (ACCESS)                                          Officers
    Alliance for Strong      Covenant House           National Community
     Families and             International            Action Partnership
     Communities
    ALS Association          DANCE/USA                National Council of
                                                       Nonprofits
    Alternate ROOTS          The Evangelical          National Health
                              Lutheran Good            Council
                              Samaritan Society
    Alzheimer's Association  Girl Scouts of the USA   National Multiple
     and the Alzheimer's                               Sclerosis Society
     Impact Movement
    American Alliance of     Girls Inc.               The Nonprofit Alliance
     Museums
    American Cancer Society  Goodwill USA             OPERA America
     Cancer Action Network
    American Council for     Habitat for Humanity     Performing Arts
     Gift Annuities           International            Alliance
    American Heart           Hemophilia Federation    Providence St. Joseph
     Association              of America               Health
    American Lung            Immune Deficiency        The Salvation Army USA
     Association              Foundation
    American Red Cross       Independent Sector       ServiceSource, Inc.
    Americans for the Arts   JDRF                     Theatre Communications
                                                       Group
    Asian Pacific Community  Jewish Federations of    UNICEF USA
     Fund                     North America
    Association of Art       League of American       United Philanthropy
     Museum Directors         Orchestras               Forum
    Association of           Lutheran Services in     United Way Worldwide
     Fundraising              America
     Professionals
    Boys & Girls Clubs of    March of Dimes           Volunteers of America
     America
    Catholic Charities USA   Mental Health America    YMCA of the USA
    Council for Advancement  National Alliance on     YWCA USA
     and Support of           Mental Illness
     Education
    Council for Christian    National Association of
     Colleges and             Charitable Gift
     Universities             Planners

    We urge Members of Congress to support the Legacy IRA Act. For more
    information about the bill, please contact Emily Horowitz, American
    Heart Association Government Relations Manager, at
    Emily.horowitz@heart.org.

                                     ______

                 Association of Mature American Citizens (AMAC)

                                312 Teague Trail

                              Lady Lake, FL 32159

                                  855-809-6976

                            https://amacaction.org/

                                @MatureAmericans

    August 10, 2021

    The Honorable Ron Wyden             The Honorable Mike Crapo
    Chairman                            Ranking Member
    U.S. Senate                         U.S. Senate
    Committee on Finance                Committee on Finance
    219 Dirksen Senate Office Building  219 Dirksen Senate Office Building
    Washington, DC 20510                Washington, DC 20510

    Dear Chairman Wyden and Ranking Member Crapo,

    On behalf of the Association of Mature American Citizens (AMAC) and
    their over 2.3 million members, I am submitting this statement for the
    record for the hearing entitled: ``Building on Bipartisan Retirement
    Legislation: How Can Congress Help?''

    AMAC is a member benefits organization supporting all Americans,
    especially those 50 plus in age. AMAC is centered on American values:
    freedom of the individual, free speech, exercise of religion, equality
    of opportunity, sanctity of life, rule of law, and love of family. AMAC
    Action, a 501(c)(4), advocates for issues important to AMAC's 2 million
    plus members on Capitol Hill, in state capitals, and local government.
    AMAC Action ensures our members' voices are heard through grassroots
    activism. The AMAC Foundation serves as a source of guidance for older
    Americans about Social Security and Medicare, completely free of
    charge. The AMAC Foundation has a staff of certified National Social
    Security Advisors to counsel retiree and pre-retirees on questions and
    issues relating Social Security and provides an array of educational
    opportunities on other issues.

    As an organization supporting Americans aged 50-plus, AMAC strongly
    believes more can be done to help Americans to save for retirement. The
    complexity of the American retirement system has made it difficult for
    mature adults to reap the full benefits of retirement savings. The
    SECURE Act was a good first step in simplifying retirement savings for
    millions of Americans, but more can and should be done to simplify the
    system.

    [GRAPHIC] [TIFF OMITTED] T2821.005

    .epsJust looking at JCT's analysis \1\ for this hearing, which spans
    more than 60 pages, shows the need for a simpler system. Currently
    private sector and governmental employees have access to nearly a dozen
    different retirement savings systems depending on the type of
    employment, defined contribution or defined benefit, single employer or
    multi-employer, and existence of collective bargaining agreements. Even
    with all these various types of qualified retirement plans, 33 percent
    of private sector workers do not have access to an employer sponsored
    plan and only 76 percent of those with access choose to use it. A study
    by the Federal Reserve found that 26 percent of non-retirees had no
    retirement savings in 2020.\2\ This high number of non-savers can be
    distilled down to two reasons:
    ---------------------------------------------------------------------------
        \1\ Joint Committee on Taxation. Present Law and Background
    Relating to Retirement Plans (JCX-32-21), July 26, 2021.
        \2\ Federal Reserve. ``Report on the Economic Well-Being of U.S.
    Households in 2020.'' May 2021.

        1.  The complexity of the retirement savings systems leads many to
    skip saving for retirement.\3\
    ---------------------------------------------------------------------------
        \3\ Washington Post. ``Why it's so hard for Americans to save for
    retirement.'' September 15, 2017.

        2.  The voluntary nature of employers offering access to retirement
    plans leaves some employees without easy access to retirement
    savings.\4\
    ---------------------------------------------------------------------------
        \4\ Pew Charitable Trusts. ``Employer Barriers to and Motivations
    for Offering Retirement Benefits.'' June 2017.

    Since 2013 \5\ the number of respondents to the Federal Reserve survey
    with no retirement savings has decreased marginally, however the high
    number still leads AMAC to believe a retirement savings crisis exists.
    ---------------------------------------------------------------------------
        \5\ Federal Reserve. ``Report on Economic Well-Being of U.S.
    Households'' 2013-2020. 2014-2021.

    In addition to the current system's inability to deal with this crisis
    of non-savers, changes in employee preferences will also be impacted by
    the complexity of the retirement savings system. According to data from
    the Bureau of Labor Statistics, more than 70 percent of workers aged
    25- to 34-years-old have less than four years of tenure with their
    current employer whereas the inverse is true, over 70 percent of 55- to
    64-year-old workers have worked more than 4 years with the same
    employer and over half have tenure of more than 10 years.\6\ The
    preference for younger employees to move jobs more often will have an
    impact on retirement savings. Employees with multiple former employers
    are often left with multiple retirement savings accounts, some of
    different types. While many employees consolidate retirement accounts,
    consolidation can have major tax implications or impact fees paid to
    the retirement plan provider.
    ---------------------------------------------------------------------------
        \6\ Bureau of Labor Statistics. ``Median tenure with current
    employer was 4.1 years in January 2020.'' September 29, 2020.

    [GRAPHIC] [TIFF OMITTED] T2821.006

    .epsAnother concerning action being taken is the number of employees
    either borrowing from or cashing out retirement savings. According to
    the Federal Reserve's 2020 data, 24 percent of non-retirees surveyed
    had removed money from self-directed retirement savings in the previous
    12 months.\7\ While tax penalties \8\ are designed to reduce permanent
    withdrawal of funds from retirement accounts, a significant portion of
    employees still viewed retirement savings as a source of extra funds
    instead of as a nest egg necessary for the future. These reductions in
    savings are likely part of the reason 45 percent of employees believe
    their retirement savings is not on track to reach their goals.\9\
    ---------------------------------------------------------------------------
        \7\ Ibid.
        \8\ 26 U.S.C. 72(t)(1).
        \9\ Ibid.

    Reductions in retirement savings will have a greater impact on future
    retirees due to the shortfall of future Social Security revenue used to
    pay benefits. According to the 2020 Social Security Trustees Report,
    the Old-Age and Survivors Insurance Trust Fund, commonly called the
    Social Security Trust Fund, will move to a cash basis in 2034 and is
    expected to only be able to meet 76 percent of scheduled benefits.\10\
    Because of the pandemic caused recession in 2020 and resulting high
    unemployment, it is likely this date will be sooner than the most
    recent report suggests.
    ---------------------------------------------------------------------------
        \10\ Social Security Administration. ``The 2020 Annual Report of
    the Board of Trustees of the Federal Old-Age and Survivors Insurance
    and Federal Disability Insurance Trust Funds.'' April 22, 2020.

    Without adequate retirement savings, or Congressional action to stop or
    delay the shortfall, many retirees will face economic hardship. This
    economic hardship could be made worse by rising inflation that makes
    many of the products retirees need more expensive while living on fixed
    incomes if adequate savings that provide increasing income do not
    exist. While not an issue covered by this hearing, AMAC strongly
    encourages Congress to make improvements to the Social Security program
    that will hold off insolvency and improve benefits for those without
    ---------------------------------------------------------------------------
    retirement savings to minimize the impact of increasing costs.

    AMAC has created to the Social Security Guarantee \11\ to help deal
    with these issues and can serve as a blueprint for Congress to pass
    real Social Security improvements without the need to make unnecessary
    tax increases or cut benefits for those that need them most. To help
    ensure retirees can afford retirement, especially those with little to
    no savings, AMAC suggests changing the way the annual cost of living
    adjustment is made:
    ---------------------------------------------------------------------------
        \11\ Association of Mature American Citizens. ``The Combined Social
    Security Guarantee and Social Security Plus Initiative.'' August 2020.

    Implement a tiered approach to the calculation of Cost-of-Living
    ---------------------------------------------------------------------------
    Adjustments (COLA) as follows:

        1.  For beneficiaries with a household income (Modified Adjusted
    Gross Income) level less than 150 percent of the federal poverty
    threshold (FPT, 150% FPT limit would be $25,860 for 2020), set an
    annual COLA range of 3 percent minimum--4 percent maximum.
        2.  For beneficiaries with a household income (MAGI) between 150
    percent and 300 percent of FPT ($25,860-$51,720 for two-person
    households in the continental U.S.) set an annual COLA range of 1.5
    percent minimum and 3 percent maximum.
        3.  For beneficiaries with a household income (MAGI) exceeding 300
    percent of federal poverty threshold ($51,720 for two-person households
    in the continental U.S.), set an annual COLA range of .5 percent
    minimum and 1.5 percent maximum.

    Additional changes to the program are also necessary to avoid
    insolvency and more details about the Social Security Guarantee are
    available at the end of these comments.

    One of the most important parts of the Social Security Guarantee is
    helping to increase retirement savings for non-retirees. To accomplish
    this AMAC recommends the creation of a new ``Social Security Plus''
    (``SSP'') account to be a supplemental voluntary companion benefit
    retirement account to provide access to additional funds for all
    workers at age 62.\12\
    ---------------------------------------------------------------------------
        \12\ Ibid.

    According to a February 2018 Pew Research report:\13\
    ---------------------------------------------------------------------------
        \13\ Pew Charitable Trusts. ``Workplace Retirement Plans Tend to
    Sharpen Focus on Financial Futures Survey.'' February 2018.

            ``[M]ore than one-third of all private sector workers lack
            access to a workplace plan. Moreover, 31 percent of those whose
            employers offer retirement benefits do not participate. Some
            may decide they are unable to afford regular contributions,
            while others may be ineligible because of plan rules, such as
    ---------------------------------------------------------------------------
            requirements for a minimum number of hours worked each year.''

    In sum, tens of millions of Americans have no retirement plan, and the
    average person receiving retirement benefits collects slightly more
    than $16,000 per year. Accordingly, the majority of retired workers
    rely on Social Security as the largest portion of their retirement
    income. For many Americans, Social Security is their only source of
    income. There is an urgent need to help workers save more for
    retirement.

    AMAC recommends the creation of a simple voluntary employer-offered
    companion retirement savings option that can be easily and
    inexpensively implemented by small employers--a Social Security Plus
    (SSP) account. SSP employee accounts would be managed for the
    employee(s) by established financial services firms and accountable to
    an industry board functioning under the auspices of the Social Security
    Administration.

    Recommended core elements of the SSP:

          It must be offered by the employer to all employees (full and
    part-time), but participation will be a voluntary account for both
    employee and employer.
          When new employees are hired, they must opt out of the SSP
    account, or they will be enrolled at $10/week.
          The individual is the owner of this supplemental retirement
    savings account.
          Tax deduction for employer contributions, after-tax contribution
    for employee with income sheltered.
          Employee not taxed on receiving funds (similar to a Roth IRA).
          Paid via payroll deduction, employer provides the contribution
    slot to employee.
          The weekly minimum is $5, the weekly maximum is $100 or $5,200/
    year.
          Employer may elect to contribute to employees' SSP accounts in
    any amount or percentage of pay they choose up to $50 per week ($2,600
    per year).
          The employer may start or stop their contribution at any time.
          Portability, if wage earner changes jobs, new employer must add
    payroll access for the SSP.
          Funds only available to wage earner at age 62 unless death or
    total disability occurs.
          Wage earner may elect to start receiving payouts at any age
    between 62 and 70\1/2\.
          Death benefit is the accrued value of account at time of death.
          SSP account benefits, including earnings, are tax-free.
          Contribution should be indexed for inflation at 4%.

    Investment options for the Social Security Plus retirement savings
    account:

          80% of the funds must invested in stock funds and bonds and the
    other 20% may be invested in any approved conservative investment
    (i.e., S&P 500 index).
          A volunteer board of investment experts creates lists of
    approved investments to assure quality.
          Investment choices would be similar to those used in 401(k)
    plans and IRAs and the cost of administration would be borne by the
    same providers who offer those plans, not the federal government.

    A program such as the Social Security Plus account or other automatic
    IRA approach would ensure more Americans are able to save for
    retirement. Under this proposal, a 23-year-old employee contributing
    only $25/week in the first year and an employer contributing $15/week,
    with both adding 4 percent annually thereafter, in a mix of 80 percent
    stock funds and 20 percent conservative investments, would accumulate
    over $1 million by age 65. Having an extra $1 million in retirement
    savings would greatly reduce reliance on Social Security income for
    many retirees.

    Ensuring our members have a smooth transition into retirement is a top
    priority for AMAC. Previous legislation to improve retirement security
    have been valuable, but continued bipartisan improvements are needed to
    increase retirement savings with a less complicated system. We
    appreciate the bipartisan efforts in working towards a solution to help
    preserve retirement savings for seniors.

    Sincerely,

    Bob Carlstrom
    President

                                     ______

                            Center for Fiscal Equity

                          14448 Parkvale Road, Suite 6

                              Rockville, MD 20853

                          fiscalequitycenter@yahoo.com

                        Statement of Michael G. Bindner

    Chairman Wyden and Ranking Member Crapo, thank you for the opportunity
    to submit these comments for the record to the Committee on this topic.

    The title is a bit ironic. Only Congress can build on retirement
    legislation. Whether Congress is helping or not is the open question.
    Gridlock is not helping, although sometimes doing nothing is better
    than faux bipartisanship that makes things worse.

    The current structure of Social Security found its genesis in the 1983
    Greenspan Commission, which resulted in a Social Security Trust Fund,
    which raised taxes on workers for their future retirements while
    avoiding the repeal of President Reagan's signature tax cuts.

    Many think tanks of a certain ideology hint that we cannot afford the
    burden of retirement spending as repaying trust is a budget buster. It
    is not. Certain people simply must pay what they owe. Whatever the
    future of Social Security, for the present, the burden of repaying the
    Trust Fund is on the wealthy, not current or future retirees. The bill
    is now coming due and those families who received the benefit of this
    plan owe the rest of us some money.

    Truth is more important than bipartisanship.

    The 1990s found us in a pension crisis. Actuaries sold the nation on
    the belief that pay-as-you-go pensions were not adequate. Investments
    must be fully funded. This led many companies to stop funding their
    plans altogether, shifting funds to defined contribution programs. As
    fortune would have it, the financial sector had many ideas (and
    products to sell) to fill this need. It is almost as if the actuaries
    had been talking to those who created the new regime.

    Bipartisan reforms of late have been an effort to strengthen this
    regime. They have been good for many retirees. Most retirees, however,
    were not able to afford to make the required savings because their
    incomes were not adequate to do so. By most, I mean the vast majority.
    Few workers have the economic clout to insist on wages high enough to
    adequately save. Those who do are bedeviled by the need to ``hit their
    number.'' Job one in doing this is to control the income and benefits
    of the non-professional class.

    The only thing that saves most retirees and the disabled is Social
    Security. It is not currently adequate. Before the Reagan Revolution,
    the National Commission on Social Security did its work, releasing its
    recommendations in 1981, which were rejected out of hand. The report is
    available at https://www.ssa.gov/history/reports/80commission.html. The
    Commission found that the best way to assure retirement security is to
    build it around, not away from, Social Security.

    The Commission noted that savings would not have increased were it not
    for the program. Like now, the economy was a concern for solvency. The
    Pandemic may be duplicating those economic conditions, especially if
    the Fed starts to fight inflation. The declining birth rate was a
    concern then. It still is. One thing that is different is that
    productivity was stagnant the decade before. It is not stagnant now
    (although the gains have not been shared.

    They proposed a higher retirement age (eventually passed), general
    funding (which is now programmed in as the trust fund is paid down),
    independent funding of Medicare, Medicaid, Disability and SSI under a
    separate agency (trust funds have met with limited success) and other
    recommendations for 88 in total. Their OASDI trust fund was only for a
    year. More than a few of their recommendations deserve a second look,
    particularly with regard to healthcare and disability insurance.

    We cannot turn the clock back to 1981 (or November 1980). This does not
    mean that we are without options. Committee members and staff are
    likely familiar with our proposed solutions. The tax reform plan to
    enact them can be found in our first attachment. We will refer to it in
    the text.

    Our first task must be to increase incomes for workers and retirees.

    The President's Budget features a permanent increase in the Child Tax
    Credit, retaining the refundability added as part of the American
    Rescue Plan Act. The CTC is the ultimate in bipartisan legislation.
    Both Republicans and Democrats have added to it, although only now has
    it become refundable for smaller families. It is still not adequate.

    Making these reforms permanent and increasing benefit levels further
    should be seen as bipartisan as well. As we have pointed out (because
    our Center has a religious bent), higher incomes for families are one
    of the most effective ways to reduce the number of abortions. We call
    upon the U.S. Conference of Catholic Bishops and the National Right to
    Life Committee to make doing so a required vote to maintain a perfect
    pro-life voting record.

    If we want people to save for retirement, we must make sure that they
    can also eat and have adequate housing and medical care. Higher incomes
    achieve both of those goals (while the latter is outside the scope of
    these comments).

    Our tax reform plan, specifically the Subtraction Value-Added Tax,
    details how the Child Tax Credit can be paid out without turning the
    Internal Revenue Service to society's pay master. Payments through the
    IRS are a temporary expedient, but this is likely too much government
    for Republican members to support on a permanent basis. Distributing
    benefits through other government payments, such as Social Security,
    Unemployment Insurance and TANF training stipends and through wages (as
    an offset to either the subtraction VAT or quarterly payments to the
    IRS) is more likely to stand the test of time.

    Our second attachment addresses how to raise the minimum wage and why
    this is essential for retirees. Enacting these changes must be a
    required vote for ratings by the American Association of Retired
    Persons and other retiree coalitions.

    Our second task is to reform how Social Security taxes are collected.

    Disability Insurance, the Employer Contribution to FICA and
    Supplemental Security Insurance should be decoupled from wages and
    credited on an equal dollar basis. Our first attachment explains how
    this can be done through tax reform. Doing so could be funded by
    consumption taxes in three ways.

    Our (Credit) Invoice VAT will increase the competitiveness of our
    exports and protect worker jobs while decreasing employer costs. Our
    Subtraction (Net Business Receipts) VAT is useful if options include
    personal accounts holding employer voting and preferred stock (but in
    no cases should it be invested in the stock market). Our Asset VAT is
    appropriate for funding the repayment of the Social Security Trust
    Fund.

    Each of these proposals (all of which can be used) burden the entire
    economy, as well as investors, who have had the benefit of worker
    productivity, especially that part of productivity which featured the
    destruction of unions and limiting pay and benefits for all but the top
    10% of households. There are no caps to increase with these taxes and
    they can be adjusted more easily than payroll taxes (which are
    regressive).

    Our third task is to move toward employee ownership, which allows a
    return to defined benefit compensation.

    Our Asset VAT can be enacted as a replacement for estate (death) taxes
    and capital gains and income taxes (including dividends, interest, rent
    and pass-throughs) through personal income tax filing. Corporate income
    taxes and business taxes collected through individual income taxes and
    all but the highest taxes on salaries would be shifted to our
    subtraction VAT. The Asset and Invoice VATs are superior to Wealth
    Taxes because they are impossible to dodge. This also makes them
    superior to the Estate Tax. This is described in detail in our first
    attachment.

    The key feature of the Asset VAT would be an easier path for
    shareholders to avoid taxation on sales to qualified Employee Stock
    Ownership Plans. This benefit is available to only a small number of
    business owners. It should be available to every investor and heir. It
    would not be paid by inheritors until they sell the family business,
    farm or share holdings. ESOP sales allow them to avoid taxation
    altogether (except when purchasing new shares or spending the gains).

    Employee-ownership is real liberty for workers. Capitalist ownership
    fosters an authoritarian workplace, not a libertarian one. Being paid
    to obey is not freedom. Any libertarian worthy of the name must
    recognize this.

    The 2017 tax reform brought capital gain and profit taxes into a small
    range. They should be set to a single rate rather than being debated
    with each change of administration. When net interest payments on the
    debt become less workable, this is one of the taxes that would be
    increased, along with a high salary surtax (which could be collected
    through tax prepayment bonds for a quick buy-back).

    We must put our fiscal house in order. It is the most important thing
    we can do for retirees.

    Thank you for the opportunity to address the committee. We are, of
    course, available for direct testimony or to answer questions by
    members and staff.

     Attachment One--Tax Reform, Center for Fiscal Equity, March 5, 2021

    Individual payroll taxes. These are optional taxes for Old-Age and
    Survivors Insurance after age 60 for widows or 62 for retirees. We say
    optional because the collection of these taxes occurs if an income
    sensitive retirement income is deemed necessary for program acceptance.
    Higher incomes for most seniors would result if an employer
    contribution funded by the Subtraction VAT described below were
    credited on an equal dollar basis to all workers. If employee taxes are
    retained, the ceiling should be lowered to $85,000 to reduce benefits
    paid to wealthier individuals and a $16,000 floor should be established
    so that Earned Income Tax Credits are no longer needed. Subsidies for
    single workers should be abandoned in favor of radically higher minimum
    wages.

    Wage Surtaxes. Individual income taxes on salaries, which exclude
    business taxes, above an individual standard deduction of $85,000 per
    year, will range from 6.5% to 26%. This tax will fund net interest on
    the debt (which will no longer be rolled over into new borrowing),
    redemption of the Social Security Trust Fund, strategic, sea and non-
    continental U.S. military deployments, veterans' health benefits as the
    result of battlefield injuries, including mental health and addiction
    and eventual debt reduction. Transferring OASDI employer funding from
    existing payroll taxes would increase the rate but would allow it to
    decline over time. So would peace.

    Asset Value-Added Tax (A-VAT). A replacement for capital gains taxes,
    dividend taxes, and the estate tax. It will apply to asset sales,
    dividend distributions, exercised options, rental income, inherited and
    gifted assets and the profits from short sales. Tax payments for option
    exercises and inherited assets will be reset, with prior tax payments
    for that asset eliminated so that the seller gets no benefit from them.
    In this perspective, it is the owner's increase in value that is taxed.
    As with any sale of liquid or real assets, sales to a qualified broad-
    based Employee Stock Ownership Plan will be tax free. These taxes will
    fund the same spending items as income or S-VAT surtaxes.

    This tax will end Tax Gap issues owed by high income individuals. A 26%
    rate is between the GOP 24% rate (including ACA-SM and Pease surtaxes)
    and the Democratic 28% rate. It's time to quit playing football with
    tax rates to attract side bets. A single rate also stops gaming forms
    of ownership. Lower rates are not as regressive as they seem. Only the
    wealthy have capital gains in any significant amount. The de facto rate
    for everyone else is zero.

    Subtraction Value-Added Tax (S-VAT). These are employer paid Net
    Business Receipts Taxes. S-VAT is a vehicle for tax benefits, including

          Health insurance or direct care, including veterans' health care
    for non-
    battlefield injuries and long term care.
          Employer paid educational costs in lieu of taxes are provided as
    either
    employee-directed contributions to the public or private unionized
    school of their choice or direct tuition payments for employee children
    or for workers (including ESL and remedial skills). Wages will be paid
    to students to meet opportunity costs.
          Most importantly, a refundable child tax credit at median income
    levels (with inflation adjustments) distributed with pay.

    Subsistence level benefits force the poor into servile labor. Wages and
    benefits must be high enough to provide justice and human dignity. This
    allows the ending of state administered subsidy programs and
    discourages abortions, and as such enactment must be scored as a must
    pass in voting rankings by pro-life organizations (and feminist
    organizations as well). To assure child subsidies are distributed, S-
    VAT will not be border adjustable.

    The S-VAT is also used for personal accounts in Social Security,
    provided that these accounts are insured through an insurance fund for
    all such accounts, that accounts go toward employee-ownership rather
    than for a subsidy for the investment industry. Both employers and
    employees must consent to a shift to these accounts, which will occur
    if corporate democracy in existing ESOPs is given a thorough test. So
    far it has not. S-VAT funded retirement accounts will be equal-dollar
    credited for every worker. They also have the advantage of drawing on
    both payroll and profit, making it less regressive.

    A multi-tier S-VAT could replace income surtaxes in the same range.
    Some will use corporations to avoid these taxes, but that corporation
    would then pay all invoice and subtraction VAT payments (which would
    distribute tax benefits. Distributions from such corporations will be
    considered salary, not dividends.

    Invoice Value-Added Tax (I-VAT). Border adjustable taxes will appear on
    purchase invoices. The rate varies according to what is being financed.
    If Medicare for All does not contain offsets for employers who fund
    their own medical personnel or for personal retirement accounts, both
    of which would otherwise be funded by an S-VAT, then they would be
    funded by the I-VAT to take advantage of border adjustability. I-VAT
    also forces everyone, from the working poor to the beneficiaries of
    inherited wealth, to pay taxes and share in the cost of government.
    Enactment of both the A-VAT and I-VAT ends the need for capital gains
    and inheritance taxes (apart from any initial payout). This tax would
    take care of the low-income Tax Gap.

    I-VAT will fund domestic discretionary spending, equal dollar employer
    OASI contributions, and non-nuclear, non-deployed military spending,
    possibly on a regional basis. Regional I-VAT would both require a
    constitutional amendment to change the requirement that all excises be
    national and to discourage unnecessary spending, especially when
    allocated for electoral reasons rather than program needs. The latter
    could also be funded by the asset VAT (decreasing the rate by from
    19.5% to 13%).

    As part of enactment, gross wages will be reduced to take into account
    the shift to S-VAT and I-VAT, however net income will be increased by
    the same percentage as the I-VAT. Adoption of S-VAT and I-VAT will
    replace pass-through and proprietary business and corporate income
    taxes.

    Carbon Value-Added Tax (C-VAT). A Carbon tax with receipt visibility,
    which allows comparison shopping based on carbon content, even if it
    means a more expensive item with lower carbon is purchased. C-VAT would
    also replace fuel taxes. It will fund transportation costs, including
    mass transit, and research into alternative fuels (including fusion).
    This tax would not be border adjustable unless it is in other nations,
    however in this case the imposition of this tax at the border will be
    noted, with the U.S. tax applied to the overseas base.

    Tax Reform Summary

    This plan can be summarized as a list of specific actions:

    1.  Increase the standard deduction to workers making salaried income
    of $425,001 and over, shifting business filing to a separate tax on
    employers and eliminating all credits and deductions--starting at 6.5%,
    going up to 26%, in $85,000 brackets.

    2.  Shift special rate taxes on capital income and gains from the
    income tax to an asset VAT. Expand the exclusion for sales to an ESOP
    to cooperatives and include sales of common and preferred stock. Mark
    option exercise and the first sale after inheritance, gift or donation
    to market.

    3.  End personal filing for incomes under $425,000.

    4.  Employers distribute the child tax credit with wages as an offset
    to their quarterly tax filing (ending annual filings).

    5.  Employers collect and pay lower tier income taxes, starting at
    $85,000 at 6.5%, with an increase to 13% for all salary payments over
    $170,000 going up 6.5% for every $85,000--up to $340,000.

    6.  Shift payment of HI, DI, SM (ACA) payroll taxes employee taxes to
    employers, remove caps on employer payroll taxes and credit them to
    workers on an equal dollar basis.

    7.  Employer paid taxes could as easily be called a subtraction VAT,
    abolishing corporate income taxes. These should not be zero rated at
    the border.

    8.  Expand current state/federal intergovernmental subtraction VAT to a
    full GST with limited exclusions (food would be taxed) and add a
    federal portion, which would also be collected by the states. Make
    these taxes zero rated at the border. Rate should be 19.5% and replace
    employer OASI contributions. Credit workers on an equal dollar basis.

    9.  Change employee OASI of 6.5% from $18,000 to $85,000 income.

    Attachment Two--Raising the Minimum Wage to Raise Retirement Income

    An increased minimum wage is an essential part of increasing income.
    Earlier this year, Senate Republicans countered the proposal for a $15
    per hour wage with a $10 wage. This would return the current wage to
    the purchasing power it had at the last increase. Let us join hands and
    make this change now and with no phase-in period. From this point
    forward, the wage must be automatically indexed for inflation.

    When this is done, the benefits of current retirees should be adjusted
    accordingly. An additional Cost of Living Adjustment is necessary as
    well. Food prices have gone through the roof and current retirees are
    suffering. We cannot wait for an end of the year price adjustment.

    Over and above inflation, the minimum wage should reflect increased
    labor productivity. To get to parity with where wages and productivity
    diverged, a $12 per hour wage is necessary. Another way to reward
    workers (and retirees) for productivity gains is to shorten the
    workweek to 32 hours (with 26 hours being considered full time for the
    purpose of benefits). In this case, the wage could be set to $11 per
    hour.

    Would these changes cost jobs? Hardly. Low wage workers are sent home
    when workload is low and required to stay (or not call in) when
    workload is high. Their work is supplemented by work by higher wage
    workers in high demand situations, regardless of how much more these
    workers are paid. Unlike salaried workers, low wage workers are never
    allowed to sit or stand around doing nothing. Lower wages would not
    change this.

    A statutory wage increase means that employers who do the right thing
    and pay a higher wage are not put at a competitive disadvantage to
    those without scruples. This is the logic behind increasing the child
    tax credit. Without such a credit, workers with children would either
    not be welcome or would, as now, suffer hunger while working.

    Higher wages, ideally $18 an hour ($15 was so 2000s), would be
    accompanied by alternative educational opportunities (with pay) so that
    workers who are less productive would be paid the same wage to increase
    both literacy and job skills.

                                     ______

                                Church Alliance

                               1601 K Street, NW

                              Washington, DC 20006

                               Tel (202) 778-9000

                               Fax (202) 778-9100

    July 28, 2021

    The Honorable Ron Wyden             The Honorable Mike Crapo
    Chairman                            Ranking Member
    U.S. Senate                         U.S. Senate
    Committee on Finance                Committee on Finance
    219 Dirksen Senate Office Building  219 Dirksen Senate Office Building
    Washington, DC 20510                Washington, DC 20510

    Dear Chairman Wyden and Ranking Member Crapo:

        The Church Alliance is pleased to submit the following statement
    for the record ahead of the Senate Committee on Finance's July 28, 2021
    hearing on Building on Bipartisan Retirement Legislation: How Can
    Congress Help? We greatly appreciate the Committee's work over many
    years on bipartisan retirement reform. Building on passage of the
    Setting Every Community Up for Retirement Enhancement (SECURE) Act, we
    are looking forward to consideration and passage of the next iteration
    of retirement reform legislation. As the Committee considers retirement
    reform, the Church Alliance is pleased to serve as a resource on issues
    impacting the church benefits community.

    ABOUT THE CHURCH ALLIANCE

        The Church Alliance is an organization composed of thirty-seven
    church benefit boards, covering mainline and evangelical Protestant
    denominations, several Jewish entities, and Catholic schools and
    institutions. The boards provide employee benefit plans, including
    retirement and/or health coverage, to approximately one million
    participants (clergy and lay workers) serving over 155,000 churches,
    parishes, synagogues and church-associated organizations. The Church
    Alliance is dedicated to ensuring that clergy and lay church workers
    can enjoy retirement security following years of dedicated service and
    appreciate your ongoing efforts to strengthen our country's retirement
    system.

    RETIREMENT SECURITY & SAVINGS ACT (S. 1770)

        As the Committee considers different approaches to retirement
    reform, the Church Alliance would like to express our appreciation for
    the introduction of the Retirement Security & Savings Act (S. 1770) by
    Senators Ben Cardin and Rob Portman. This legislation, which builds
    upon the important reforms included in the SECURE Act, touches on two
    issues of particular importance to the Church Alliance.

        The Church Alliance appreciates inclusion of Section 502, a
    provision to expand the IRA charitable distribution provision to
    include distributions from certain qualified retirement plans. During
    this time of increased need, allowing individuals to make charitable
    distributions from qualified retirement plans would enable them to
    continue to build on a lifetime of service by making charitable
    distributions to organizations playing a critical role in our
    communities.

        Additionally, the Church Alliance supports the inclusion of Section
    503, which would allow surviving spouses to use the same methodology
    for calculating their required minimum distributions (RMDs) if they
    elect to remain in their deceased spouses' employer plans than if they
    had rolled over those plan assets to an IRA. Allowing a surviving
    spouse to remain in his or her spouse's retirement plan, with the
    Uniform Table being applied to calculate his or her RMD, would equalize
    RMD calculations between employer plans and traditional IRAs. This
    would create flexibility for the surviving spouse, eliminating the
    burden now imposed when he or she remains in the deceased spouse's
    employer plan. In the church plan context, allowing employer defined
    contribution plans to use the same methodology for calculating RMDs as
    is allowed for IRAs would level the playing field. This would result in
    surviving spouses having the freedom to stay in a retirement plan
    aligned with their needs, values, and culture. Church retirement plans
    often provide strong, customized customer support and low fees. Church
    plans also often provide a bundled suite of benefits, including health
    coverage with robust mental health benefits, which can provide
    important support and comfort during a challenging time. This provision
    helps ensure that a grieving spouse continues to have access to the
    robust benefits they enjoy in their church plan without having to make
    a sudden change during this difficult time.

        It is worth noting that these two provisions were not included in
    the Securing a Strong Retirement Act (H.R. 2954). We would greatly
    appreciate inclusion of these provisions in any potential compromise
    retirement reform legislation.

        The Church Alliance also appreciates inclusion of provisions to
    allow nonspousal beneficiaries to roll assets into retirement plans (in
    particular 403(b) plans), and allow employers to provide matching
    contributions to retirement plans for employees making student loan
    payments. The streamlined language included in Section 108 with respect
    to increasing the RMD age is also beneficial--numerous changes to the
    RMD can create administrative burdens on plans and potentially confuse
    plan participants; this streamlined approach will be much simpler and
    clearer to implement. We also appreciate changes previously made to
    language providing an exemption from RMDs for individuals with less
    than $100,000 in aggregate retirement savings, which help relieve
    potential administrative burdens (Section 316). All of these provisions
    contribute to improving the financial security of our retirees and,
    importantly, encourage them to save for retirement.

        Finally, the Church Alliance appreciates efforts to make
    improvements to and strengthen the Saver's Credit. We applaud Chairman
    Wyden's work on this important tax credit, as well as the inclusion of
    improvements to the Saver's Credit in S. 1770.

    CONCLUSION

        On behalf of the Church Alliance, thank you for your ongoing
    leadership on these important issues. We applaud your bipartisan
    efforts on retirement reform, and are happy to serve as a resource for
    the Committee on these and other issues impacting church benefits
    plans.

                Sincerely,

                James F. Sanft
                Chair
    Chair:                              Secretary:
    Mr. James F. Sanft *                Ann T. Stillman
    Concordia Plan Services of          Concordia Plan Services of
    The Lutheran Church--Missouri Synod The Lutheran Church-Missouri Synod
    1333 S. Kirkwood Road
    St. Louis, MO 63122
    (314) 885-6701

    Treasurer:                          Vice Chair:
    Robert A. Bouche                    Rev. Jeffrey Thiemann *
    Concordia Plan Services of          Evangelical Lutheran Church in
                                        America
    The Lutheran Church--Missouri Synod 800 Marquette Ave., Suite 1050
                                        Minneapolis, MN 55402
                                        (612) 752-4051

    Members:

    Rev. Dr. Todd Adams                 Mr. Louis Barbarin *
    Christian Church (Disciples of
    Christ)                             American Baptist Churches

    Mr. Brian Bodager *                 Ms. Barbara A. Boigegrain *
    United Church of Christ             United Methodist Church

    Mr. John H. Bolt                    Mr. John Brummitt
    Christian Reformed Church in North
    America                             National Association of Free Will
                                        Baptists

    Mr. Scott Dolfi *                   Mr. Mark Dowley
    Young Men's Christian Association   Free Methodist Church of North
                                        America

    Mr. Nevin Dulabaum                  Dr. Craig A. Dunn
    Church of the Brethren              Wesleyan Church

    Mr. Ed Dunnington                   Mr. Curtis Farmer
    Presbyterian Church in America      Christian and Missionary Alliance

    Mr. Rob Fox                         Mr. Bart J. Francescone
    CBF Church Benefits                 Evangelical Presbyterian Church

    Mr. Kevin Gilmore                   Dr. O. S. Hawkins *
    Church of the Nazarene              Southern Baptist Convention

    Mr. Ken Hochstetler                 Mr. Reggie Hundley
    Mennonite Church                    Christian Churches Pension Plan

    Mr. Michael Kimmel                  Mr. Steve Klimkowski
    Reform Pension Board                Evangelical Covenant Church

    Rev. Richard Nugent                 Rev. Jim M. O'Bold
    Unitarian Universalist Association  Board of Pensions of the Church of
                                        God (IN)

    Ms. Kelly Oliveira                  Mr. Joshua Peterman
    Reformed Church in America          Wisconsin Evangelical Lutheran
                                        Synod

    Mr. Jonathan Phillips               Br. Michael F. Quirk, FSC *
    International Church of the
    Foursquare Gospel                   Christian Brothers Services

    Mr. Arthur D. Rhodes                Mr. Edwin G. Romero
    Church of God Benefits Board (TN)   General Conference of Seventh-Day
                                        Adventists

    Ms. Rachel Roth                     Mr. Mitchell J. Smilowitz *
    American Conference of Cantors      Joint Retirement Board for
                                        Conservative Judaism

    Rev. Frank C. Spencer *             Rev. Ric Stanghelle
    Presbyterian Church (U.S.A.) Board
    of Pensions                         Evangelical Free Church of America

    Rev. Bernard E. Tanis               Mr. James P. Thomas
    Converge/Baptist General Conference Churches of God, General Conference

    Ms. Mary Kate Wold *
    Church Pension Group/Episcopal
    Church

        * Steering Committee Members.

                                     ______

                  Statement Submitted by James Webster Coates
    I am a citizen of the United States of America, duly registered to vote
    in the 3rd Congressional District of Pennsylvania. I live in Japan,
    where I moved in May 2001, immediately after graduating from college. I
    have lived and worked in Japan for my entire adult life, and am married
    to a Japanese citizen, with whom I have two young sons.

    While I am proud to be an American and enjoy visiting the United States
    once a year to see family and friends, I have made my life in Japan and
    this is my permanent home. Since my employment income is generated in
    Japan and denominated in Yen, as are all of my living expenses, I need
    to organize my financial and retirement planning in Japan. I am, of
    course, a tax resident in Japan, where I am subject to full taxation at
    rates of up to 55% on my worldwide income.

    The problem I have is that the U.S. tax laws make it very difficult for
    me to live the same kind of life that my friends and neighbors live.
    You see, they are subject only to the Japanese tax system and can
    organize their finances appropriately. As a U.S. citizen, I am subject
    to the tax system here in Japan and the U.S. tax system. Those systems
    are not compatible. Most attempts at responsible financial/
    retirement planning here in Japan are frustrated by the need to comply
    with U.S. tax laws.

    The issues resulting from the U.S. system of citizenship-based taxation
    are particularly problematic when saving and planning for retirement.
    Congress should address issues such as the following in order to
    eliminate double taxation and unnecessary reporting complexity, and to
    facilitate effective retirement planning by U.S. citizens who reside
    overseas:

          Many investment products in our home countries are categorized
    as a ``Passive Foreign Investment Company'' (PFIC), which results in
    punitive taxation on ``excess distributions,'' which does not apply to
    the equivalent U.S.-based financial product. As a result of this highly
    discriminatory rule, U.S. citizens residing outside the United States
    are effectively prohibited from investing in common investment vehicles
    such as mutual funds, ETFs, and certain types of pension or annuity
    products. Meanwhile, we cannot open accounts or purchase investment
    products in the United States since we do not have a U.S. address.
    Congress should provide an exception to PFIC treatment for non-resident
    U.S. citizens so that we can responsibly invest for our future.

          Furthermore, there are complex disclosures required for all
    types of non-U.S. financial products. These things aren't ``foreign''
    to me. They are necessities to protect my family and responsibly
    prepare for retirement. Again, the equivalent financial products in the
    U.S. are not subject to these requirements. U.S. domestic investment
    products are easy to report to the IRS. Those of us living abroad are
    punished by tax rules which don't fit our financial lives. All IRS
    reporting requirements including Form 3520 (``Annual Return to Report
    Transactions with Foreign Trusts and Receipt of Certain Foreign
    Gifts''), Form 3520A (``Annual Information Return of Foreign Trust with
    a U.S. Owner''), Form 8621 (``Information Return by a Shareholder of a
    Passive Foreign Investment Company or Qualified Electing Fund''), Form
    8938 (``Statement of Foreign Financial Assets''), and Financial Crimes
    Enforcement Network Form 114 (``Report of Foreign Bank and Financial
    Accounts'') should be modified to eliminate reporting requirements for
    accounts held by individuals in their country of residence.

          Bilateral tax treaties are intended to prevent double taxation.
    Indeed, the full name of the U.S.--Japan treaty is the ``Convention
    between the Government of the United States of America and the
    Government of Japan for the Avoidance of Double Taxation.'' However,
    this is unbelievable, but the United States inserted a provision in
    Article 4 Paragraph 3 of the treaty (the so-called ``savings clause''),
    which reserves the right of the United States to tax its citizens based
    on citizenship, effectively overriding the other provisions of the
    treaty which would otherwise provide some margin of relief for U.S.
    citizens. For example, Articles 17 and 18 of the U.S.--Japan treaty
    state that pension distributions are to be taxed based on residency,
    but that does not apply to U.S. citizens, so I will pay double tax once
    I retire and begin to draw a pension. All bilateral tax treaties should
    be updated with the latest provisions related to foreign pension plans
    of U.S. participants, which are included in the 2016 United States
    Model Income Tax Convention.

          The Foreign Earned Income Exclusion should be redefined to
    include already-taxed retirement income, and foreign government social
    welfare payments such as indigent pension, aged pension, unemployment,
    disability pension, child care, parental leave, pandemic support, etc.

          The Windfall Elimination Provision should be repealed so that
    people who have worked in both the United States and another country
    can receive the pension benefits which would otherwise be due to them.

    I do not live ``offshore.'' I do live in Japan, where I am responsible
    for paying tax on my worldwide income at rates of up to 55%. Yet,
    because I am a U.S. citizen, I am subject to the U.S. extraterritorial
    tax regime, which means the United States imposes taxation on my non-
    U.S. income even though I am already fully taxed on that income in my
    country of residence, and I do not live in the United States. There is
    no other advanced country in the world that imposes such
    extraterritorial taxation.

    The U.S. extraterritorial tax regime makes it difficult for me to save,
    invest, participate in pension plans and generally behave in a
    financially responsible way. This is because all of these essential
    activities are taking place in my country of residence and not in the
    United States. My retirement investments are foreign to the United
    States, but local to me. As a tax resident of both the United States
    and my country of residence, I get the worst of both tax systems.

    This is extremely unjust. For many years, Americans abroad have been
    attempting to get both Treasury and Congress to address these issues.

    It is time for the United States to stop extraterritorial taxation of
    non-resident citizens. The best solution to this problem is for the US
    to come into alignment with every other developed nation on the planet
    and move to a residence-based taxation system for individuals. The
    definition of ``individual'' in Treasury Regulation, 26 Section 1.1-1
    should be modified to include only ``residents.'' U.S. citizens who are
    tax residents of other countries would continue to be liable to pay
    U.S. Federal Income Tax on any income which is effectively connected
    with the United States, as all non-resident aliens do, by using Form
    1040-NR instead of Form 1040.

    Thank you for reading my entire statement.

    James Webster Coates
    Tokyo, Japan

                                     ______

                         Committee of Annuity Insurers

                    1455 Pennsylvania Avenue, NW, Suite 1200

                              Washington, DC 20004

                                 (202) 347-2230

                            www.annuity-insurers.org

    May 19, 2021

    The Honorable Ben Cardin            The Honorable Rob Portman
    509 Hart Senate Office Building     448 Russell Senate Office Building
    Washington, DC 20510                Washington, DC 20510

        Re: The Committee of Annuity Insurers Supports the Retirement
    Security and Savings Act of 2021

    Dear Senator Cardin and Senator Portman:

        On behalf of the Committee of Annuity Insurers (CAI), we want to
    express our strong endorsement of The Retirement Security and Savings
    Act of 2021 (RSSA). The CAI greatly appreciates your leadership on
    modernizing and improving retirement plans, especially your focus on
    increasing access to guaranteed lifetime income solutions for middle-
    class Americans.

        The CAI is a coalition of life insurance companies formed in 1981
    to participate in the development of federal policy with respect to
    annuities. The CAI's 31 member companies represent approximately 80% of
    the annuity business in the United States and are among the largest
    issuers of annuity contracts to employer-sponsored retirement plans. A
    list of member companies is attached.

        The RSSA has great potential to significantly improve retirement
    security for middle-class Americans, particularly by increasing their
    access to guaranteed lifetime income. From the CAI's perspective, the
    provisions of the bill that would remove barriers for life annuities
    under the required minimum distribution rules, enact important reforms
    for qualifying longevity annuity contracts, and clarify the
    substantially equal periodic payment rules for annuities are
    particularly important. These changes have been long sought by the CAI,
    and we truly appreciate your great work in bringing them one step
    closer.

        We greatly appreciate your continued focus on retirement security
    and look forward to working together to ensure that all Americans have
    access to lifetime income solutions through their retirement plans and
    IRAs.

                Counsel to the Committee of Annuity Insurers

    Bryan W. Keene                      Mark E. Griffin
    Partner, Davis and Harman LLP       Partner, Davis and Harman LLP
    bwkeene@davis-harman.com            megriffin@davis-harman.com

                       The Committee of Annuity Insurers

    AIG Life and Retirement, Los Angeles, CA
    Allianz Life Insurance Company, Minneapolis, MN
    Allstate Financial, Northbrook, IL
    Ameriprise Financial, Minneapolis, MN
    Athene USA, Des Moines, IA
    Brighthouse Financial, Inc., Charlotte, NC
    Equitable, New York, NY
    Fidelity Investments Life Insurance Company, Boston, MA
    Genworth Financial, Richmond, VA
    Global Atlantic Financial Group, Southborough, MA
    Great American Life Insurance Co., Cincinnati, OH
    Guardian Insurance & Annuity Co., Inc., New York, NY
    Jackson National Life Insurance Company, Lansing, MI
    John Hancock Life Insurance Company, Boston, MA
    Lincoln Financial Group, Fort Wayne, IN
    Massachusetts Mutual Life Insurance Company, Springfield, MA
    Metropolitan Life Insurance Company, New York, NY
    Nationwide Life Insurance Companies, Columbus, OH
    New York Life Insurance Company, New York, NY
    Northwestern Mutual Life Insurance Company, Milwaukee, WI
    Ohio National Financial Services, Cincinnati, OH
    Pacific Life Insurance Company, Newport Beach, CA
     Protective Life Insurance Company, Birmingham, AL
    Prudential Insurance Company of America, Newark, NJ
    Sammons Financial Group, Chicago, IL
    Security Benefit Life Insurance Company, Topeka, KS
    Symetra Financial, Bellevue, WA
    Talcott Resolution, Windsor, CT
    Thrivent, Minneapolis, MN
    TIAA, New York, NY
    USAA Life Insurance Company, San Antonio, TX

    The Committee of Annuity Insurers was formed in 1981 to participate in
    the development of federal policies with respect to annuities. The
    member companies of the Committee represent approximately 80% of the
    annuity business in the United States.

                                     ______

                Employee-Owned S Corporations of America (ESCA)

                          1341 G Street, NW, Suite 600

                              Washington, DC 20005

                Statement of Noelle Montano, Executive Director

    Thank you, Chairman Wyden, Ranking Member Crapo, and members of the
    Committee, for holding this hearing to continue your consideration of
    legislative solutions to address ongoing challenges to American
    retirement security. The Employee-Owned S Corporations of America
    (ESCA) applauds your longstanding leadership in promoting bipartisan
    policies to encourage retirement savings. ESCA appreciates the
    opportunity to submit comments about the important role that private
    employee ownership plays in providing retirement security for hundreds
    of thousands of American workers.

    ESCA is the national voice for employee-owned S corporations, and its
    exclusive mission is to preserve and protect employee-owned S
    corporations and the benefits provided to their employee-owners. Most S
    corporation ESOPS are 100-percent owned by their employees. Our S ESOP
    companies engage in a broad spectrum of business activities, many of
    which were on the front lines of the response to the pandemic from
    health care to manufacturing tubing for ventilators to playing critical
    supporting roles such as retail grocery stores and other essential
    functions to America's infrastructure. There are almost 3,000 S ESOPs
    in the U.S. which account for $92 billion in direct output to the
    nation's economy. (Economic Growth Through Employee Ownership Study)

    It was 25 years ago that Congress passed legislation creating S ESOPs
    with the goal of encouraging employee ownership of private industry,
    enabling workers to benefit from their labor, and creating a path for
    building meaningful retirement savings. We have appreciated your
    comments over the years that private ESOPs are a successful model for
    growing jobs and providing workers with retirement savings and that we
    should do more to grow this model, and know that you are well aware
    that a large bipartisan majority of the Members of the Senate Finance
    Committee are strong supporters of private employee ownership.

    Your enthusiasm and others' for S corporation ESOPs, we believe, is
    attributable to the fact that the evidence is compelling that expanding
    the availability of S corporation ESOPs for more companies and their
    workers would not only boost the retirement savings of countless
    working Americans, but would also create more jobs, generate more
    economic activity, and encourage the formation of businesses that are
    more stable and successful because they provide their employees with
    the kind of built- in incentives conducive to loyalty and productivity.

    That is why your Finance Committee colleagues Senators Cardin and
    Portman (along with the following original sponsors from the Senate
    Finance Committee: Crapo, Stabenow, Cantwell, Daines, Brown,
    Whitehouse, Hassan, and Casey) again introduced legislation at the
    start of the 117th Congress, the Promotion and Expansion of Private
    Employee Ownership Act (S. 1300) that will:

          Encourage owners of S corporations to sell their stock to an
    ESOP
          Provide additional technical assistance for companies that may
    be interested in forming an S corporation ESOP
          Ensure small businesses that become ESOPs retain their SBA
    certification
          Acknowledge the importance of preserving the S corporation ESOP
    structure in the Internal Revenue Code

    This measure was mentioned in the 2015 submission of the Committee's
    Savings and Investment Working Group, chaired by Senators Brown and
    Crapo, for its bipartisan support and the benefits it offers to
    encourage more employee ownership.

    The bill currently has 30 bipartisan cosponsors and would provide
    incentives to owners of S corporations to sell their stock to an ESOP,
    an incentive that currently exists only for owners of C corporations.
    Section 1042 of the Tax Code allows a C corporation owner to defer the
    recognition of gains when the owner sells shares to an ESOP. Extending
    parity to S corporation owners is the most significant legislative
    action that Congress could take to encourage S corporation owners to
    choose an ESOP when they consider how to transition their business from
    their current ownership.

    This provision was also included in the Retirement Security and Savings
    Act (S. 1770) introduced by Senators Cardin and Portman in May. ESCA
    appreciates this incentive for employee ownership being included in
    this comprehensive bipartisan approach to retirement security. While
    you have seen firsthand from your visits to
    employee-owned companies in Oregon and Idaho, many studies, by renowned
    economists from across the ideological spectrum, illustrate how S ESOPs
    are powerful for workers as a retirement savings and economic security
    tool, and how they have contributed to communities and the national
    economy. A few key points from the most recent studies:

    New Survey by John Zogby Strategies

    A new John Zogby Strategies survey--in partnership with ESCA--of mid-
    and lower-level employees at employee-owned private companies tells an
    encouraging story about the financial stability of S ESOP employees
    during the COVID-19 pandemic. Survey results found that employee owners
    reported significantly less financial adversity, more stable jobs,
    better housing security and consistent retirement savings than non-ESOP
    employees.

    In the midst of a public health emergency that triggered a massive
    unemployment event, non-ESOP employees reported experiencing:

          Six times the rate of job losses or downsizing of employee
    owners;
          Financial insecurity at more than three times the rate of
    employee owners;
          Inability to pay down debt at more than twice the rate of
    employee owners.

    Despite the pandemic economic downturn, twice as many ESOP workers as
    employees at non-ESOP companies expect to retire by the age of 60.

    These findings confirm what employee owners have known to be true for
    decades, building on research that shows working for a private ESOP
    company better equips American workers to weather periods of economic
    uncertainty. Zogby Strategies notes in their findings that this data
    should compel policymakers to make the ESOP structure an option ``for
    as many working Americans as possible,'' giving more workers the
    opportunity to gain financial independence and build retirement savings
    through future public health and economic crises.

    New Jared Bernstein Study

    In January, ESCA released a study by Jared Bernstein--now serving on
    President Biden's White House Council of Economic Advisors--that looks
    at why there are not more ESOPs and considers how to address potential
    barriers to entry. His analysis found that education and awareness
    about private ESOP structures are the most frequent hurdles to ESOP
    creation and that private and governmental approaches could ``help more
    retiring business owners access the resources and information they need
    to fully consider an ESOP for their company,'' especially as those
    owners are considering retiring.

    This work follows a 2016 Jared Bernstein study showing that by
    increasing capital ownership, ESOPs reduce wealth inequality and do not
    have the effect of trading employee ownership for wages. In fact, the
    study finds that if S ESOP plans were to proliferate, the impact could
    be far more significant. Bernstein's report also found that ESOP
    companies provide more stable employment than other businesses, were
    better able to weather the Great Recession, and provide capital
    ownership, pay better wages, and, in the majority of cases, provide
    employees with an additional 401(k) or similar plan.

    Additionally, we believe that when we have data from the pandemic-
    induced recession that S ESOP companies will again prove to be a bright
    spot with their resilience and commitment to job preservation and
    creation. In a 2010 Georgetown University/McDonough School of Business
    study, two leading tax economists reviewed the performance of a cross-
    section of S corporation ESOP companies during the 2008-2009 recession
    and found that these companies performed better than other companies in
    job creation, revenue growth, and providing for workers' retirement
    security. Specifically, the study found that:

          Companies that are S corporation ESOPs are proven job creators,
    even during tough times. While overall U.S. private employment in 2008
    fell by 2.8%, employment in surveyed S ESOP companies rose by 1.9%.
    Meanwhile, 2008 wages per worker in surveyed S ESOP companies rose by
    5.9%, while overall U.S. earnings per worker grew only half that much.

          S corporation ESOP companies provided substantial and
    diversified retirement savings for their employee-owners at a time when
    most other, comparable companies did not. Despite the difficult
    economic climate, surveyed S-ESOP companies increased contributions to
    retirement benefits for employees by 18.6%, while other U.S. companies
    increased their contributions to employee retirement accounts by only
    2.8%, or one-sixth that amount.

    Quite simply, more S ESOPs means more worker savings, wealth and wage
    equality, job stability and national economic benefit. We look forward
    to continuing to work with Finance Committee members to advance
    policies to encourage more private, employee ownership so that more
    workers can benefit from the American Dream at Work. Thank you for your
    continued consideration and your support for S ESOPs and the employees
    who own them.

                                     ______

                          Financial Services Institute

                     1201 Pennsylvania Ave., NW, Suite 700

                              Washington, DC 20004

                                  888 373-1840

                         https://financialservices.org/

    The Financial Services Institute (FSI) represents independent broker-
    dealers (IBD) and the independent financial advisors affiliated with
    them. We are pleased that the Committee is holding this hearing to
    explore the issues facing Main Street Americans saving for retirement,
    particularly given that the COVID-19 pandemic has only worsened the
    country's existing retirement savings crisis. We support Congressional
    efforts to help more Americans save for a secure and dignified
    retirement, particularly those that provide private sector solutions to
    ensure that retirement savers have access to personalized investment
    advice.

    Specifically, we wish to register our support for several pieces of
    legislation: the Securing a Strong Retirement Act (H.R. 2954), the
    Retirement Security and Savings Act (S. 1770), the Encouraging
    Americans to Save Act (S. 2452), and the Improving Access to Retirement
    Savings Act (S. 1703). The changes contained in these bills would not
    only make retirement saving more streamlined and accessible for
    investors, they would also increase the flexibility that financial
    professionals have to help their clients save for a financially secure
    retirement. We are encouraged that Congress has taken a bipartisan
    approach to moving these crucial pieces of legislation forward.

    While these bills differ in some respects, they all seek address areas
    that are key to improving the retirement system. In particular, FSI
    believes that Congress should include the following in retirement
    security legislation: expanding access to retirement savings plans;
    encouraging workers to begin saving for retirement earlier through
    automatic enrollment; helping small businesses offer retirement plans
    to their employees; and allowing individuals to save for retirement
    longer.

    Further, FSI Members believe that all investors should have access to
    competent and affordable financial advice, products, and services.
    Sadly, too many Americans do not have access to such advice to help
    them save for a dignified retirement. Research shows that investors who
    work with a financial advisor are better prepared for their retirement,
    better understand the costs that may arise in retirement and how to
    save for them and feel more confident in their ability to be successful
    in retirement.\1\ S. 1770 would provide a tax deduction for financial
    advice by allowing employees to use pre-tax dollars through employer-
    based retirement programs to pay for retirement related financial
    planning services. This provision will encourage retirement savers to
    seek advice from financial professionals, which is even more important
    in these turbulent economic times. Many investors, including those
    nearing retirement, are watching their hard-earned savings fluctuate
    with the turbulent stock market. Financial advisors can help investors
    avoid common errors in response--such as buying high and selling low or
    losing sight of their long-term financial plan--to ensure that their
    retirement savings are secure.
    ---------------------------------------------------------------------------
        \1\ The Insured Retirement Institute, The State of Retirement
    Security in America Today--2019 Boomer Expectations for Retirement
    Study, available at: https://www.myirionline.org/docs/default-source/
    default-document-library/
    iri_babyboomers_whitepaper_2019_final.pdf?sfvrsn=0; Claude
    Montmarquette, Nathalie Viennot-Briot, Centre for Interuniversity
    Research and Analysis on Organizations (CIRANO), The Gamma Factor and
    the Value of Advice of a Financial Advisor, available at https://
    www.cirano.qc.ca/files/publications/2016s-35.pdf.

    We urge Congress to build on the success of 2019's SECURE Act to
    further strengthen Americans' access to retirement savings vehicles and
    planning services. We thank the Committee for holding this hearing and
    for the work it is doing to address these issues. We are ready to serve
    as a resource in your efforts to help Main Street Americans save for
    their retirement. Should you have any questions or would like more
    information on FSI and our position on this important issue, please
    contact our Director of Legislative Affairs, Hanna Laver, at (202) 499-
    7224.

                           Background on FSI Members

    The independent financial services community has been an important and
    active part of the lives of American investors for more than 40 years.
    In the U.S., there are more than 160,000 independent financial
    advisors, which account for approximately 52.7 percent of all producing
    registered representatives.\2\ These financial advisors are self-
    employed independent contractors, rather than employees of the
    Independent Broker-Dealers (IBD).\3\
    ---------------------------------------------------------------------------
        \2\ Cerulli Associates, Advisor Headcount 2016, on file with
    author.
        \3\ The use of the term ``financial advisor'' or ``advisor'' in
    this letter is a reference to an individual who is a dually registered
    representative of a broker-dealer and an investment adviser
    representative of a registered investment adviser firm. The use of the
    term ``investment adviser'' or ``adviser'' in this letter is a
    reference to a firm or individual registered with the SEC or state
    securities division as an investment adviser.

    FSI's IBD member firms provide business support to independent
    financial advisors in addition to supervising their business practices
    and arranging for the execution and clearing of customer transactions.
    Independent financial advisors are small-business owners and job
    creators with strong ties to their communities. These financial
    advisors provide comprehensive and affordable financial services that
    help millions of individuals, families, small businesses, associations,
    organizations, and retirement plans. Their services include financial
    education, planning, implementation, and investment monitoring. Due to
    their unique business model, FSI member firms and their affiliated
    financial advisors are especially well positioned to provide Main
    Street Americans with the affordable financial advice, products, and
    ---------------------------------------------------------------------------
    services necessary to achieve their investment goals.

    FSI members make substantial contributions to our nation's economy.
    According to Oxford Economics, FSI members nationwide generate $48.3
    billion of economic activity. This activity, in turn, supports 482,100
    jobs including direct employees, those employed in the FSI supply
    chain, and those supported in the broader economy. In addition, FSI
    members contribute nearly $6.8 billion annually to federal, state, and
    local government taxes. FSI members account for approximately 8.4% of
    the total financial services industry contribution to U.S. economic
    activity.\4\
    ---------------------------------------------------------------------------
        \4\ Oxford Economics for the Financial Services Institute, The
    Economic Impact of FSI's Members (2016).

                                     ______

                      Statement Submitted by Erik C. Gould
    As Congress considers what additional improvements that can be made to
    retirement programs (in effect, a SECURE Act II), I would urge it to be
    fair to existing IRA participants, and to not further disadvantage them
    like it did with the original SECURE Act.

    Pre-SECURE Act ROTH IRA holders accelerated the payment of taxes on
    ROTH contribution/conversion IRA dollars, (risking a result in which
    they will have already paid taxes on gains that might be later lost,
    with no tax deduction for such losses), precisely in exchange for
    having their IRA investment be able to grow tax-free (without a cap),
    to avoid being subject to minimum distributions, and to have the
    ability to confer those benefits to chosen beneficiaries who could
    ``stretch'' those tax benefits over their statistical life
    expectancies.

    Congress, to help ``pay for'' the SECURE Act, chose to remove this
    bargained-for benefit of the ``stretch'' from the IRA rules and
    existing IRA holders. Taking away this benefit from existing ROTH IRA
    account holders amounted to a classic ``bait and switch'' by Congress,
    first inducing taxpayers to pay taxes earlier than they would have had
    to with a traditional IRA, calculated on gains they might not even
    later realize, in exchange for a benefit that was later taken away.
    This unconscionable result could have been easily avoided by
    grandfathering the retirement rules, if not for all IRAs, then at least
    for existing ROTH IRAs.

    Fundamental principles of fairness dictate that no current IRA account
    holders (and particularly, no ROTH account holders who have already
    early-paid taxes in consideration for a set of benefits), regardless of
    how well their investments may have performed, should have the rules of
    the game changed in mid-stream. This is inarguably the case regardless
    of one's notions about the ``legislative intent'' behind the original
    IRA legislation or the desirability of further enhancing the benefits
    of retirement legislation for some parties.

    Any tinkering with existing retirement laws should have as its first
    principle to ``do no harm'' to the incentive to invest for one's
    retirement or to existing IRA investors who have relied on existing
    retirement rules. The ProPublica release of the information about Peter
    Thiel's $5 billion ROTH has reignited discussion about capping amounts
    that can be held in an IRA or in what type of investment that an IRA
    may invest. Instead of viewing statistical outliers (the relatively few
    very large IRAs) as a defect or failure of the current IRA rules,
    successful IRA investors should be held out to taxpayers as an
    incentive and model for what is possible (and this in no way prevents
    an IRS investigation of whether Peter Thiel's original IRA purchases
    were properly valued in accordance with existing IRA regulations and/or
    an investigation of how Peter Thiel's information could have been
    released by the IRS to ProPublica in the first place).

    Much has been made about the ``well-heeled elite'' and their access to
    investments that the average investor supposedly can't access. While it
    is true that it takes considerably more effort, regardless of tax
    bracket, to ferret out and to participate in exceptional early-stage
    and/or non-publicly traded opportunities, it is far from impossible for
    an industrious individual of relatively average investing acumen to
    participate in these sometimes very attractive investments. I know this
    because I have helped sponsor multi-family real estate investments with
    individual investor participation the past 14 years with an overall
    annual portfolio return of better than 20%. Many of our individual
    investors would, by their own estimation, likely place themselves
    outside the ``exceptionally positioned/gifted'' investor category. The
    truth of the matter is that most anyone with a middle-class income has
    the possibility of ending up with a seven figure IRA provided they
    begin investing early in their life, are willing to spend the time
    doing diligent investment research and have a bit of luck along the way
    during a long-term investment program. There was absolutely nothing
    preventing anyone from purchasing the stock of Microsoft, Netflix,
    Facebook, Google or any of the many other phenomenally successful
    companies listed on the various public stock exchanges after their
    initial public offerings, holding those stocks in a long-term portfolio
    and having a very comfortable retirement.

    And do we really want to be telling the founder of a start-up company,
    who is making a big bet with their own resources despite long odds
    against them, but who might be the needle in the haystack that ends up
    employing thousands of people, that they aren't entitled to have their
    IRA benefit from the success of their own start-up company?

    Congress should neither reduce the incentive for people to invest for
    their retirement nor punish those diligent investors who have relied on
    and followed the existing IRA rules and diligently and successfully
    invested for their retirement, regardless of the degree of their
    success. Congress should also heed the lesson of the Alternative
    Minimum Tax which was originally passed to address the perceived abuses
    of a few fat cats but mostly ended up hurting many more modestly
    situated taxpayers instead.

    Placing new caps on the amount an IRA can grow to or adding new rules
    about the type of investments in which an IRA can invest will simply
    reduce the incentives for all to participate and would be particularly
    unfair to existing ROTH IRA holders who have already paid their taxes
    in reliance on the existing rules. Please don't again rob Peter
    (existing IRA investors) to service Paul (those who may benefit from
    any subsequent retirement legislation).

                                     ______

    Daniel Hemel,* Professor of Law, University of Chicago Law School; and
      Steven Rosenthal,* Senior Fellow, Urban-Brookings Tax Policy Center
    ---------------------------------------------------------------------------
        * The views presented here are the authors' own and should not be
    attributed to the University of Chicago, the Tax Policy Center, the
    Urban Institute, the Brookings Institution, or those organizations'
    trustees or funders.
    ---------------------------------------------------------------------------
        The Senate Finance Committee's July 28 hearing spotlighted ``mega-
    IRAs'': individual retirement accounts with balances of $5 million or
    more. An analysis by the Joint Committee on Taxation (JCT) in advance
    of the July 28 hearing found that the number of taxpayers with mega-
    IRAs now exceeds 28,000.\1\ The hearing followed a June 2021 report by
    the nonprofit investigative journalism organization ProPublica, which
    revealed--based on leaked IRS files--that a handful of high-net-worth
    individuals had accumulated massive IRA balances.\2\
    ---------------------------------------------------------------------------
        \1\ Memorandum from Thomas A. Barthold to Kara Getz, Tiffany Smith,
    and Drew Couch (July 27, 2021), https://www.finance.senate.gov/imo/
    media/doc/7.28.21%20JCT%20Mega%20IRA%
    20Data1.pdf. The JCT analysis was based on 2019 data. The number of
    mega-IRAs has likely increased since then.
        \2\ See Justin Elliott, Patricia Callahan and James Bandler, Lord
    of the Roths: How Tech Mogul Peter Thiel Turned a Retirement Account
    for the Middle Class Into a $5 Billion Tax-Free Piggy Bank, ProPublica
    (June 24, 2021), https://www.propublica.org/article/lord-of-the-roths-
    how-tech-mogul-peter-thiel-turned-a-retirement-account-for-the-middle-
    class-into-a-5-billion-dollar-tax-free-piggy-bank.

        The Senate Finance Committee hearing and the ProPublica report
    emphasized one way that taxpayers amass mega-IRAs: by ``stuffing'' an
    account with undervalued assets such as pre-IPO stock and investment-
    fund carried interests. ``Stuffing'' no doubt occurs in some instances,
    and Congress could take steps to stop it (e.g., by prohibiting IRAs
    from holding non-publicly traded assets). However, it is unlikely that
    most mega-IRAs result from abusive stuffing tactics. Individuals
    engaged in stuffing would generally want to convert their IRAs from
    traditional to Roth accounts quickly. Yet JCT's analysis found that 85
    ---------------------------------------------------------------------------
    percent of mega-IRA owners hold only traditional accounts.

        How, then, have tens of thousands of high-income individuals
    created mega-IRAs? As our submission shows, existing rules allow high-
    income taxpayers to amass mega-IRAs straightforwardly--and legally--by
    ``maxing out'' 401(k) defined contribution plans, potentially combining
    defined contribution plans with defined benefit plans, and investing in
    S&P 500 index funds or other publicly traded assets. Mega-IRAs are
    indeed a problem, but they are a problem primarily caused by laws that
    lavish excessive tax benefits on high-income individuals.

        We begin by illustrating how high-income individuals can create
    mega-IRAs through entirely legal means. Next, we review the choices
    that Congress has made over the last quarter-century that opened a wide
    door to mega-IRAs. We then explain why the JCT data and other sources
    strongly suggest that most mega-IRAs do not reflect stuffing. We
    conclude with concrete policy recommendations to stem the tide of mega-
    IRAs and other mega-retirement arrangements, which undermine the
    progressivity and revenue-raising potential of the federal income tax
    system.

    I. How To Create a Mega-IRA: An Illustration

        We begin with an example of a high-income professional (e.g., a
    law-firm partner) born in 1950 who contributes the maximum amount to a
    401(k) defined contribution plan starting in 1990. In addition, the
    individual's employer establishes a cash balance defined benefit plan
    sometime after the 1996 legislative change that lifted limits on
    combined defined contribution and defined benefit plans maintained by
    the same employer.\3\ Beginning in 2010, the individual makes
    ``backdoor'' contributions to a Roth IRA. The individual retires in
    2015 at the age of 65 and receives the maximum lump-sum distribution
    from the cash balance plan (approximately $2.5 million in 2015).\4\ She
    rolls over her 401(k) and deposits her cash balance plan distribution
    into an IRA. She invests exclusively in a portfolio tracking the S&P
    500 index total return.
    ---------------------------------------------------------------------------
        \3\ Small Business Job Protection Act of 1996, Pub. L. No. 104-188,
    Sec. 1452, 110 Stat. 1755, 1816 (repealing I.R.C. Sec. 415(e) for years
    beginning after December 31, 1999).
        \4\ The maximum lump-sum distribution from a cash balance plan is
    determined actuarially based on interest-rate and mortality
    assumptions. We use an amount ($2,452,050 for a 65-year-old in 2015)
    based on materials posted by the American Society of Pension
    Professionals and Actuaries. See Richard A. Block, Sec. 415 and
    Multiple Annuity Starting Dates (MASD) and Effects of Different
    Crediting Rates on Sec. 415 in Cash Balance Account Plans (2020),
    https://www.
    asppa.org/sites/asppa.org/files/DOCs/LA_Pension/WS19-
    %20MASD%20%26%20Effects.pdf.

        Table 1 shows how the individual's retirement savings contributions
    would have evolved over her career. The gray shading of pre-2010 IRA
    contribution amounts reflects our assumption that a high-income
    individual would not have made any IRA contributions until backdoor
    contributions to a Roth IRA became possible in 2010.\5\ The bold type
    of post-2015 amounts reflects our assumption that the individual would
    not have made any contributions after retirement.
    ---------------------------------------------------------------------------
        \5\ A high-income individual who participates in a defined benefit
    or defined contribution plan would be precluded from making
    nondeductible contributions to a traditional IRA or direct
    contributions to a Roth IRA. I.R.C. Sec. Sec. 219(g), 408A(c)(3).
    Starting in 2010, an individual at any income level could make
    nondeductible contributions to a traditional IRA and then immediately
    convert the traditional IRA to a Roth IRA. See Tax Increase Prevention
    and Reconciliation Act of 2005, Pub. L. No. 109-222, Sec. 512, 120
    Stat. 345, 365-66 (2006) (amending I.R.C. Sec. 408A for taxable years
    beginning after December 31, 2009).

            Table 1. Tax-Favored Retirement Savings Limits, 1990-2021
    ------------------------------------------------------------------------
                  401(k) Plan              IRA b
            --------------------------------------------
      Year    All Ages   Age  50               Age  50          Notes
                 a       Catchup    All Ages   Catchup
    ------------------------------------------------------------------------
    1990       $30,000                $2,000
    ------------------------------------------------------------------------
    1991       $30,000                $2,000
    ------------------------------------------------------------------------
    1992       $30,000                $2,000
    ------------------------------------------------------------------------
    1993       $30,000                $2,000
    ------------------------------------------------------------------------
    1994       $30,000                $2,000
    ------------------------------------------------------------------------
    1995       $30,000                $2,000
    ------------------------------------------------------------------------
    1996       $30,000                $2,000             Section 415(e)
                                                          limit repealed
                                                          (effective 2000)
    ------------------------------------------------------------------------
    1997       $30,000                $2,000             Roth IRAs
                                                          established
                                                          (effective 1998)
    ------------------------------------------------------------------------
    1998       $30,000                $2,000
    ------------------------------------------------------------------------
    1999       $30,000                $2,000
    ------------------------------------------------------------------------
    2000       $30,000                $2,000             Effective start of
                                                          defined benefit/
                                                          defined
                                                          contribution
                                                          combos c
    ------------------------------------------------------------------------
    2001       $35,000                $2,000             Roth 401(k) plans
                                                          established
                                                          (effective 2002)
    ------------------------------------------------------------------------
    2002       $40,000     $1,000     $3,000       $500
    ------------------------------------------------------------------------
    2003       $40,000     $2,000     $3,000       $500
    ------------------------------------------------------------------------
    2004       $41,000     $3,000     $3,000       $500
    ------------------------------------------------------------------------
    2005       $42,000     $4,000     $4,000       $500
    ------------------------------------------------------------------------
    2006       $44,000     $5,000     $4,000     $1,000  Income limits on
                                                          Roth conversions
                                                          lifted (effective
                                                          2010)
    ------------------------------------------------------------------------
    2007       $45,000     $5,000     $4,000     $1,000
    ------------------------------------------------------------------------
    2008       $46,000     $5,000     $5,000     $1,000
    ------------------------------------------------------------------------
    2009       $49,000     $5,500     $5,000     $1,000
    ------------------------------------------------------------------------
    2010       $49,000     $5,500     $5,000     $1,000  ``Backdoor'' Roth
                                                          IRAs open to high-
                                                          income individuals
    ------------------------------------------------------------------------
    2011       $49,000     $5,500     $5,000     $1,000
    ------------------------------------------------------------------------
    2012       $50,000                $5,000     $1,000
    ------------------------------------------------------------------------
    2013       $51,000                $5,500     $1,000
    ------------------------------------------------------------------------
    2014       $52,000                $5,500     $1,000
    ------------------------------------------------------------------------
    2015       $53,000     $6,000     $5,500     $1,000  $2.5 million
                                                          distribution from
                                                          cash balance
                                                          defined benefit
                                                          plan
    ------------------------------------------------------------------------
    2016 d     $53,000     $6,000     $5,500     $1,000
    ------------------------------------------------------------------------
    2017 d     $54,000     $6,000     $5,500     $1,000
    ------------------------------------------------------------------------
    2018 d     $55,000     $6,000     $5,500     $1,000
    ------------------------------------------------------------------------
    2019 d     $56,000     $6,000     $6,000     $1,000  RMD age raised from
                                                          70\1/2\ to 72
                                                          (effective 2020)
    ------------------------------------------------------------------------
    2020 d     $57,000     $6,500     $6,000     $1,000
    ------------------------------------------------------------------------
    2021 d     $58,000     $6,500     $6,000     $1,000
    ------------------------------------------------------------------------
    a Figures are for elective deferrals plus employer contributions.
    b High-income individuals generally precluded from making tax-advantaged
      contributions to IRAs until 2010.
    c Prior to the effective date of section 415(e) repeal, defined benefit/
      defined contribution combinations were technically permitted but
      subject to strict limits on benefits and contributions.
    d Illustration assumes no 401(k) or IRA contributions after 2015
      retirement.

        Figure 1 illustrates how the individual's combined IRA and 401(k)
    would have grown over the 1990-2021 period, assuming investments
    appreciate at the S&P 500 index total return rate. We show how the
    individual's balance (including investment returns) would have grown
    based on (a) 401(k) contributions alone, (b) 401(k) contributions plus
    backdoor Roth IRA contributions starting in 2010, and (c) both of the
    above plus a cash balance defined benefit plan distribution in 2015. We
    provide an online data file showing our calculations at bit.ly/megaira.

    [GRAPHIC] [TIFF OMITTED] T2821.007

        .epsIn our illustration, the individual ends up with a mega-IRA
    balance of $13.4 million as of August 2021. If she had made 401(k)
    contributions and backdoor Roth IRA contributions (without a cash
    balance defined benefit plan), the value of her IRA would be $7.5
    million. If she had made 401(k) contributions only and rolled over to
    an IRA, her IRA balance would be $7.4 million.

        Our illustration understates the amount that an individual could
    accumulate in an IRA through legal means. A higher balance would be
    feasible with the following modifications:

            More years of contributions. If our individual started
    contributing to her 401(k) in 1985 at age 35, her IRA balance as of
    2021 (including the effect of backdoor Roth contributions and a cash
    balance payout) would be $18.7 million (see online data file). If she
    had made 401(k) contributions only, the balance would be $12.7 million.
            Multiple 401(k) or cash balance plans. We assumed the
    individual contributed to only one 401(k) plan and received only one
    lump-sum distribution from a cash balance plan. An individual with
    income from employment and self-employment could potentially contribute
    a combined total of $122,500 in 2021 to an employer-sponsored 401(k)
    and a solo 401(k). An individual who switches employers could
    potentially receive a lump-sum payout from the first employer's cash
    balance plan and participate in the second employer's cash balance
    plan.
            Inheritances. We assumed the individual did not merge her IRA
    with anyone else's. Someone who inherited an IRA, such as a surviving
    spouse, could have a total balance much larger than the amount
    illustrated.\6\
    ---------------------------------------------------------------------------
        \6\ An individual who inherits an IRA from a spouse can add the
    inherited IRA to her own IRA. Under the SECURE Act of 2019, IRAs
    inherited from someone other than a spouse generally must be
    distributed over 10 years, but IRAs inherited before 2020 are exempt
    from the SECURE Act's 10-year rule. See Setting Every Community Up for
    Retirement Enhancement Act of 2019, Pub. L. No. 116-94, Sec. 401, 133
    Stat. 2534, 3176.
    ---------------------------------------------------------------------------
            Higher rate of return on investments. Although the S&P 500
    generated an impressive 10.6 percent annualized return from 1990 to
    August 2021 (assuming reinvestment of dividends), some 401(k) plan
    participants and IRA owners have likely outperformed the index without
    stuffing nonpublic assets into their accounts. For example, Berkshire
    Hathaway executive Ted Weschler--who reportedly had $264.4 million in
    his IRA at the end of 2018 \7\--states that he has ``invested the
    account in only publicly-traded securities.''\8\
    ---------------------------------------------------------------------------
        \7\ See Elliott, Callahan and Bandler, supra note 2.
        \8\ Statement from Ted Weschler to ProPublica (June 2021), https://
    www.documentcloud.org/documents/20971124-ted-weschler-statement.
    ---------------------------------------------------------------------------

    II. How We Got Here

        If pre-1996 laws had remained in effect, the individual in our
    illustration could have contributed the $30,000 maximum to her 401(k)
    plan each year until retirement in 2015. She could not have taken
    advantage of a backdoor Roth IRA, and she could not have participated
    in a cash balance defined benefit plan without running into the former
    section 415(e) limits. Her IRA balance in August 2021 would be
    approximately $6.1 million (see online data file), and she would need
    to begin taking RMDs this year.

        More than half of the $13.4 million balance in our illustration
    ($7.3 million, or 54 percent) is attributable to legislative changes
    starting in 1996. We summarize the most significant changes in Table 2.
    We include, with gray shading in the last row, the Securing a Strong
    Retirement Act of 2021, or ``SECURE Act 2.0,'' which was reported out
    of the House Ways and Means Committee on May 5, 2021.\9\ If the SECURE
    Act 2.0 becomes law, high-income individuals will be able to make even
    larger contributions to 401(k) plans before age 65, and owners of mega-
    traditional IRAs would be able to delay RMDs for even longer.
    ---------------------------------------------------------------------------
        \9\ Securing a Strong Retirement Act of 2021, H.R. 2954, 117th
    Cong., 1st Sess. (2021).

     Table 2. Legislative Changes Since 1996 That Have Facilitated the Rise
                                  of Mega-IRAs
    ------------------------------------------------------------------------
     Year          Legislation                        Effects
    ------------------------------------------------------------------------
      1996  Small Business Jobs       Repealed section 415(e), which had
             Protection Act of 1996    limited the amount that individuals
                                       could save through defined
                                       contribution and defined benefit
                                       plans with the same employer
    ------------------------------------------------------------------------
      1997  Taxpayer Relief Act       Established Roth IRAs with no required
                                       minimum distributions (RMDs)
    ------------------------------------------------------------------------
      2001  Economic Growth and Tax   Raised IRA and 401(k) contribution
             Relief Reconciliation     limits; added catchup contributions;
             Act of 2001 (EGTRRA)      raised maximum allowable benefit
                                       under defined benefit plans;
                                       established Roth 401(k)s
                                      Note: Changes scheduled to sunset
                                       after 2010
    ------------------------------------------------------------------------
      2006  Tax Increase Prevention   Lifted income limits on traditional-to-
             and Reconciliation Act    Roth conversions; opened the door to
             of 2005                   backdoor Roth IRA contributions
    ------------------------------------------------------------------------
      2006  Pension Protection Act    Made key provisions of EGTRRA
             of 2006                   permanent; removed several remaining
                                       barriers to cash balance defined
                                       benefit plans
    ------------------------------------------------------------------------
      2019  SECURE Act of 2019        Raised RMD age for traditional
                                       accounts and Roth 401(k) plans from
                                       70\1/2\ to 72; repealed age cap on
                                       contributions to traditional IRAs
                                       (thereby allowing high-income
                                       individuals  age 70\1/2\ to use
                                       backdoor Roths)
    ------------------------------------------------------------------------
     2021?  SECURE Act 2.0            Would raise RMD age to 75; increase
            Reported out of House      catchup contributions to $10,000 for
             Ways & Means Committee    401(k) participants ages 62-64; and
             on May 5                  allow employees to elect Roth
                                       treatment for employer contributions
                                       to 401(k) plans
    ------------------------------------------------------------------------

        These changes primarily benefited the rich. As Figure 2
    illustrates, households in the top decile by net worth have increased
    their average retirement account balances by vastly more than the rest
    of the population over the past three decades.

    [GRAPHIC] [TIFF OMITTED] T2821.008

        .epsStuffing. Importantly, ``stuffing'' plays no part in our
    illustration. ``Stuffing'' occurs when an individual uses an IRA to
    acquire non-publicly traded assets at prices below fair market value.
    The ProPublica report indicates that tech entrepreneur Peter Thiel
    started on the path to his mega-IRA by purchasing pre-IPO shares of
    PayPal at a very low price. An October 2014 report by the Government
    Accountability Office suggested that private equity funds and hedge
    funds were allowing key employees to use their Roth IRAs to purchase
    profits interests (commonly known as ``carried interests'') at
    potentially abusive valuations.\10\ The GAO report concluded that
    strategies involving non-publicly traded assets are ``likely'' the
    cause of mega-IRAs.\11\
    ---------------------------------------------------------------------------
        \10\ U.S. Government Accountability Office, GAO-15-16, Individual
    Retirement Accounts: IRS Could Bolster Enforcement on Multimillion
    Dollar Accounts, but More Direction from Congress Is Needed, 32-36
    (October 2014).
        \11\ Id. at 26. The GAO report said that it was ``improbable'' that
    an individual could accumulate an account balance above $5 million
    through contributions to a 401(k) plan, and it added that ``an
    accumulation of more than $5 million looks large in comparison to . . .
    the maximum lump sum payable to a 65-year-old DB participant'' (which
    GAO calculated to be $2.3 million to $2.6 million in 2011). See id. at
    25. However, the GAO report failed to consider the possibility that an
    individual could combine a 401(k) defined contribution plan with a cash
    balance defined benefit plan. The GAO data also is 10 years old now and
    does not factor in the intervening decade of stock market growth.

        Stuffing is primarily a problem with respect to Roth IRAs. Stuffing
    a traditional IRA with pre-IPO stock or private equity fund carried
    interests is generally a questionable tax-avoidance strategy because it
    converts what would often be long-term capital gains (taxed at a top
    rate of 23.8 percent) into ordinary income (taxed at a top rate of 37
    percent).\12\ As Table 3 illustrates, most of the mega-IRAs identified
    by JCT are traditional IRAs. According to the JCT data, 85 percent of
    all mega-IRAs are traditional IRAs, and at least 79 percent of the
    aggregate balance of mega-IRAs lies in traditional accounts.
    ---------------------------------------------------------------------------
        \12\ Stuffing a traditional IRA still may yield modest benefits if
    the deferral advantage outweighs the negative rate arbitrage, or larger
    benefits if assets otherwise would have generated income taxed at
    ordinary rates (e.g., carried interests in some hedge funds). However,
    any taxpayer who stuffed an IRA in 2010 or afterwards could convert to
    a Roth. The fact that most mega-IRAs are traditional IRAs is evidence
    that they do not reflect stuffing.

                              Table 3. Mega-IRAs by Account Balance Ranges and Type (2019)
    ----------------------------------------------------------------------------------------------------------------
                                                        $5m to       $10m to      $15m to                 All Mega-
                                                         $10m         $15m         $25m         $25m      IRAs (5m)
    ----------------------------------------------------------------------------------------------------------------
    # of Taxpayers                                        24,990        2,275          853          497       28,615
    ----------------------------------------------------------------------------------------------------------------
    Traditional only                                      21,682        1,709          557          303       24,251
    ----------------------------------------------------------------------------------------------------------------
    Roth only                                              2,175          425          237          156        2,993
    ----------------------------------------------------------------------------------------------------------------
    Both                                                   1,133          141           59           38        1,371
    ----------------------------------------------------------------------------------------------------------------
    Aggregate Balance                                   $160,111      $26,917      $15,926      $76,612     $279,566
    ----------------------------------------------------------------------------------------------------------------
    Traditional only                                    $137,725      $20,144      $10,370      $53,111     $221,350
    ----------------------------------------------------------------------------------------------------------------
    Roth only                                            $14,719       $5,602       $4,512      $15,624      $40,457
    ----------------------------------------------------------------------------------------------------------------
    Both                                                  $7,667       $1,171       $1,044       $7,877      $17,759
    ----------------------------------------------------------------------------------------------------------------
    Source: Memorandum from Thomas Barthold to Kara Getz, Tiffany Smith and Drew Crouch (July 27, 2021).
    Notes: ``Both'' reflects taxpayers with traditional and Roth IRAs whose aggregate balance $5 million.

        Stuffing an IRA--even a Roth IRA--provides only a modest benefit to
    start-up founders and early-stage investors who have access to other
    legal tax-avoidance strategies. For example, individuals who hold
    shares of stock or other property until death can qualify for tax-free
    stepped-up basis. Since 2010, start-up founders and early-stage
    investors who acquire pre-IPO stock and hold it for at least five years
    can--in many circumstances--exclude $10 million or more of capital
    gains on the sale of the stock under section 1202. These strategies
    allow individuals to replicate (roughly) the benefits of Roth IRA
    stuffing without legal risk.

    III. Takeaways

        We see at least three takeaways from our illustration and analysis:

        1. High-income individuals can create mega-IRAs by maximizing their
    tax-favored savings across multiple plans and then consolidating their
    balances into IRAs--all of which Congress expressly permits. We are
    encouraged that members of Congress are focusing attention on the mega-
    IRA problem. However, rather than revealing mega-IRAs to be an
    ``abuse,'' our review demonstrates that mega-IRAs are a product of
    choices that Congress has made over the last quarter century--choices
    that foreseeably allowed high-income individuals to shift eight-figure
    sums into tax-favored accounts.\13\
    ---------------------------------------------------------------------------
        \13\ Congress's choice to lift income limits on traditional-to-Roth
    IRA conversions (effective 2010) was particularly cynical: lawmakers
    characterized the move as a revenue-raiser, even though independent
    analysis showed that the change would reduce net long-term federal
    revenues by at least $14 billion in present value terms. See Leonard E.
    Burman, Roth Conversions as Revenue Raisers: Smoke and Mirrors, Tax
    Notes, May 22, 2006, at 953.

        2. Cash balance defined benefit plans--especially when combined
    with defined contribution plans--put many high-income professionals
    within close reach of mega-IRAs even before accounting for investment
    growth. The number of cash balance plans has grown dramatically over
    the last two decades, from 1,477 in 2001 to an estimated 25,040 in
    2019.\14\ These plans are especially concentrated in the medical and
    financial sectors and among professional practices such as law firms.
    The largest law-firm cash balance plan is now approaching $1 billion in
    assets, and cash balance plans in total hold more than $1 trillion.\15\
    An estimated 97 percent of cash balance plans are add-ons to existing
    401(k) plans.\16\ Mega-IRAs will become increasingly common as long as
    Congress allows high-income individuals to pair defined contribution
    and defined benefit plans.
    ---------------------------------------------------------------------------
        \14\ FuturePlan Cash Balance Center of Excellence, 2020 National
    Cash Balance Research Report 3 (11th ed. 2021).
        \15\ Id. at 7-8.
        \16\ Chuck Epstein, Q&A: Dan Kravitz on Cash Balance Plans,
    BenefitsPro (July 2, 2014), https://www.benefitspro.com/2014/07/02/qa-
    dan-kravitz-on-cash-balance-plans.

        3. The mega-IRA problem is not limited to Roths--and not even
    limited to IRAs. A mega-traditional IRA is simply a mega-IRA that the
    owner has not (yet) chosen to convert to a Roth. The owner of a mega-
    traditional IRA may delay conversion for any number of reasons. For
    example, she may anticipate that top tax rates will go down (as indeed
    they did at the end of 2017). She may be planning to change her tax
    domicile from a high-tax state (e.g., New York) to a low-tax state
    (e.g., Florida). Or she may be planning to stretch a conversion over
    several years so that more of her income can be taxed at lower marginal
    rates. From a policy perspective, the fact that a mega-IRA owner has
    not yet chosen to Rothify her account does not make the existence of
    ---------------------------------------------------------------------------
    the mega-IRA any less problematic.

        Indeed, it is not clear why--from a policy perspective--we should
    care whether a mega-retirement account balance is in an IRA or any
    other tax-favored vehicle. The individual in our illustration could
    have reaped similar tax benefits if she had left her 401(k) balance in
    her employer-sponsored plan rather than rolling over to a mega-IRA. Any
    solution that seeks to tackle the mega-IRA problem also must address
    mega-401(k)s and other tax-favored mega-accounts.

    IV. Policy Implications

        1. Mega-IRAs and other mega-retirement accounts are a serious
    problem, even when they do not result from abusive stuffing tactics.
    Mega-retirement accounts allow high-income individuals to reduce tax
    either on the front end (by excluding traditional 401(k) contributions
    and defined benefit accruals from income) or on the back end (by
    excluding Roth withdrawals), all the while avoiding year-to-year tax on
    accumulations.\17\ Whether traditional or Roth, these tax-favored
    vehicles deliver a windfall to individuals at the very top of the
    income distribution, exacerbating already wide inequalities.
    Furthermore, if Congress fails to address the problem of mega-IRAs and
    other mega-retirement accounts, revenue losses are likely to grow as
    more and more employers offer supersized defined benefit/defined
    contribution combinations.
    ---------------------------------------------------------------------------
        \17\ For an explanation of the theoretical equivalence between
    traditional and Roth IRA benefits (an application of the ``Cary Brown
    theorem''), see Christopher H. Hanna, Tax Theories and Tax Reform, 59
    SMU L. Rev. 435 (2006).

        2. Congress could address the mega-retirement plan problem by
    establishing a lifetime limit on all tax-favored retirement benefits--
    as proposed by the Obama-Biden administration. Under the Obama-Biden
    proposal, the cap would be set such that an individual could retire at
    age 62 and purchase a lifetime annuity for herself and her spouse
    paying the maximum annual benefit for a defined benefit plan. In 2016,
    that amount would have been $210,000 per year, corresponding to a
    maximum balance of approximately $3.4 million for a 62-year-old. Once
    an individual reached the cap, she could no longer make additional
    contributions or receive additional defined benefit accruals, though
    her balance could continue to grow with investment earnings.\18\
    ---------------------------------------------------------------------------
        \18\ U.S. Department of the Treasury, General Explanations of the
    Administration's Fiscal Year 2017 Revenue Proposals, 166-68 (February
    2016).

        The Obama-Biden proposal, if implemented, would constitute an
    important step toward stopping the growth of mega-retirement accounts.
    Under the proposal, an individual still could use tax-favored
    retirement savings arrangements to ensure a comfortable retirement for
    herself and her spouse. But IRAs, defined contribution plans, and
    defined benefit plans would no longer be tools for preserving dynastic
    wealth. Moreover, the Obama-Biden plan rightly recognized that mega-
    IRAs are just one type of mega-retirement plan. Capping only IRAs (or
    only Roth IRAs) would arbitrarily penalize individuals who decided to
    take rollovers rather than leaving their balances in an employer-
    sponsored plan (or who decided to pay tax on a traditional-to-Roth
    conversion rather than delaying conversion until a more opportune
    time). Worse yet, an IRA-specific or Roth-specific reform would simply
    ---------------------------------------------------------------------------
    shift the problem to other accounts that currently feed into mega-IRAs.

        3. Supplemental steps. We know of no adequate substitute for the
    cross-plan cap proposed by the Obama-Biden administration. However,
    Congress could supplement that legislative change with additional
    measures:

            Mandating RMDs starting at age 72 from all accounts, including
    Roth IRAs. Congress created tax-favored retirement plans to support
    individuals in their later years. Without RMDs, these plans can quickly
    become intergenerational wealth-transmission devices. The SECURE Act
    2.0 proposal to raise the RMD age to 75 would exacerbate the mega-
    retirement plan problem.
            Ending backdoor Roths. Congress created Roth IRAs as savings
    vehicles for low- and middle-income Americans--not as mechanisms for
    high-income individuals to add onto their other savings. Congress could
    shut the Roth ``backdoor'' by barring high-income individuals from
    making nondeductible IRA contributions--the first step of the backdoor
    two-step.
            Prohibiting IRAs and defined contribution plans from holding
    non-publicly traded assets. While we do not think that a majority of
    mega-IRAs arise from ``stuffing'' strategies, there is no reason for
    Congress to allow ``stuffing'' in the first place. A ban on non-
    publicly traded assets in IRAs, 401(k)s, and other defined contribution
    plans would limit both stuffing and self-dealing (i.e., improper
    transactions between an IRA and its owner).

    V. Conclusion

        We are troubled by mega-IRAs, which undermine the progressivity and
    revenue-raising potential of the federal income tax. However, mega-IRAs
    are a symptom of an even more serious disease: a retirement savings
    system that disproportionately favors the rich. Instead of simply
    treating the symptom, Congress could cure the disease--a disease
    largely caused by Congress's own choices.

                                     ______

                     ICMA Retirement Corporation (ICMA-RC)

                    777 North Capitol Street, NE, Suite 600

                              Washington, DC 20002

    May 4, 2021

    Senator Ben Cardin                  Senator Rob Portman
    U.S. Senate                         U.S. Senate
    509 Hart Senate Office Building     448 Russell Senate Office Building
    Washington DC 20510                 Washington DC 20510

        Re: ICMA-RC Supports the Retirement Security and Savings Act

    Dear Senator Cardin and Senator Portman:

        On behalf of ICMA Retirement Corporation (``ICMA-RC''), I am
    writing to express our strong support for the Retirement Security and
    Savings Act and congratulate you on its recent reintroduction.

        ICMA-RC's mission is to help public sector employees build
    retirement security. Founded in 1972, ICMA-RC is a non-profit
    independent financial services corporation based in Washington, DC,
    focused on providing retirement plans and related services for more
    than one million public sector participant accounts and more than 9,000
    retirement plans. We are dedicated every day to our mission and serving
    those who serve our communities.

        Enactment of the Retirement Security and Savings Act would
    significantly benefit millions of Americans, including public sector
    employees, who work hard every day to prepare for their retirement.
    ICMA-RC appreciates your longstanding efforts to make it easier for
    more Americans to save for retirement and for working to advance the
    bipartisan ideas in the Retirement Security and Savings Act.

        ICMA-RC strongly supports your provision that would permit 403(b)
    plan participants to access lower-cost collective investment funds. We
    have long utilized collective investment trusts and have found them to
    be effective in reducing the costs for the public sector retirement
    savers we support. Additionally, we are very supportive of your
    provision to streamline contribution requirements for government
    workers in 457(b) plans. Under your bill, public sector employees would
    have additional flexibly when making decisions about how much they
    would like to save each month by conforming the deferral rules for
    457(b) plans with other existing retirement savings vehicles.

        We look forward to working with you on our shared goal of enhancing
    retirement security for all workers.

                Sincerely,

                Angela Montez
                ICMA-RC
                Senior Vice President and General Counsel

                                     ______

                          Insured Retirement Institute

                      1100 Vermont Avenue, NW, 10th Floor

                              Washington, DC 20005

                  Statement of Wayne Chopus, President and CEO

    Chairman Wyden, Ranking Member Crapo, and Members of the Senate
    Committee on Finance, my name is Wayne Chopus. As the President and CEO
    of the Insured Retirement Institute (IRI), I am pleased to provide you
    with our perspective on the importance of this Congress enacting
    common-sense, bipartisan solutions that will help America's workers,
    retirees, and their families build economic equity, strengthen
    financial security, and protect income in a manner that can sustain
    them throughout their retirement years.

    I commend you for holding this hearing, and I welcome the opportunity
    to provide this statement for the record to the Committee recommending
    several proposals for building bipartisan retirement legislation. The
    public policy proposals IRI offers in this statement for the record for
    the Committee's consideration will help to shape a stronger and more
    inclusive private-sector retirement system by increasing access to
    workplace retirement plans, facilitating greater use of lifetime income
    options, and making information about past and possibly forgotten
    retirement accounts more readily available.

    Summary of Testimony

    Consistent with our consumer-focused mission, my statement for the
    record will address two key points:

        1.  America's workers and retirees were already facing a looming
    retirement income crisis before the onset of the COVID-19 pandemic, and
    the economic disruption it has caused further exacerbated already
    existing retirement income anxiety.

        2.  Legislation like the public policy measures contained in IRI's
    2021 Federal Retirement Security Blueprint,\1\ eleven of which are
    included in recently introduced legislation in the Senate, offer a
    solid foundation of common-sense, bipartisan solutions that will help
    more of our nation's workers and retirees strengthen and enhance their
    retirement security.
    ---------------------------------------------------------------------------
        \1\ The ``2021 IRI Federal Retirement Security Blueprint,'' Insured
    Retirement Institute, March 2021.
    ---------------------------------------------------------------------------

    About IRI

    For three decades, IRI has vigorously promoted consumer confidence in
    the value and viability of insured retirement strategies, bringing
    together the interests of the industry, financial advisors, and
    consumers under one umbrella. Our mission is to pursue the following
    goals:

          Promote a better understanding of the insured retirement value
    proposition.
          Modernize standards and practices to improve value delivery and
    the customer experience within this industry.
          Advocate before public policymakers on critical issues affecting
    consumers who rely on insured retirement strategies to sustain them
    during their retirement years.

    IRI is the only national trade association representing the entire
    supply chain for the insured retirement strategies industry. Our member
    companies include major life insurance companies like Prudential,
    Equitable, Pacific Life, Nationwide, Transamerica, Principal Financial
    Group, and Jackson National; broker-dealers like Morgan Stanley,
    Raymond James, and Edward Jones; and asset management companies like
    PIMCO, T. Rowe Price, and BlackRock. Our member companies represent
    more than 90 percent of annuity assets and include the top 10
    distributors ranked by assets under management. Our member base also
    includes financial professionals serving millions of people across the
    country. Therefore, we bring a perspective to this discussion that
    encompasses both the full supply chain of insured retirement strategies
    as well as Main Street America.

    America's Growing Retirement Anxiety and Savings Crisis

    According to a survey by the Economic Innovation Group,\2\ 82 percent
    of voters believe retirement security is a significant problem for our
    nation. Workers, retirees, and their families are concerned about their
    ability to accumulate sufficient savings to provide sustainable income
    to last during their retirement years. This anxiety has significantly
    grown in the past year with the COVID-19 pandemic's impact on retirees'
    and workers' physical and financial health.
    ---------------------------------------------------------------------------
        \2\ The ``Retirement Security and Wealth Attitudes: National Voter
    Survey,'' Economic Innovation Group, June 2021.

    A survey conducted by the National Institute of Retirement Security \3\
    provides insights into the depth of this anxiety. The survey found that
    more than two-thirds--67 percent--say the nation faces a retirement
    crisis, and more than half--56 percent--are concerned that they will
    not achieve a financially secure retirement. The research also found
    that 51 percent say their concerns about their ability to achieve
    financial security in retirement has increased, 67 percent say that
    COVID-19 has changed or is causing them to consider changing their
    plans about when they will retire, and 65 percent of current workers
    say it is likely they will have to work past retirement age to have
    enough money to retire.
    ---------------------------------------------------------------------------
        \3\ ``Retirement Insecurity 2021--American Views of Retirement,''
    National Institute of Retirement Security, February 2021.

    Fidelity Investments recently released its ``2021 State of Retirement
    Planning Study''\4\ which further demonstrates the harm inflicted on
    workers' and retirees' plans for retirement due to the events of the
    past year. The study found that 80 percent of America's workers said
    their retirement plans were disrupted in the past year due to actions
    such as job loss or retirement account withdrawals. The survey also
    found that one in three people estimate that they will need two to
    three years to recover financially from the events of the past year.
    ---------------------------------------------------------------------------
        \4\ ``2021 State of Retirement Planning Study,'' Fidelity
    Investments, March 2021.

    Furthermore, a study by Transamerica \5\ found that nearly one in five
    workers has reported contributing less to their retirement account now
    than before the pandemic, 18 percent have reduced retirement
    contributions since the coronavirus crisis started, and 31 percent of
    those who are recently unemployed reported they are contributing less
    to their retirement. Those who reported contributing less to their
    retirement savings can be further broken down generationally, with
    about 16 percent being Baby Boomers, 18 percent being Generation Xers,
    around 15 percent being Millennials, and about 27 percent identified as
    Generation Z.
    ---------------------------------------------------------------------------
        \5\ '`Retirement Security Amid COVID-19: The Outlook of Three
    Generations,'' 20th Annual Transamerica Retirement Survey of Workers,
    May 2020.

    As this research demonstrates, retirement security remains an area of
    significant concern for America's workers, retirees, and their
    families. Additionally, this research confirms what IRI's members hear
    from the millions of workers and retirees they work with each day:
    workers and retirees are shouldering the burden of accumulating savings
    to sustain them during their retirement years. This has caused enormous
    pressure for the individual consumer, particularly if they are lower-
    ---------------------------------------------------------------------------
    and middle-income workers.

    Further adding to this anxiety is a lack of access to workplace
    retirement savings plans. According to Transamerica's ``Navigating the
    Pandemic: A Survey of U.S. Employers,''\6\ 48 percent of employers do
    not offer a 401(k) or similar retirement plan, and 63 percent of those
    employers said they are not too likely or not likely at all to start a
    plan within the next two years. Even though 65 percent of employers
    feel a sense of responsibility in trying to help their employees
    achieve a financially secure retirement and nearly three-quarters
    believe that offering retirement benefits is essential for attracting
    and retaining employees, concerns about plan costs remain a top reason
    why employers do not offer a plan.
    ---------------------------------------------------------------------------
        \6\ ``Navigating the Pandemic: A Survey of U.S. Employers,''
    Transamerica Institute, June 2021.

    IRI respectfully submits for your consideration the measures outlined
    below to strengthen and enhance retirement security for America's
    workers and retirees as the Committee examines how Congress can help to
    build upon bipartisan retirement legislation.

    Bipartisan, Common-Sense Solutions

    Earlier this year, IRI published its 2021 Federal Retirement Security
    Blueprint. The Blueprint offers several measures which, if enacted into
    law, would do the following:

          Measure 1: Expand opportunities for more of our nation's workers
    to save in a workplace retirement plan.
          Measure 2: Facilitate the use of lifetime income products to
    better insure against the risk of outliving savings.
          Measure 3: Preserve and promote access that enables retirement
    savers to obtain information about their retirement accounts.

     Measure 1: Expanding Opportunities for More Workers to Save for
                        Retirement

    To expand opportunities for more of America's workers to save for
    retirement, IRI's 2021 Federal Retirement Security Blueprint put forth
    several measures that have attracted bipartisan support and have been
    introduced in bills during the 117th session of Congress. These include
    further increasing the age at which required minimum distributions
    (RMDs) must be taken, enhancing automatic enrollment and escalation
    features, authorizing the formation of 403(b) pooled employer plans
    (PEPs), and clarifying the start up credit available to small
    businesses starting a retirement plan. Bills offering additional
    opportunities for military spouses to save, help for workers to save
    while paying back student loans, increased age requirements and amount
    of catch-up contributions allowed for Baby Boomers as they near
    retirement, and an enhancement of the current Savers Credit have also
    been introduced.

    Further Increase the RMD Age and Modernize RMD Rules

    Workers and retirees today face an increased risk of outliving
    retirement assets because of longer lifespans. Under current law,
    workers and retirees must take a required minimum distribution (RMD)
    when they reach the age of 72. The Retirement Security and Savings Act
    of 2021 (S. 1770--117th Congress) contains a provision which would
    increase the RMD age to 75, allowing workers and retirees to have
    additional time to keep their savings in tax-deferred retirement
    accounts. The bill would also modify RMD rules to exempt certain
    annuity benefits and payments from the minimum income threshold test
    (MITT) to reflect more current circumstances regarding individuals'
    working years and longevity. The proposed changes contained in the bill
    would allow more workers to accumulate and grow savings and, thereby,
    improve their retirement security.

     Increase Automatic Enrollment Contribution Rates and Enhance Automatic
                        Plan Features

    Automatic enrollment in an employer-provided retirement plan has proven
    to be an extremely effective tool for encouraging Americans to save for
    retirement. Research shows a plan with automatic enrollment features
    increases participation rates at least 10 percentage points. When there
    is an employer matching contribution, the likelihood an employee will
    participate goes up to 50 percent. A June 2021 study by Principal
    Financial Group \7\ found that 84 percent of employees automatically
    enrolled in a workplace plan say they started saving for retirement
    sooner because they were automatically enrolled than if they had to
    make that decision independently. The same survey found that 87 percent
    of plan sponsors increased plan participation through the use of
    automatic enrollment. The Retirement Security and Savings Act of 2021
    (S. 1770--117th Congress) would direct the Secretary of the Treasury to
    develop regulations to simplify and clarify the rules governing the
    timing of participant notifications, specifically for employees who are
    enrolled immediately upon hiring and for employers who utilize multiple
    payroll and administrative systems. This measure will help workers save
    more for their retirement by ensuring they are informed in an effective
    manner when automatically enrolled in a workplace retirement plan
    unless they opt not to participate.
    ---------------------------------------------------------------------------
        \7\ ``Principal Retirement Security Survey: Consumer and plan
    sponsor results,'' Principal Financial Group, June 2021.
    ---------------------------------------------------------------------------

    Authorize the Formation of 403(b) PEPs

    The SECURE Act contained provisions that will make workplace retirement
    plans more available to small business employees and reduce barriers
    that have discouraged small business employers from offering their
    employees a workplace retirement plan. It amended the law governing
    multiple employer plans (MEPs) and established pooled employer plans
    (PEPs). The changes made by the SECURE Act will enable small employers
    to band together and delegate responsibility to a professional
    fiduciary while reducing the individual cost of offering a retirement
    plan.

    A recent study conducted by Transamerica \8\ demonstrates that the
    changes made by the SECURE Act will encourage more small business
    employers to offer their employees a retirement plan. The study found
    that of the employers not anticipating offering a plan within the next
    two years, nearly one-third would consider joining a multiple employer
    plan MEP or PEP because of their reasonable cost.
    ---------------------------------------------------------------------------
        \8\ ``Navigating the Pandemic: A Survey of U.S. Employers,''
    Transamerica Institute, June 2021.

    Unfortunately, the benefits of a workplace retirement plan that could
    be offered by a small business employer through a MEP or PEP in
    accordance with the changes made by the SECURE Act is not available to
    501(c)(3) nonprofits, public educational organizations, and religious
    institutions. The SECURE Act did not authorize employers who offer
    their employees a 403(b) retirement plan, which is typically utilized
    by nonprofit, public educational organizations, and religious
    institutions, to use MEPs or PEPs. Those employers offering a 403(b)
    retirement plan still have the barriers in place that the SECURE Act
    reduced for employers who offer other types of retirement plans. As a
    result of not including 403(b) plans in the SECURE Act, organizations
    eligible to offer a 403(b) plan must still assume the financial and
    administrative challenges and legal risks when offering a plan.
    ---------------------------------------------------------------------------
    Therefore, many do not offer a retirement plan to their employees.

    The SECURE Act should be amended to encourage employers who would
    typically use a 403(b) plan to offer a retirement plan to their
    employees by authorizing these organizations to form and use 403(b)
    PEPs in the same manner as other small businesses are permitted to do
    so under the SECURE Act. This change would relieve nonprofit, public
    educational and religious institution employers of the burdensome
    administration challenges that now discourage them from offering their
    employees a workplace retirement plan and give them access to the same
    economies of scale now available to other small businesses. This
    measure was included in the Improving Access to Retirement Savings Act
    (S.1703--117th Congress).

    Clarifying the Start-Up Credit for Small Businesses Joining a PEP

    While the improvements made in the SECURE Act to enhance the tax credit
    available to small businesses offering their employees a retirement
    savings plan by joining a MEP or PEP, the start-up credit is not
    available to a small business joining a MEP or PEP after the plan's
    first 3 years of operation. The Improving Access to Retirement Savings
    (S. 1703--117th Congress) will clarify that the 3-year start-up credit
    will apply to small businesses for three years from the time the small
    business joins the MEP or PEP and not from the time the MEP or PEP
    begins operations. This clarification will encourage more small
    businesses to offer a retirement plan and facilitate greater use of
    MEPs and PEPs as the means to provide employees a workplace retirement
    plan.

     Enhance the Start-Up Tax Credit to Encourage Small Business to
                        Establish Plans

    Current law allows small employers to receive a tax credit equal to
    half of the cost associated with starting a workplace retirement plan.
    Although the SECURE Act increased the annual cap allowed for this tax
    credit, the increased percentage has not had its desired effect of
    encouraging more small employers to offer their employees the
    opportunity to save for their retirement at their workplace. The
    Retirement Security and Savings Act of 2021 (S. 1770--117th Congress)
    will further increase the tax credit to 75 percent of startup costs for
    small businesses with 25 or fewer employees. The increase to 75 percent
    of qualified start-up costs will serve to encourage more small business
    employers to establish workplace plans to benefit their workers.

     Establish Tax Incentives for Offering Retirement Savings to Military
                        Spouses

    Due to frequency of moves made due to their partners' assignments to
    new billets, military spouses often change jobs. Further compounding
    the problems associated with frequent changes in duty stations and
    retirement preparedness of military spouses is the fact that 92 percent
    of military spouses are women,\9\ who due to a confluence of factors--
    wage disparity, time out of the workforce, and competing priorities--
    have retirement account balances which are on the aggregate more than
    50 percent smaller than their male counterparts.\10\ The Retirement
    Security and Savings Act of 2021 (S. 1770--117th Congress) will offer a
    tax credit to an employer who enrolls a military spouse in a retirement
    plan within 2 months of their hiring. This new tax credit would
    encourage small business employers to provide military spouses with an
    opportunity to participate in a workplace retirement plan and would
    also increase military spouses' savings rate by requiring that they be
    made eligible for any matching or non-elective contributions like those
    available to employees with two or more years of employment.
    ---------------------------------------------------------------------------
        \9\ ``Women Versus Men in DC Plans,'' Vanguard, January 2019.
        \10\ ``Women's Perspectives on Savings, Investing, and Retirement
    Planning,'' Insured Retirement Institute, November 2015.
    ---------------------------------------------------------------------------

    Help Employees Save for Retirement While Repaying Student Debt

    Student loan debt is a major challenge for America's workers who are
    trying to manage competing financial priorities. Individuals who have
    student loan debt have lower workplace retirement balances than those
    who do not. In fact, IRI's own research found that of 46 percent of
    Millennials are not saving for retirement, and nearly 10 percent
    specifically cite wanting to pay off debts as their reason for not
    contributing to a retirement account.\11\ The Retirement Security and
    Savings Act of 2021 (S. 1770--117th Congress) will better position
    America's workers who have incurred student loan debt to start building
    their retirement nest eggs by permitting employers to make matching
    contributions into employees' retirement accounts based on the amount
    of workers' student loan payments.
    ---------------------------------------------------------------------------
        \11\ ``Millennials and Retirement 2020--Understanding, Saving, and
    Planning,'' Insured Retirement Institute, January 2020.
    ---------------------------------------------------------------------------

    Increase Catch-Up Contributions Limits for Baby Boomers

    Current law allows workers who reach age 50 to make additional catch-up
    contributions to retirement plans up to an amount set by the Internal
    Revenue Service each calendar year. Current research demonstrates
    dramatic retirement anxiety among Baby Boomers. A study conducted by
    the Center for a Secure Retirement \12\ found that 52 percent of non-
    retired Baby Boomers are worried that the impact the COVID-19 pandemic
    had on their financial lives has been so severe they will never be able
    to retire. More than half (53 percent) report having to tap into
    savings to pay for daily expenses during the pandemic, and 41 percent
    have been financially supporting family members. This has led to 75
    percent not being able to save as much for their retirement as needed.
    It is not surprising then that 61 percent of non-retired Baby Boomers
    came to the realization that they will need more savings to be secure
    in retirement. This is further compounded by IRI's own research that
    found that 45 percent of Baby Boomers have zero retirement savings.\13\
    The Retirement Security and Savings Act of 2021 (S. 1770--117th
    Congress) increases the catch-up contribution limits to $10,000 for
    retirement savers who have attained the age of 60 by the close of a tax
    year. With a third of employed Baby Boomers saying they will be
    postponing retirement,\14\ this measure will give them a chance to
    enhance their nest eggs and achieve greater financial security for
    their retirement years.
    ---------------------------------------------------------------------------
        \12\ ``Pandemic Forces Boomers to Financially Support Family,
    Greatly Impacting Their Own Retirement Plans,'' Center for a Secure
    Retirement, July 2022.
        \13\ ``Boomer Expectations for Retirement 2019, Ninth Annual Update
    on the Retirement Preparedness of the Boomer Generation,'' Insured
    Retirement Institute, April 2019.
        \14\ Ibid.
    ---------------------------------------------------------------------------

    Increase the Amount Allowable Under the Saver's Credit

    Under current law, certain lower-income retirement savers are eligible
    for a non-refundable tax credit for contributions made to IRAs and
    workplace retirement plans up to $2,000. Section 102 of the Retirement
    Security and Savings Act of 2021 (S. 1770--117th Congress) would make
    this credit refundable and would contribute the credit into a Roth
    account as part of a retirement plan or into a Roth IRA. The provision
    would increase the number of savers eligible for the 20 percent credit.
    The bill also directs the Department of the Treasury to promote the
    Saver's Credit to increase public awareness to help more workers
    utilize the credit.

    Measure 2: Facilitate the Use of Protected Lifetime Income Solutions

    IRI's 2021 Federal Retirement Security Blueprint includes several
    measures to facilitate the use of protected lifetime income solutions
    to insure consumers against the risk of outliving one's savings during
    their retirement years. Several of these proposals have been introduced
    in bills during the 117th session of Congress. We offer these policy
    solutions for the Committee's consideration as it conducts its
    examination of how Congress can help to build upon bipartisan
    retirement legislation.

    Allow for the Broader Use of QLACs

    Qualifying Longevity Annuity Contracts (QLACs) are valuable tools in
    retirement income planning because they are an investment vehicle that
    can be used as longevity insurance to help address the fear of growing
    older and outliving the funds an individual has accumulated to use
    during their retirement years. Current Treasury Department regulations
    have created a barrier that limits the amount a retirement saver can
    save when purchasing a QLAC. This regulation reduces their ability to
    insure against outliving their savings throughout their retirement
    years. The Retirement Security and Savings Act of 2021 (S. 1770--117th
    Congress) amends the current law to allow for more than 25 percent of a
    retirement plan or IRA to be rolled over into a QLAC and increases the
    dollar limitation on premiums from $135,000 to $200,000. Additionally,
    the provision would authorize a diverse slate of indexed and variable
    annuity contracts with guaranteed benefits to be offered as QLACs.
    Increasing the dollar limitation on premiums and authorizing QLACs to
    be offered through a diverse slate of indexed and variable annuity
    contracts with guaranteed benefits are critical reforms needed to make
    QLACs more available to workers and retirees. Increased access to QLACs
    benefits consumers who are seeking the opportunity to insure against
    the risk of outliving their accumulated retirement savings by keeping
    more of their tax-deferred savings longer with a protected, guaranteed
    monthly income throughout their lifetime.

    Facilitate the Use of Low-Cost ETF Investments in Variable Annuities

    Currently, exchange-traded funds (ETFs) are widely available through
    retirement plans, IRAs, and taxable investment accounts but generally
    are not available within variable insurance products. The reason why
    they are not available is that Treasury Department regulations, which
    pre-date ETFs, have created a technical gap that prevents ETFs from
    being included on the menu of investment options offered in variable
    insurance products. The Retirement Security and Savings Act of 2021 (S.
    1770--117th Congress) directs the Treasury Department to amend its
    regulations to allow ETFs to be offered within variable insurance
    products. This would allow for ETF structured annuity offerings which
    would provide consumers with lower-cost investment options and allow
    for more consumers primarily in the fee-based advisory market to
    utilize and benefit from variable insurance products by obtaining
    protected lifetime income for their retirement years.

     Measure 3: Promote Greater and Easier Access to Information About
                        Retirement Plans

    To promote greater and easier access to information that can help guide
    retirement savers as they plan for retirement, IRI's 2021 Federal
    Retirement Security Blueprint included several measures that have
    attracted bipartisan support and have been introduced as bills in
    previous sessions of Congress. One of the measures included in the
    Retirement Security and Savings Act of 2021 (S. 1770--117th Congress)
    would aid individuals in planning for their retirement by providing
    them with an opportunity to obtain information more readily about past
    and possibly forgotten accounts.

     Establish a National, Online Lost and Found for Americans' Retirement
                        Accounts

    Today, workers in America change jobs more frequently, and they often
    leave retirement savings in plans maintained by their previous
    employers. Over the past decade, 25 million workplace retirement plan
    participants changed jobs and left behind a retirement savings plan.
    Millions more have left two or more accounts resulting in roughly $8.5
    billion in ``lost'' retirement savings. To facilitate workers planning
    for their retirement, Congress should provide the tools and resources
    necessary for retirement savers to locate employer-sponsored retirement
    accounts. A national, digital database utilizing information already
    provided to the Department of Treasury should be established. This
    database would enable retirement savers to search and locate their
    former employer-sponsored retirement savings accounts to ensure they
    are not leaving retirement savings behind.

    The creation of this one-stop-shop database will help workers--
    especially Generation Xers, Millennials, and future generations--to
    track their past and possibly forgotten workplace retirement accounts.
    By making it easier to track past or forgotten retirement savings
    accounts, workers will have additional opportunities to roll over their
    found savings into a new account of into their current retirement
    savings account, thereby increasing their retirement savings. Creating
    a national, online lost and found database will also allow workers to
    keep better track of their employer-sponsored retirement savings and
    not leave thousands of dollars on the table. This measure was included
    in the Retirement Security and Savings Act of 2021 (S. 1770--117th
    Congress).

    Conclusions

    IRI appreciates the opportunity to submit this statement for the record
    to the Committee. The enactment of the SECURE Act in late 2019 was a
    big step forward that has put workers and retirees on a path towards
    relieving some of the anxiety they are feeling about how they will be
    able to have a secure and dignified retirement.

    However, there is still much more that needs to be done. IRI is
    respectfully submitting this statement for the record in which we are
    expressing our support for several measures included in the Retirement
    Security and Savings Act of 2021 (S. 1770--117th Congress) and the
    Improving Access to Retirement Savings Act (S. 1703--117th Congress).
    These bills will help to strengthen and enhance our nation's
    private-sector retirement system. The bills will also offer help to
    those individuals whose long and short-term retirement security has
    been impacted by the economic consequences stemming from the pandemic
    and those who are affected by America's long-standing, looming
    retirement savings crisis.

    The proposals we expressed support for included in the Retirement
    Security and Savings Act of 2021 (S. 1770--117th Congress) and the
    Improving Access to Retirement Savings Act (S.1703-117th Congress) will
    all help to enhance retirement savings opportunities, increase access
    to lifetime income solutions, and increase plan participants access to
    information to reconnect them with ``lost'' savings. IRI believes these
    solutions will provide workers and retirees with the opportunity to
    build economic equity, strengthen their financial security, and protect
    their income in a way that can sustain them throughout their retirement
    years.

                                     ______

                    National Association for Fixed Annuities

                    1717 Pennsylvania Avenue, NW, Suite 1025

                              Washington, DC 20006

                                  414-332-9306

                               https://nafa.com/

    July 28, 2021

    The Honorable Ron Wyden
    Chairman
    U.S. Senate
    Committee on Finance
    221 Dirksen Senate Office Building
    Washington, DC 20510

    The Honorable Mike Crapo
    Ranking Member
    U.S. Senate
    Committee on Finance
    239 Dirksen Senate Office Building
    Washington, DC 20510

    Dear Chairman Wyden and Ranking Member Crapo:

    On behalf of NAFA, the National Association for Fixed Annuities, I want
    to thank you for your ongoing leadership to achieve critical retirement
    policy reforms for Americans and for holding this important hearing
    today. NAFA appreciates the opportunity to submit this letter in
    support of S. 1770, the Retirement Security and Savings Act, offered by
    Senators Ben Cardin and Rob Portman.

    In 2019 Congress took a significant step forward for retirement savers
    by passing into law the Setting Every Community Up for Retirement
    Enhancement Act (SECURE Act). This overwhelmingly bipartisan measure is
    helping create new savings opportunities for millions of Americans.
    While NAFA lauded the enactment of the SECURE Act, now more than ever,
    especially as Americans work to recover from the adversities of the
    COVID-19 pandemic, additional robust retirement options are needed.

    NAFA supports the many positive policy changes contained in S. 1770,
    including facilitating catch-up contributions, providing for expanded
    auto enrollment, and helping small businesses provide savings plans for
    workers. Additionally, NAFA is pleased that there are provisions to
    address longevity risk. In particular, we strongly support increasing
    the requirement minimum distribution (RMD) age to 75 and expanding
    opportunities for greater savings in qualified longevity annuity
    contracts (QLACs). Regarding QLACs, the Retirement Security and Savings
    Act would allow for greater contribution levels and provides for
    expanded annuity product choices.

    We hope the Finance Committee will pass this legislation this fall and
    that the Senate and House will work together to present a comprehensive
    retirement package to the President for signature later this year.

    Sincerely,

    Chuck DiVencenzo
    President and CEO

                                     ______

     National Association of Government Defined Contribution Administrators

                        201 East Main Street, Suite 1405

                              Lexington, KY 40507

                                 (859) 514-9161

                              Fax: (859) 514-9188

                                 www.nagdca.org

    July 28, 2021

    The Honorable Ron Wyden             The Honorable Mike Crapo
    Chairman                            Ranking Member
    U.S. Senate                         U.S. Senate
    Committee on Finance                Committee on Finance
    Washington, DC 20510                Washington, DC 20510

    Re: Building on Bipartisan Retirement Legislation: How Can Congress
    Help?

    Dear Chairman Wyden and Ranking Member Crapo:

    The National Association of Government Defined Contribution
    Administrators (NAGDCA) thanks you for your leadership on retirement
    issues affecting the public and private sectors. We appreciate today's
    hearing and look forward to future legislation arising out of it.

    NAGDCA governmental members oversee plans for participants from 60
    state and territorial government entities and 146 local government
    entities, including counties, cities, public safety agencies, school
    districts, and utilities. NAGDCA's members administer governmental
    deferred compensation and defined contribution plans, including Section
    457(b), 401(k), 401(a), and 403(b) plans. The association provides a
    forum for working together to improve defined contribution plan
    operations and outcomes by sharing information on investments,
    marketing, administration, and the federal laws and regulations
    governing these plans.

    With as many plans as NAGDCA represents, our legislative priorities are
    manifold. We outline some of our key priorities below.
    Allow 403(b) Plans to Invest in Collective Investment Trusts
    Under current law, private sector 401(k) plans are permitted to invest
    in collective investment trusts (``CITs''), an innovative investment
    option that utilizes unique asset classes and lifetime income options.
    CITs often have lower costs than the mutual funds and annuity contracts
    that many governmental 403(b) plans are currently restricted to
    investing in. Governmental plans serve the workers who are the backbone
    of our society: teachers, firefighters, police, and otherpublic
    servants. Allowing 403(b) plans to invest in CITs would correct the
    inequitable treatment of governmental employees and allow these public
    servants to access the innovative solutions and potentially lower costs
    that CITs offer to their private sector counterparts.
    Eliminate the ``First Day of the Month'' Requirement in 457(b) Plans
    Under current law, deferral election changes in 457(b) plans must be
    made prior to the first day of the month in which the change is to
    begin. This provision was enacted as an administrative convenience
    prior to the advent of modern record keeping technology, but now it is
    an administrative inconvenience that delays requested changes and
    creates an unnecessary impediment to participants' ability to manage
    their retirement assets. This restriction is not imposed on other
    retirement savings plans and should no longer apply to 457(b) plans.
     Allow Roth IRA Assets to Roll into 401(k), 457(b), and 403(b) Roth
            Plans
    If a plan permits it, participants may roll Roth account assets from an
    employer-sponsored plan into a Roth account in another employer-
    sponsored plan, but current law does not allow them to roll Roth IRA
    assets into Roth accounts in employer-sponsored plans. Allowing Roth
    IRA rollovers to Roth accounts in employer-
    sponsored governmental DC plans would help participants achieve
    consolidation, enhanced portability, and administrative simplicity.
    Maintain the Special Catch-Up Provision in 457(b) Plans
    Under current law, a governmental 457(b) plan may include a special
    catch-up contribution provision allowing a participant to make
    additional contributions to their plan in the last three years before
    retirement. This provision is widely used because government employees
    often are not in a financial position to save extensively in their
    early years in public service, so employees nearing retirement often
    make every effort to save extra contributions. The provision is also
    frequently used by retiring governmental employees to defer significant
    payments made to them upon their severance for accumulated vacation,
    sick leave and compensation time benefits. Without the special catch-
    up, these employees would have to recognize the additional income in
    the year of payment and assume a significant tax burden. We request
    that this special catch-up for 457(b) plans be retained to allow public
    servants to continue to save for retirement.
    Preserve Unique Plan Features, Generally
    NAGDCA believes that the existing unique plan features of the different
    types of governmental DC plans should not be changed merely for the
    sake of creating consistency with other plan types (e.g., merely for
    streamlining or consolidation). Changes to the existing plan structure
    are likely to be confusing to participants, creating risks of lower
    participation and savings. In addition, changes could introduce
    potentially significant costs for modifying recordkeeping systems, and
    those costs would likely then fall on plan participants. In addition,
    plan providers may need to maintain the existing infrastructure for any
    grandfathered assets, resulting in more administrative complexity and
    participant communications challenges.
    Preserve Both Pre-Tax and Roth Savings Options
    NAGDCA supports maintaining both pre-tax and after-tax savings options.
    Mandating a shift in retirement incentives toward after-tax savings
    could have adverse unintended consequences that have not been studied
    and could result in reduced retirement savings and decreased retirement
    security overall. NAGDCA's 2018 Benchmarking Survey found that while 62
    percent of plans offered a Roth option, only .3 percent of reported
    assets were Roth assets. Roth contributions are an option that are not
    fully understood or fully utilized by governmental defined contribution
    plan participants. Furthermore, Roth contributions appeal to some but
    not all of our participants. The immediate tax advantage created by
    pre-tax saving is an effective incentive for employees to enroll and to
    save. Losing or reducing that incentive would be detrimental to the
    goal of early enrollment and future retirement security. Therefore,
    retaining both pre-tax and Roth savings options provides the
    flexibility to be supportive of and responsive to the diverse needs of
    our participants and support their retirement readiness.

    We appreciate your longstanding attention to retirement policy and are
    happy to be a resource to you in any way. Please call David Levine
    (202-861-5436), Brigen Winters (202-861-6618), or Matt Petersen, NAGDCA
    Executive Director (859-469-5789) if you have any questions.

                Sincerely,

                Joshua Luskin
                Board President

                                     ______

                             Pew Charitable Trusts
    My name is John Scott, and I direct the Retirement Savings Project
    (https://www.pewtrusts.org/en/projects/retirement-savings) at the Pew
    Charitable Trusts. Pew is a nonpartisan, nonprofit research
    organization dedicated to applying evidence-based solutions to today's
    pressing public policy problems. I want to thank Chairman Wyden and
    Ranking Member Crapo for holding this hearing and considering how
    Congress, building on its long history of bipartisanship on retirement
    policy, can help improve retirement security for older Americans.

    Pew's involvement with retirement security extends back to 2004 when it
    funded the retirement security project at the Brookings Institution,
    which among other activities generated key proposals on automatic
    enrollment that has significantly boosted participation in employer-
    sponsored retirement savings plans as well as provided the foundation
    for today's state-facilitated auto-IRA programs. In 2014, Pew initiated
    the retirement savings project to understand the barriers that workers
    face in trying to save for retirement; the challenges to small business
    in offering retirement benefits to workers; and feasible solutions to
    these issues. In the course of our work, we focused on state auto-IRA
    programs as a feasible solution that would boost participation and
    savings among groups of workers that have historically not had access
    to retirement savings plans.

    I'd like to focus this statement on three areas: the Chairman's
    proposed expansion of the Saver's Credit that could significantly
    improve retirement security; the development of state facilitated auto-
    IRA programs, especially the positive effects on employers and the
    private market for retirement plans; and a need to develop a coherent
    national retirement security policy.

    Expanding the Saver's Credit

    There are many proposed legislative initiatives that have been
    introduced in this Congress, but in the interests of brevity, I would
    like to limit this statement to the proposed expansion of the Saver's
    Credit that, based on Pew's work, could significantly improve
    retirement security for many low to moderate income workers.

    I am especially appreciative of Chairman Wyden's leadership in
    proposing an expansion of the Saver's Credit in the Encouraging
    Americans to Save Act (https://www.congress.gov/bill/116th-congress/
    senate-bill/5035?s=1&r=9), an idea that has bipartisan appeal as
    evidenced by a similar proposal from your colleagues Senators Ben
    Cardin (D-MD) and Rob Portman (R-OH). As you know, the Saver's Credit
    currently provides a nonrefundable tax credit of 50%, 20%, or 10% of
    the first $2,000 of contributions to a retirement account during the
    year (up to a maximum of credit of $1,000), depending on a household's
    adjusted gross income. As currently structured, the Saver's Credit does
    not have a direct impact on retirement accounts. The credit is
    nonrefundable so it can reduce any required tax repayment to zero but
    not below. Moreover, the Saver's Credit is also reduced for households
    with children because it is applied after the nonrefundable Child Tax
    Credit.\1\
    ---------------------------------------------------------------------------
        \1\ The Center for Retirement Research at Boston College has an
    excellent issue brief that provides helpful illustrations of the
    Saver's Credit and its shortcomings: Alicia Munnell and Anqi Chen,
    ``Could the Saver's Credit Enhance State Coverage Initiatives?'', Issue
    Brief Number 16-7, April 2016.

    Chairman Wyden's proposal would revise the Saver's Credit in three
    ways. First, the proposal expands eligibility for the credit by
    increasing the income maximum to $32,500 for individuals and to $65,000
    for couples, with the maximums indexed for inflation. This increase in
    income limits would increase the pool of savers eligible for the
    ---------------------------------------------------------------------------
    credit.

    Second, the Chairman would also make the credit refundable so low to
    moderate income workers, who often do not have an income tax liability
    to offset with a credit, could receive a direct benefit. Third, and
    most critically, the credit would be deposited directly into the
    retirement account, including an individual retirement account (IRA),
    of the saver.

    The Chairman's legislation also provides for a coronavirus recovery
    bonus credit. The bonus credit is an additional 50% credit on the first
    $10,000 in retirement savings made during a five-year period beginning
    in 2023--for a maximum additional credit of up to $5,000

    Participation boost: The proposal could boost retirement security in
    two ways. First, the revamped Saver's Credit could act as a quasi-
    matching contribution that would encourage greater participation by
    working Americans who need to save for retirement. Like many other
    research organizations, Pew has found that the presence of a matching
    or employer contribution increases participation by workers. In our
    2016 national survey of workers (https://www.pewtrusts.org/en/research-
    and-analysis/reports/2017/09/survey-highlights-worker-perspectives-on-
    barriers-to-retirement-saving) at small to mid-sized firms, for
    example, fulltime employees were more than twice as likely to
    participate when employers contribute to their retirement accounts than
    workers whose employers do not contribute. When we asked workers their
    reactions to a hypothetical auto-IRA program, the least favorable
    reaction was to the lack of an employer contribution. And according to
    Pew's analysis (https://www.pewtrusts.org/en/research-and-analysis/
    issue-briefs/2016/09/employer-sponsored-retirement-plan-access-uptake-
    and-savings) of the Survey of Income and Program Participation (SIPP),
    take-up rates rise by 18 percentage points when employers match worker
    contributions.

    Today, approximately 68% of eligible workers, almost 400,000, are
    saving in the three operational state auto-IRA programs, but if a
    contribution in the form of a refundable tax credit has the same effect
    as found in the SIPP, that participation rate could jump to nearly 86%
    with more than 100,000 additional savers in just those three states.
    Beyond just the jump in overall participation, a refundable tax credit
    acting as a matching contribution could induce younger workers to start
    saving earlier in their careers, which would be an especially impactful
    benefit as their savings would have more time to grow through
    investment returns.

    Increase in retirement savings: The other benefit of an expanded
    Saver's Credit is the increase in savings. If a saver put away $2,000 a
    year over a 30-year career and earned a real rate of return of 5% per
    year, that person would have $139,522. If that saver qualifies for the
    full $1,000 Saver's Credit each year by saving under the same
    assumptions, they would have $209,282 by year 30. In other words, an
    expanded Saver's Credit could increase retirement savings by nearly
    $70,000.

    Given that the median private sector retirement account balance for
    households in their late 50s and early 60s is less than $100,000,\2\
    the proposed expansion of the Saver's Credit would lift many older
    households out of a situation of financial vulnerability. The
    additional funds would enable retiring workers to delay claiming of
    Social Security (https://www.pewtrusts.org/en/research-and-analysis/
    issue-briefs/2021/03/how-auto-iras-help-retirees-delay-claiming-social-
    security), boosting their benefits by 7 to 8% for each year that
    claiming is delayed. The additional savings would also provide a
    critical buffer for unexpected financial shocks in retirement, not
    least of which are medical bills that are not covered by Medicare or
    private insurance and that are a leading cause of debt in old age. The
    expanded Saver's Credit might also make annuities, whether life or
    delayed/longevity insurance, more meaningful and thereby provide an
    additional income stream to supplement Social Security.
    ---------------------------------------------------------------------------
        \2\ Vanguard, How America Saves, 2021, https://
    institutional.vanguard.com/content/dam/inst/vanguard-has/insights-pdfs/
    21_CIR_HAS21_HAS_FSreport.pdf, Figure 52: The median account balance
    for participants between the ages of 55 and 64 is $84,714.

    Streamlining the process: Depositing a tax credit directly into a
    saver's retirement account will involve some technical work, and I
    would encourage the Congress to work with the administration in making
    this process even more efficient. Currently and under the proposals for
    expansion, the saver must file a tax return to claim the Saver's
    Credit. The problem with this requirement is that some citizens do not
    file a return and even for those that do file, they may not know about
    the Saver's Credit. The Earned Income Tax Credit is often given as an
    example of a benefit that is not claimed by as many as 20 percent of
    eligible taxpayers (https://www.
    eitc.irs.gov/eitc-central/participation-rate/eitc-participation-rate-
    by-states). But it might be possible to streamline the process for
    depositing the Saver's Credit given that financial institutions
    managing and holding retirement savings track and report contributions
    and that the Social Security Administration as well as the IRS have
    data on wages and salaries. At the direction of Congress, for example,
    the Treasury Department and the Social Security Administration could
    explore ways to make the depositing of the Saver's Credit as efficient
    as possible.

    State-facilitated Auto-IRA Programs (Auto-IRAs)

    As a precursor to the discussion on a national retirement policy, I'd
    like to summarize what we know about the biggest innovation today,
    state-facilitated automatic enrollment programs also known as auto-
    IRAs. As discussed above, auto-IRAs are extending coverage to a new
    class of workers who largely have not saved for retirement. Auto-IRAs
    were intentionally designed with automatic enrollment, a feature of
    some private sector plans that increases employee participation and
    savings.

    The idea of an automatic enrollment, payroll deduction IRA program took
    hold at the state level with California passing legislation for a
    market study in 2012 and eventually program enactment in 2016. Today, 9
    states in total have enacted auto-IRAs. Three states--California,
    Illinois, and Oregon--are active and enrolling savers.

    The metrics so far are impressive. According to the consulting firm
    Massena Associates (https://myemail.constantcontact.com/Retirement-
    Security-Matters---July-15--
    2021.html?soid=1133778904165&aid=swvPsJGI6cI), combined assets are now
    over $275 million--a quarter of a billion dollars saved across the
    three programs. Program assets are up almost 60% since the start of the
    year. Funded accounts are over 346,000--up 31% year to date double
    where they were at the end of September 2020. Average account balances
    are at $770, which includes many new accounts. Average contributions in
    each of the programs are running at or over $115 a month. As noted
    above, participation is approximately 68%.

    Effects on employers: An important aspect of the discussion about auto-
    IRAs is the effect on employers, an issue that Ranking Member Crapo
    raised during the hearing. Across the three programs in operation, more
    than 34,000 employers have now registered, and over 14,000 have started
    payroll deductions for their employees.

    In Oregon, Pew surveyed participating employers (https://
    www.pewtrusts.org/en/research-and-analysis/articles/2020/07/30/
    employers-express-satisfaction-with-new-oregon-retirement-savings-
    program) in 2019 and 2020 to assess how they experienced the initial
    registration and ongoing payroll contribution processes. Nearly 3 in 4
    (73%) said they were either satisfied or neutral about the program.

    OregonSaves does not charge businesses any participation fees, and 79
    percent said that they have not experienced any related out-of-pocket
    costs. Those that have faced additional costs said office supplies and
    payroll processing time were the most common. Eighty percent also said
    that they are hearing only ``a little'' or ``no questions at all'' from
    their employees about OregonSaves. One reason for that may be that
    workers are helped directly from the program's client service team.

    This positive reaction among employers to a no-cost retirement benefit
    can also be seen in California. As of August 31, 2020, before any
    enrollment deadline, 2,249 firms employing nearly 100,000 workers had
    enrolled. More than 700 companies had started processing payroll
    contributions, and the program had amassed over $8.7 million in assets.

    Why the positive response? According to Pew's 2017 survey (https://www.
    pewtrusts.org/en/research-and-analysis/issue-briefs/2017/06/employer-
    barriers-to-and-motivations-for-offering-retirement-benefits), many
    employers want to offer retirement benefits to their workers but say
    they cannot because of high startup costs and limited administrative
    capacity. Some said they see offering retirement benefits to attract
    and retain workers, but 67% of those who supported auto-IRAs said they
    felt such a program simply ``would help my employees.''

    In the more recent survey in Oregon, responses to an open-ended
    question reflect similar sentiments about OregonSaves. Among the
    answers were:

          ``It has been an easy and transparent method for our employees
    to begin saving for their future. As a very small business it has been
    so appreciated as other options seemed out of reach for us.''
          ``It is great having a free option for savings for our
    employees. We eventually want to offer our own program, but this is
    nice for the time being.''
          ``I do appreciate the program overall. It helps younger staff
    start saving early. From a small business that can't afford to have a
    retirement plan it is a nice option for our team.''

    The work of Pew and others show that there is significant small
    business support for a public-private partnership that can help
    employers facilitate a benefit at no cost that helps workers build a
    secure retirement.

    State auto-IRA effects on private sector market: As more states enact
    auto-IRAs for private sector workers who can't save through their jobs,
    policymakers and analysts have speculated about the potential impact on
    employers: Would these state programs ``crowd out'' the private market
    for plans such that businesses would not adopt their own 401(k)s or
    comparable alternatives? Would some employers decide to no longer offer
    their own plans? Or, alternatively, could these programs encourage new
    plan growth?

    These questions are rooted in earlier surveys. In 2017, Pew published
    the results of national survey of small-business owners (https://
    www.pewtrusts.org/en/research-and-analysis/issue-briefs/2017/01/small-
    business-views-on-retirement-savings-plans) and benefits managers that
    detailed their views of hypothetical auto-IRA programs. Among those
    with retirement plans and five to 250 workers, only 13% said they would
    drop theirs and enroll in such a program if launched in their state.

    Among small and midsize employers without plans, 52% said that they
    would start their own plan rather than enroll workers in the state-
    sponsored program. That survey also suggested one reason that these
    employers might be prompted to adopt their own plans: Most of them
    won't offer retirement benefits until they are financially stable and
    already offering other benefits. The availability of a statewide auto-
    IRA might encourage those employers that have the means but have not
    decided to sponsor their own plans.

    Preliminary data from annual filings to the U.S. Department of Labor by
    employer-sponsored plans suggests that in states that have created
    auto-IRAs, employers with plans continue to offer them and businesses
    without plans are still adopting new ones at similar or higher rates
    than before the state options were available.

    Since 2013, before the first state auto-IRA programs were introduced,
    the percentage of new plans as a share of all employer-sponsored plans
    increased nationwide from roughly 6% to nearly 8% by 2019.

    The three states implementing state auto-IRA programs show a similar
    trend--with the proportion of new plans holding steady or increasing in
    each. In 2019, for example, Oregon and California had some of the
    highest proportions of new plan adoption, with Illinois' proportion
    just slightly lower than the national average (Figure 1).

    During the same period, the proportion of employer sponsors terminating
    or ending their plans was consistently about 4% of all plans, both
    nationwide and in the states implementing auto-IRA programs (Figure 2).
    The share of plans that were ended began to trend down slightly toward
    the end of the period: The U.S. average and the proportion of plans
    terminated in California, Oregon, and Illinois fell to just 3% in 2019.

    This early evidence from California, Oregon, and Illinois indicates
    that auto-IRAs appear to complement the private sector market for
    retirement plans such as 401(k)s. Some employers may be moving toward
    plan sponsorship in response to the state auto-IRA programs. Meanwhile,
    those that cannot afford their own plans can take advantage of a no-
    cost, basic savings program for their workers.

    Steps Toward a Comprehensive National Retirement Policy

    The interaction between auto-IRA programs and the private market for
    retirement plans just discussed provides a segue to the topic of
    national retirement policy. In just 3 years, we will reach the 50th
    anniversary of the passage of the Employee Retirement Income Security
    Act (ERISA). While enormous progress has been made in retirement policy
    since 1974, much more needs to be accomplished, and in some areas we
    may have slid backwards in terms of ensuring employee retirement income
    security.

    Employees amass the bulk of their retirement savings through workplace
    plans. After the IRS released regulations implementing the 401(k) plan
    in 1981, we have seen a large increase in the number of savers because
    of employers adopting these plans. However, that progress was offset by
    the decrease in the number of defined benefit (DB) plans.

    [GRAPHIC] [TIFF OMITTED] T2821.009

    .eps[GRAPHIC] [TIFF OMITTED] T2821.010

    .epsMoreover, this shift from DB to defined contribution (DC) plans
    like 401(k)s has meant more decision-making burdens for workers, who
    are not up to performing so many complicated tasks such as deciding how
    much to save, how to invest savings, and how to spend down savings in
    retirement. For example, our own research (https://www.pewtrusts.org/
    en/research-and-analysis/issue-briefs/2017/11/many-workers-have-
    limited-understanding-of-retirement-plan-fees) has shown that many plan
    participants do not read fee disclosures or even when they do, they do
    not understand them, potentially exposing their savings to high fee
    investments. The shift of burdens from employers and the government too
    workers has meant that workers are not as well prepared for retirement
    as they could be even with behavioral-based tools like automatic
    enrollment and automatic escalation of contributions.

    While the auto-IRA programs exhibit innovation and an increase in
    coverage in a way that complements the voluntary, employer-based
    system, they suffer from the same shortcoming as employer plans: the
    burden is on workers to achieve their retirement security. Moreover,
    the development of auto-IRA programs has been haphazard across the
    states, and while programs are similar from state to state, there are
    differences in terms of coverage and scope.

    Social Security also is showing signs of aging as it faces a funding
    shortfall. Without action by Congress, retirees face a significant
    benefit cut. We all assume that Congress will act in time, but
    continued inaction erodes the faith in the system and narrows options
    for a long-term solution.

    All these forces taken together suggest that we need to revisit
    national retirement policy as we approach ERISA's 50th anniversary.
    ERISA promised to create a coherent policy that would support a decent
    standard of living in retirement. As I discussed above, the state auto-
    IRA programs appear to complement the private
    employer-sponsored retirement system, but despite these and other
    innovations, retirement policy is developing in a piecemeal and halting
    fashion with a consequent and ongoing erosion in retirement security
    except for a privileged minority. The goals of access to retirement
    plans, high participation, and credible income security in old age
    should be revisited and reformulated as a shared responsibility among
    workers, employers, and the government.

    Congress might consider a national commission on retirement security
    for private sector workers as a step towards a national savings
    program. Any commission should address the whole scope of retirement
    preparation, the tax structure supporting retirement security, the role
    of the key stakeholders, and the need for legislative action including
    revisiting the key assumptions underpinning ERISA.

                                     * * *

    Thank you for holding this hearing and providing an opportunity to
    submit our views. I would be happy to supplement this statement with
    additional information.

    John Scott, Project Director, Retirement Savings, The Pew Charitable
    Trusts
    Email: jscott@pewtrusts.org

                                     ______

                            Retirement Clearinghouse

                       1916 Ayrsley Town Blvd., Suite 200

                              Charlotte, NC 28273

                              Phone: 704-295-1234

                                Fax 704-295-1202

                                                          July 28, 2021

    The Honorable Ron Wyden             The Honorable Mike Crapo
    Chairman                            Ranking Member
    U.S. Senate                         U.S. Senate
    Committee on Finance                Committee on Finance
    Washington, DC 20510                Washington, DC 20510

    Re: Building on Bipartisan Retirement Legislation: How Can Congress
    Help?

    Dear Chairman Wyden and Ranking Member Crapo:

        Retirement Clearinghouse (``RCH'') thanks you for your leadership
    on retirement issues and your commitment to helping Americans retire
    with dignity. Today's hearing is critically necessary to highlight the
    importance of access to retirement vehicles for all citizens.

        RCH is a financial technology services organization uniquely
    focused on the issues that arise because of the proliferation of small
    retirement accounts. We work every day with plan sponsors and service
    providers to deal with those issues and have pioneered solutions, like
    Auto Portability, that are proven to deliver unprecedented benefits to
    America's defined contribution system.

        Auto Portability is the routine, standardized, and automated
    movement of a retirement plan participant's 40l(k) savings from their
    former employer's plan to an active account in their current employer's
    plan. Cashing out is one of the most detrimental choices a person can
    make when it comes to retirement readiness. A hypothetical 30-year-old
    worker who cashes out a $5,000 401(k) savings account today will
    forfeit the $30,000 that the balance would have accrued by age 65.

        Fortunately, RCH has developed Auto Portability to specifically
    reduce the risk of people cashing out their retirement savings when
    they are involuntarily moved from an employer's plan into an IRA. Using
    new technology, RCH searches the databases of retirement account record
    keepers and looks for duplicate accounts. When RCH finds a match, we
    contact the account holder and ask if they would like to roll over
    their old account into their new account. The account is then
    automatically transferred unless the participant opts out. Extensive
    privacy safeguards are in place to ensure personal data is never
    compromised.

        We are proud to have recently partnered with Alight Solutions to
    make Auto Portability available to their 5 million plan participants by
    the end of 2021, and we look forward to bringing Auto Portability to
    more Americans in the future. Expanding Auto Portability is good
    policy: under a scenario where Auto Portability is implemented over the
    course of 10 years and stays in effect for a generation, we estimate
    that more than 125 million workers would avoid cashing out their small-
    balance accounts and, instead, preserve their savings in their current-
    employer plans. Furthermore, $1.5 trillion would be added to Americans'
    retirement savings (measured in today's dollars).

        Auto Portability is just one piece of the retirement puzzle. We
    appreciate your commitment to improving retirement security for all
    Americans and your attention to this critical issue. Should you have
    any questions or require additional information, please do not hesitate
    to let us know.

                Sincerely,

                J. Spencer Williams
                President and Chief Executive Officer
                swilliams@rch1.com
                Phone: 704-248-1131
                Fax: 704-353-9800

                                     ______

                           Retirement Solutions, LLC

                               235 Main St., #158

                               Madison, NJ 07940

                              Phone: 973-796-4230

                      E-Mail: jane@retirement-solutions.us

       What's the Best Way to Address Our Nation's Retirement Shortfall?

    There is no doubt this nation is confronting a retirement crisis.
    According to the Government Accountability Office's 2015 report, ``Most
    Households Approaching Retirement Have No Savings,'' about 55 percent
    of households age 55-64 have less than $25,000 in retirement savings,
    including 41 percent who have zero.\1\
    ---------------------------------------------------------------------------
        \1\ Government Accountability Office's 2015 report, ``Most
    Households Approaching Retirement Have No Savings.''

    Nearly three-quarters of Americans surveyed by SimplyWise, a financial
    technology firm, in their July 2020 Retirement Confidence Index said
    they were worried about retirement and another 20% said they intend to
    delay their Social Security benefits.\2\
    ---------------------------------------------------------------------------
        \2\ ``More Americans are worried about retirement now and their
    plans have changed,'' Allessandro Malito, MarketWatch, July 14, 2020.
    ---------------------------------------------------------------------------

      Ghilarducci's Proposals Have Ranged from Including Hedge Funds and
     Private Equity in the Plans to Making Them Closer to A Low-Cost, Less
                                Risky Index Fund

    Teresa Ghilarducci, an economics professor at the New School for Social
    Research has proposed that the Thrift Savings Plan (https://
    www.tsp.gov/), or TSP, which is available to federal employees and
    members of the military (https://www.
    militaryonesource.mil/military-life-cycle/new-to-the-military/getting-
    connected/thrift
    -savings-plan-options-making-your-retirement-dollars-work-for-you/
    #::text=The%20
    best%20way%20to%20get,to%20sock%20away%20some%20cash.&text=Any%20contri
    butions%20you%20make%20are,or%20stay%20in%20until%20retirement.),
    should be offered to low-income workers who aren't covered by a
    plan.\3\ Employees and employers would each contribute 5% of the
    employee's salary to the account. However, there are no proposals to
    cover middle and upper-class workers with no plan--according to the
    GAO's 2015 report about half of ALL workers over 55 have no retirement
    savings.\4\
    ---------------------------------------------------------------------------
        \3\ ``Everyone should have the retirement plans federal employees
    enjoy,'' Teresa Ghilarducci and Kevin Hassett, Washington Post, March
    29, 2020.
        \4\ GAO Report. Ibid.

    However, while the TSP is admired by many for offering low-cost index
    funds to its members, it wasn't until 2014 when most of the default
    assets owned by federal workers switched from G Funds, which invest in
    low-performing government securities, to the age-appropriate, lifecycle
    ``L Fund'' (also known as a target-date fund) with higher returns due
    to investments in stocks. That switch was the result of the passage of
    the Smart Savings Act, which was introduced by Senators Elizabeth
    Warren (D-MA) and Rob Portman (R-OH).\5\
    ---------------------------------------------------------------------------
        \5\ ``Congress passes `Smart Savings Act' to Strengthen Retirement
    Savings for Federal Employees,'' Congressional Documents and
    Publication, December 15, 2014.

    While her proposal is a good start to getting 401(k) plans on track to
    deliver a solid retirement, there should be concerns about
    Ghilarducci's collaborator on the current proposal, Kevin Hassett, a
    visiting fellow at the Hoover Institution. When Hassett was working for
    the Trump administration on health matters his response to the COVID-19
    panic was to downplay the danger of it and push the administration to
    re-open the economy amid lockdowns and social distancing.\6\ Hassett
    built a model that indicated that COVID-19 deaths would drop off to
    near zero, contradicting assessments by public health experts, and was
    widely panned by academics and commentators; the predictions of his
    model failed.\7\,\8\ What's more, as chairman of the White
    House Council of Economic Advisors, Hassett released analysis in 2018
    indicating that real wage growth under Trump was higher than reported,
    despite figures indicating that wage growth had not picked up.\9\
    ---------------------------------------------------------------------------
        \6\ ``34 Days of Pandemic: Inside Trump's Desperate Attempts to
    Reopen America,'' By Philip Rucker, Josh Dawsey, Yasmeen Abutaleb,
    Robert Costa and Lena H. Sun, Washington Post, May 2, 2020.
        \7\ ``No Virus Deaths by Mid-May? White House Economists Say They
    Didn't Forecast Early End to Fatalities,'' Jim Tankersley, New York
    Times, May 4, 2020.
        \8\ ``The Trump Administration's `Cubic Model' of Coronavirus
    Death, Explained,'' Mathew Yglesias, Vox, May 8, 2020.
        \9\ ``White House Says Wages Are Growing When Measured
    Differently,'' Jim Tankersley, New York Times, September 15, 2018.

    It's a relief that Ghilarducci has seen the light when it comes to
    investment strategy because her previous proposal called for a riskier
    investment strategy and a lower employer contribution rate. In 2018 as
    President Biden's pension adviser she teamed up in with Tony James of
    the Blackstone Group to propose The Retirement Savings Plan, which
    would require workers and their employers to contribute at least 3
    percent of the employee's salary each year into a ``Guaranteed
    Retirement Account'' that ``could be invested in opportunities
    typically reserved for institutional investors--less liquid, higher
    return asset classes. These include high-yielding and risk-reducing
    alternative asset classes like real estate, hedge funds, managed
    futures and commodities.''\10\
    ---------------------------------------------------------------------------
        \10\ The Retirement Savings Plan by Tony James and Teresa
    Ghilarducci, October 21, 2015, http://teresaghilarducci.org/blog/333-
    the-retirement-savings-plan-by-tony-james-and-teresa-ghilarducci.

    Two problems with the proposal: First, the 3% employer-employee
    contribution rate is LOWER than the current typical combined employee
    contribution of 5 percent of pay and employer contribution equal to 3
    percent of pay. And by including hedge funds along with private equity
    as investments the proposal would have moved the retirement funds into
    riskier investments than those typically featured in 401(k) plans,
    which are low-cost passive index mutual funds that typically outperform
    managed funds--the same funds that are featured in the Thrift Savings
    Plan--contrary to Ghilarducci's assertion that most 401(k) investments
    are in ``pretty crappy products.''\11\
    ---------------------------------------------------------------------------
        \11\ ``She wants to kill your 401(k),'' Emily Cadei, USA Today,
    March 16, 2015.

    In fact many mutual funds managed by Vanguard are ranked at the top of
    the list of U.S. mutual funds by assets under management (https://
    en.wikipedia.org/wiki/
    List_of_US_mutual_funds_by_assets_under_management). Along with
    BlackRock (https://en.wikipedia.org/wiki/BlackRock) and State Street
    (https://en.wikipedia
    .org/wiki/State_Street_Corporation), Vanguard is considered one of the
    Big Three index funds that dominate corporate America. What's even more
    puzzling is her switch to supporting the TSP investment model since
    ---------------------------------------------------------------------------
    most, if not all of its investments are in index funds.

    Ghilarducci's previous approval of private equity is concerning, given
    that many consumer advocates have denounced it. Ghilarducci told
    Investment News in June of 2020 ``Most 401(k)s are not well-managed and
    are often used for short term purposes. Private equity in 401(k)s is a
    half-step towards solving the fatal flaws in the voluntary, individual
    directed, for profit 401(k) system.''\12\
    ---------------------------------------------------------------------------
        \12\ ``DOL encourages use of private equity funds in retirement
    plans,'' Investment News, Mark Schoeff, June 3, 2020.

    Consumer advocates couldn't disagree more. When Eugene Scalia was the
    Secretary of Labor in the Trump administration and said private equity
    investments will help Americans ``gain access to alternative
    investments that often provide strong returns'' Dennis Kelleher, chief
    executive of Better Markets, rebutted him: ``The last thing the DOL and
    the SEC should be doing is directing more investment money from
    ---------------------------------------------------------------------------
    transparent public markets to high-risk dark private markets.''

    Barbara Roper, director of investor protection for the Consumer
    Federation of America, wrote a letter to Scalia denouncing the idea.
    ``Far from providing the benefits touted without any supporting
    evidence by the private equity industry, these investments are likely
    to saddle middle-class retirement savers with high costs and lock them
    into unnecessarily complex investments that under perform publicly
    available alternatives.'' Roper's letter was co-signed by 14 advocacy
    groups and five labor unions, including the AFL-CIO, the United
    Steelworkers and the National Education Association.\13\
    ---------------------------------------------------------------------------
        \13\ Group sign on letter urging withdrawal of DOL-PE Guidance,
    Consumer Federation of America, June 2020.
    ---------------------------------------------------------------------------

                       A Blueprint for Retirement Reform

    Do we need 401(k) reform? Absolutely.

    Compare the nest eggs of Americans nearing retirement with those of
    their counterparts in Australia. According to the GAO's report about
    29% of households 55 or older have no retirement savings from a defined
    benefit plan OR a 401(k) plan. Among those with some savings the median
    amount saved is about $104,000 for those aged 55 to 64 and $148,000 for
    those aged 65 to 74. Given that the formula for retirement adequacy is
    to have accumulated 10 to 14 times your salary nearing retirement and
    the median income for that age group is around $76,000 attention must
    be paid.\14\
    ---------------------------------------------------------------------------
        \14\ GAO Report. Ibid.

    On the other hand, Australians are scheduled to retire with nest eggs
    of $500,000 to $700,000--more than four times that of their American
    counterparts. The reason why Australians' nest eggs are fuller than
    those of their American counterparts? Very simply: Australian employers
    are REQUIRED to contribute to their version of a 401(k) account--the
    current contribution rate is equal to 9.5% of salary, increasing to 12%
    in 2027, compared to the measly 3% matching contribution rate typically
    offered by American employers.\15\
    ---------------------------------------------------------------------------
        \15\ Superannuation in Australia, https://en.wikipedia.org/wiki/
    Superannuation_in_Australia.

    What's more, the Ozzie employer contribution is made regardless of
    whether the employee contributes--it's not simply a ``matching
    contribution.'' Thirty nine percent of the Vanguard Group's client's
    workers don't participate in their employer's plan and end up with
    nothing, according to their 2020 How America Saves report.\16\
    ---------------------------------------------------------------------------
        \16\ Vanguard Group, How America Saves 2020.
    ---------------------------------------------------------------------------

                The Problems: Our Economy Isn't Trickling Down
                          to the Average Joe and Jane

    The kind of 401(k) reform the country desperately needs involves
    including benefit-deprived part-timers in the plan--whether they are
    part-time college professors or ``Task-Rabbiters''--mandating more
    generous contributions along with ensuring that employees ``own'' the
    employer contributions as soon as they are made so that they don't lose
    out once they change jobs.

    Most of the job growth in the 21st century has been in low-wage jobs
    without benefits--including workers with a college degree AND student
    loan debt. When it comes to measuring economic health, most economists
    are ``econ-nitwits'' because they only measure unemployment and not
    under-employment. In the decade between 2005 and 2015, literally all of
    the net U.S. job growth was in nonstandard, contingent--AKA part-time--
    work, according to economists Lawrence Katz and Alan Krueger, as Robert
    Kuttner observed in his book, ``Can Democracy Survive Global
    Capitalism.'' While total US employment during that decade increased by
    9.1 million jobs nonstandard employment grew by 9.4 million. In other
    words, during a decade that included a steep recession followed by what
    appeared to be a strong recovery, all of the net job growth--and more--
    was in jobs that most people would take only as a last resort.

                   CEO Pay Is Through the Roof in the U.S.--
                     More Than 9 Times What It Was In 1980

    In the not-so-old days U.S. companies valued their workers over their
    shareholders and compensated them well--the ratio of CEO-to-worker pay
    in the S&P 500 was 42 to one in 1980 compared to 380 to one in 2011,
    according to ``The CEO File,'' in the June 2012 issue of Reuters
    Magazine. This is the highest ratio (https://usatoday30.usatoday.com/
    money/companies/management/2008-06-29-europe-ceo-pay_N.htm) in the
    world; the CEO/worker ratio in France is 23 to one, 20 to one in
    Germany and 26 to one in Italy.\17\
    ---------------------------------------------------------------------------
        \17\ ``As CEO pay in Europe rises, so does talk of curbing it,''
    Jeffrey Stinson, USA Today.
    ---------------------------------------------------------------------------

                Some of the Wealthiest Companies With Plans Are
                         Short-Changing Their Employees

    401(k) plans essentially replaced defined benefit pensions, even though
    their creation in 1978 by retirement consultant Ted Benna was meant to
    IMPROVE DB plans rather than replace them. In 2014 Bloomberg's ranking
    (https://www.
    bloomberg.com/news/articles/2014-07-22/conocophillips-best-among-401-k-
    plans-with-facebook-last) of 401(k) plans at the 250 biggest companies
    found that some of the least generous companies are among the richest:
    Facebook, Amazon and Whole Foods Market, which was subsequently
    acquired by Amazon. The natural-foods grocer offered a measly employer
    annual maximum 401(k) contribution of $152, when it was a stand-alone
    company.\18\
    ---------------------------------------------------------------------------
        \18\ ``ConocoPhillips Proves Best Among 401(k) Plans, With Facebook
    Last,'' Margaret Collins and Carol Hymowitz, Bloomberg, July 22, 2014.

    Not only does Amazon, founded by the world's richest man, Jeff Bezos,
    require employees to wait three years after they join the company to be
    eligible for a matching contribution but they only match up to 2
    percent of employees' salaries if they contribute 4 percent compared to
    the typical employer match of 50 cents on the dollar for up to 6% of
    pay. To make matters worse, the match is made entirely in company
    stock, which is surprising given that many other companies who used to
    offer a stock match switched to the more-liquid and less-volatile cash
    match after Enron's collapse.\19\
    ---------------------------------------------------------------------------
        \19\ ``Amazon's 401(k) plan is pretty brutal, too,'' Suzanne
    Woolley, Margaret Collins, Spencer Soper, Benefits Selling, August 25,
    2015.

    Facebook, worth a whopping $97 billion-plus in 2018, finished last in
    the Bloomberg rankings, which were based on 2012 data, the latest
    available for all companies. Founded in 2004, Facebook offered NO
    matching contribution until 10 years later in 2014. It currently
    matches 50% up to 7 percent of pay. Anyone who thinks that Facebook's
    employees can afford to fund their own retirement is in denial; most of
    Facebook CEO Mark Zuckerberg's generation can barely make ends meet. A
    recent Wells Fargo study of millennials between the ages of 22 and 32
    indicated that 87 percent didn't have enough money to save for
    retirement--81 percent were paying off other debts, most likely college
    loans. Because of these loans, fewer of them can qualify for
    mortgages--which isn't just bad for the mortgage industry but bad for
    millennials since home equity is a major retirement asset.\20\
    ---------------------------------------------------------------------------
        \20\ ``A Paradox: Optimistic Millennials Burdened by Debt,''
    Houston Style Magazine, Jim Chapman, July 23, 2013.

     Part-time Workers Who Must Have Multiple Jobs--Whether They Are Uber
            Drivers or Adjunct Professors--Deserve a Retirement Plan

    Task Rabbit's company website calls it ``a marketplace dedicated to
    empowering people to do what they love.'' It's hard to believe that
    lovable jobs include cleaning garages, painting apartments, or
    assembling Ikea products. There are a whopping 75 million gig workers
    in America according to the Federal Reserve.\21\ What economists call
    ``contingent'' workers--or casual labor--generally don't get
    unemployment insurance, workers' comp, or fringe benefits; they fully
    fund their Social Security benefits and can't organize unions. As
    Robert Kuttner observes in his article in The American Prospect, ``The
    Task Rabbit Economy,'' employers should at least be required to provide
    the same benefits to temps and part-timers that full-time workers
    receive, to discourage the strategy of redefining normal jobs as
    contingent ones. The Dutch version of ``flexicurity'' accords part-
    timers the same labor rights as full-
    timers, with the result that most part-time jobs in the Netherlands are
    considered good jobs.
    ---------------------------------------------------------------------------
        \21\ ``Number of gig workers from Contingent Workers Could be
    Eligible for Social Security Disability Benefits,'' Selig Law Group,
    May 16, 2019.

    The good news is that thanks to President Biden's labor secretary,
    Marty Walsh, Uber and Lyft drivers may get unionized. ``In a lot of
    cases gig workers should be classified as employees,'' Walsh told
    Reuters in an interview (https://www.reuters.
    com/world/us/exclusive-us-labor-secretary-says-most-gig-workers-should-
    be-classified-2021-04-29/). ``These companies are making profits and
    revenue and I'm not (going to) begrudge anyone for that because that's
    what we are about in America but we also want to make sure that success
    ---------------------------------------------------------------------------
    trickles down to the worker.''

    Cherri Murphy, an organizer with Bay Area-based Gig Workers Rising,
    said ``It's refreshing to have a Department of Labor that does not turn
    a blind eye to the plight of gig workers. Misclassification of gig
    workers is rampant and the pandemic has exacerbated inequality for app-
    based workers.'' She called employee classification an ``important
    first step to critical reform we need.''\22\
    ---------------------------------------------------------------------------
        \22\ ``U.S. Labor Secretary supports classifying gig workers as
    employees,'' Nandita Bost, Reuters, April 28, 2021.
    ---------------------------------------------------------------------------

           The Majority of College-Degreed Professors Are Struggling

    And it's not just part-time working-class folks who would be helped by
    an improved system but part-time professors--the folks who are stuck
    with the burden of making payments on the student loans that were
    supposed to prepare them for a well-paying jobs.

    Elite private colleges have saved money by increasing the number of
    adjunct professors. Incredibly, the majority of professors in the U.S.
    are benefit-deprived. According to the American Association of
    University Professors, 70 percent (https://www.chronicle.com/article/
    adjuncts-build-strength-in-numbers/) of college faculty work outside
    the tenure track.\23\ What's more, nearly 25 percent of adjunct faculty
    members rely on public assistance, and 40 percent struggle to cover
    basic household expenses, according to a 2020 report, ``An Army of
    Temps,'' from the American Federation of Teachers. Nearly a third of
    the 3,000 adjuncts surveyed for the report earn less than $25,000 a
    year, putting them below the federal poverty guideline for a family of
    four.\24\
    ---------------------------------------------------------------------------
        \23\ ``Adjuncts Build Strength in Numbers,'' Audrey Williams June,
    Chronicle of Higher Education, November 5, 2012.
        \24\ ``An Army of Temps,'' American Federation of Teachers, 2020.

    Many professors are taking matters in their own hands and forming
    unions.\25\ Overall, about a fourth of the nation's full-time faculty
    members and about a fifth of its part-time faculty are now represented
    (https://www.chronicle.com/article/part-time-faculty-are-catching-up-
    to-full-timers-in-union-representation/) by collective-bargaining
    units.
    ---------------------------------------------------------------------------
        \25\ ``Part-time Faculty Are Catching Up to Full-Timers in Union
    Representation,'' Peter Schmidt, Chronicle of Higher Education,
    November 18, 2011.

    It was Anne McLeer's own experience as an adjunct professor at George
    Washington University that inspired her to not only start a union but
    help lead one: SEIU's Local 500's Higher Education Work.\26\ ``Before I
    started teaching I was a grad student with a 20-hour a week job as an
    administrative assistant to one of my dissertation advisers. I was
    considered ``permanent part-time staff'' and had access to a retirement
    plan and health plan. The day I gave up that job and I started
    teaching, which you would think is closer to the mission of the
    university, I became a `temporary part-time person' with absolutely
    nothing.''
    ---------------------------------------------------------------------------
        \26\ ``Ann McLeer's Experience Is From Rich Colleges, Poor
    Professors,'' Jane White, Huffington Post, May 4, 2013.

    McLeer's Local 500 now represents part-time faculty at George
    Washington University, American University, Montgomery College and
    Georgetown University. At GWU and American they've achieved much higher
    rates of pay and created more job security by making it more difficult
    for management to dismiss adjuncts for no reason.

              The Solution: Require Employers to Provide Benefits
                            ALL the Workers Deserve

    Step One: Mandate Portable Benefits for Gig Workers: All workers, from
    Uber drivers to adjunct professors, must be covered by a retirement
    plan, along with other benefits.

    A plan for these gig workers, The Shared Security System, was created
    by entrepreneur Nick Hanauer, who co-formed the Seattle-based venture
    capital company, Second Avenue Partners and David Rolf, the founder and
    President Emeritus of SEIU 775 and a former Vice President of SEIU
    International. Under their Shared Security System workers would earn
    portable benefits, with every worker having a retirement account along
    with having vacation time, sick time and health insurance.\27\
    ---------------------------------------------------------------------------
        \27\ ``Portable Benefits for an Insecure Workforce,'' Nick Hanauer,
    David Rolf, The American Prospect, Winter 2017.

    As the authors point out, strong economies are completely compatible
    with high wages and labor standards--fast-food workers make a minimum
    of $20 an hour in Denmark, and the average autoworker in Germany made
    more than $67 per hour including salary and benefits--compared to the
    $34 average in the United States. Compare the $20 minimum wage hour in
    Denmark to ours, which is a measly $7.25 an hour--with fast-food
    workers earning a paltry $8 to $10 an hour.\28\
    ---------------------------------------------------------------------------
        \28\ Minimum wage from https://www.dol.gov/agencies/whd/minimum-
    wage.

    Step Two: Require Companies to Provide ADEQUATE Nest Eggs for Their
    ---------------------------------------------------------------------------
    Employees.

        1.  Replicate Australia's Superannuation system by mandating
    employer contributions to 401(k) accounts equaling 9% of pay for
    Fortune 500 companies such as Facebook and Amazon.

        2.  Non-Fortune 500 companies with 10 or more employees that have
    been in business for 5 years or more must contribute the equivalent of
    6% of pay--twice the typical current contribution. And that includes
    gig companies like Uber and Lyft, who are laughing all the way to the
    bank. Those employers who contend that a 6% contribution rate is too
    burdensome should consider that the U.S. has one of the least generous
    pension systems in the advanced world. According to the OECD's 2019
    Pensions at a Glance report, six of the eight OECD countries that have
    a mandatory 401(k) style system feature employer contribution rates
    that are more generous than ours. Chile's is 10%, Denmark's is 12%,
    Israel's is 12.5%, Norway's is more than 18%, Sweden's is more than 14%
    and Poland's is 19.5%.\29\
    ---------------------------------------------------------------------------
        \29\ ``Pensions at a Glance 2019,'' OECD.

        3.  Employees working in companies with fewer than ten employees
    that have been in business less than five years would be enrolled in a
    Universal 401(k) featuring a government matching contribution
    equivalent to 6% of pay, similar to what Ghilarducci proposed. A
    ---------------------------------------------------------------------------
    clearinghouse akin to the TSP would receive all deposits.

        4.  All new employees must be automatically enrolled in a company
    plan, as is the case when a company offers a pension (although they
    will likely forfeit those benefits if they change jobs less than 5
    years later.) Vanguard Group's 2020 How America Saves report notes that
    half of employers don't offer automatic enrollment.\30\
    ---------------------------------------------------------------------------
        \30\ Vanguard Group. Ibid.

        5.  What's more, employer matching contributions must start when
    the employee is hired, not after one year AND they must be ``owned''
    immediately. As of 2020 22% of employers surveyed by the Vanguard Group
    required employees to have one year of service before the match starts
    in order to ``minimize compensation costs.''\31\ However, this practice
    results in ``minimizing nest eggs'' since it could deprive someone who
    changed jobs every 4 years of a total of 11 years of employer
    contributions and investment returns. What's even worse, many 401(k)
    plans require workers to wait up to six years before they can ``own''
    these contributions, according to a 2017 report from the Government
    Accountability Office.\32\
    ---------------------------------------------------------------------------
        \31\ Vanguard Group. Ibid.
        \32\ ``Most Households Approaching Retirement Have Low Savings,''
    U.S. Government Accountability Office, 2015.

        6.  Employees need to be told what percentage of their salaries to
    contribute based on their years to retirement. Even if workers are
    lucky enough to work for an employer who offers a 6% matching
    contribution they still have to kick in 7% of pay at age 25, 10% if
    they wait to start saving at age 30, 14.25% at age 35, 20.25% at age 40
    and 45% at age 50. What's mind-boggling is that the vast majority of
    mutual fund providers offer a vague contribution rate of 10 to 15
    percent of pay regardless of the worker's age when they start saving,
    even though those who postpone saving need to cough up more, which is
    why the concept of ``catch-up'' contributions was created.
    Unfortunately, according to Vanguard's findings, the median employee
    deferral rate is 6%; only 21% of workers contribute more than 10%.\33\
    ---------------------------------------------------------------------------
        \33\ Vanguard Group. Ibid.

        7.  Get rid of the low ceiling on contributions. The limits are
    $19,500 for those under age 50 and $6,500 for those over age 50,\34\
    indexed to inflation. Allegedly these limits are in place to prohibit
    wealthy employees from contributing too much but the vast majority of
    middle- AND upper-class workers are falling behind. And if a middle-
    class worker gets a decent inheritance or wins the lottery why can't he
    or she sock away that money for retirement? Baby Boomer Australians can
    sell a home and add the proceeds to their accounts: those over age 60
    can make after-tax contributions of $150,000 a year or $450,000 over
    three years.\35\
    ---------------------------------------------------------------------------
        \34\ https://www.irs.gov/retirement-plans/plan-participant-
    employee/retirement-topics-401k-and-profit-sharing-plan-contribution-
    limits.
        \35\ Narrative on Australians is from ``Individuals' Super
    Contributions Beat Those of Employers,'' The Australian, September 28,
    2007.

    Step Three: Make Sure that Workers Keep Their Eggs in No More Than Two
    ---------------------------------------------------------------------------
    Baskets by Encouraging Rollover to an IRA When They Change Jobs.

        8.  All employees should be encouraged to open an IRA for two
    reasons: it's highly likely they'll change jobs frequently and will not
    be able to move their old 401(k) balances to their new employer because
    they won't be able to join the plan right away and unlike 401(k) plans
    there are no ``ceilings'' on the amount that can be contributed by the
    rollover.

    Why Rollovers Matter: The Average Joe or Jane Works for 10 or More
    Employers During a Career. The average person changes jobs \36\
    (https://www.the
    balancecareers.com/how-often-do-people-change-jobs-2060467) 10 to 15
    times (with an average of 12 job changes) during his or her career. The
    Bureau of Labor Statistics (https://www.thebalancecareers.com/bureau-
    of-labor-statistics-bls-2059767) reports that people born between 1957
    and 1964 held an average of 11.7 jobs from ages 18 to 48.\37\ Among
    jobs started by workers age 25 to 29, 87 percent had an average length
    of employment of fewer than five years as compared to 83 percent of
    workers age 30 to 34. What's more, almost 15 million Americans with
    401(k) accounts change jobs ANNUALLY, according to Retirement
    Clearinghouse LLC, a company that assists (https://www.wsj.com/
    articles/labor-department-clears-path-for-automatic-401-k-transfers-
    1542045512) in transferring old balances to new plans.
    ---------------------------------------------------------------------------
        \36\ Bureau of Labor Statistics Career Information, Alison Doyle,
    Thebalancecareers.com, October 15, 2019.
        \37\ How Often Do People Change Jobs During a Lifetime, Alison
    Doyle, Thebalancecareers.com, June 15, 2020.
    ---------------------------------------------------------------------------

        Problem with Brokers: Why You Should ALWAYS Do a Rollover to an
                      IRA and Not the New Employer's Plan

    Unfortunately, even if a worker were immediately able to transfer money
    from an old 401(k) account to one at a new employer, there's a chance
    that a broker will steer them to an annuity--because the costs may be
    lower to the employer but ``hidden costs'' are higher to the employee.

    Former President Obama took on the brokerage industry \38\ in 2015 by
    supporting a Labor Department proposed regulation that would subject
    those advising 401(k) participants to a fiduciary standard that makes
    them liable for putting client money into a mutual fund that pays the
    broker a commission whose annual returns are lower than a fund that
    pays no commission. The conservative cost of broker conflicts is $8
    billion to $17 billion a year, according to Obama's Council of Economic
    Advisers.
    ---------------------------------------------------------------------------
        \38\ ``Obama Could Make Broker Kickbacks Disappear,'' Paula Dwyer,
    Bloomberg.com, January 26, 2015 (https://www.bloomberg.com/opinion/
    articles/2015-01-26/obama-wants-broker-kickbacks-to-disappear-from-
    wall-street).
    ---------------------------------------------------------------------------

         The Rollover Solution: Employees Should Select Their Rollover
     Preference as Soon As they Start Working to Keep All Their Eggs in No
                             More Than Two Baskets

        9.  Workers should choose to have their balances rolled over to an
    IRA rather than a new employer plan for three reasons: their new
    employer will probably not allow them to move their balances to an
    account at the new job because they won't be eligible to join the plan
    as soon as they start the job. And there is a strong possibility that
    if their next job is at a small business the new employer will either
    offer no plan (https://www.transamericacenter.org/docs/default-source/
    retirees-survey/tcrs2018_sr_retirees_survey_financially_faring.pdf)
    --21% of companies offer no plans--according to the Transamerica Center
    for Retirement Studies,\39\ or the company will only offer a plan that
    features brokers pushing high-fee annuities that are hard to
    understand. What's more, the worker will have a better sense of his or
    her retirement assets if most of them are in one mutual fund than if
    the balances are left at multiple employers. The only challenge may be
    that many mutual funds require a minimum balance before the account can
    be opened--for the Vanguard Group it's $3,000--so some workers may not
    have the option to roll lower balances over.
    ---------------------------------------------------------------------------
        \39\ ``A Precarious Existence: How Today's Retirees Are Financially
    Faring in Retirement,'' Transamerica Center for Retirement Studies,
    December 2018.

    Conclusion: Does retirement reform pose a challenge? Absolutely. But
    President Biden has an ambitious agenda to rebuild America's middle
    ---------------------------------------------------------------------------
    class.

    President Biden has an impressive track record after his first 100 says
    in office. He signed into law the American Rescue Plan Act of 2021
    (https://en.wikipedia.org/wiki/American_Rescue_Plan_Act_of_2021) to
    help speed up the United States' recovery from the economic (https://
    en.wikipedia.org/wiki/Economic_impact_of_the_
    COVID-19_pandemic_in_the_United_States) and health effects of the
    COVID-19 pandemic (https://en.wikipedia.org/wiki/COVID-
    19_pandemic_in_the_United_
    States). Biden's orders also reversed several Trump administration
    policies, including rejoining the Paris Agreement (https://
    en.wikipedia.org/wiki/Paris_Agreement) on climate change (https://
    en.wikipedia.org/wiki/Climate_change), reaffirming protections for
    Deferred Action for Childhood Arrivals (https://en.wikipedia.org/wiki/
    Deferred_Action_for_Childhood_Arrivals) recipients, halting
    construction of the Trump border wall (https://en.wikipedia.org/wiki/
    Trump_wall) and ending the Trump travel ban (https://en.wikipedia.org/
    wiki/Trump_travel_ban) imposed on predominantly Muslim countries.\40\
    ---------------------------------------------------------------------------
        \40\ https://en.wikipedia.org/wiki/Joe_Biden.

    What's more, President Biden plans to sign an executive order to create
    a task force that would aim to make it easier for workers to unionize.
    The task force will facilitate collective bargaining by the federal
    workforce; wielding federal policies to pave the way for other workers
    to organize; aiding workers in jurisdictions with restrictive labor
    laws, along with marginalized workers such as women and people of
    color.\41\
    ---------------------------------------------------------------------------
        \41\ ``Biden to launch pro-union task force,'' Eleanor Mueller,
    Politico, April 26, 2021.

    ``One thing that I will say is that I do think that the Biden
    administration and President Biden have exceeded expectations that
    progressives had,'' Representative Alexandria Ocasio-Cortez said during
    a virtual town hall. ``I'll be frank, I think a lot of us expected a
    lot more conservative administration. Biden announced that he plans to
    cut emissions by half by 2030. I don't think it's an exaggeration to
    say that two years ago it was almost unthinkable to think that Joe
    Biden would be making an announcement like that.''\42\
    ---------------------------------------------------------------------------
        \42\ ``AOC praises Biden Administration, says it has surpassed
    progressives' expectation,'' Sarah Elbeshibishi, USA Today, April 24,
    2021.

    I think we can be confident he'll be willing and able to take the first
    ---------------------------------------------------------------------------
    step at addressing our retirement crisis.

                                     ______

        401(k) Reform: A Secure Retirement Plan for Life for ``The 99%''

    Introduction: How We Became So Pension Poor

    Mention the word Australia and the images that come to mind are
    ``shrimps on the barbie,'' Koala bears and kangaroos. We'd like to add
    another image: people who can actually afford to retire. Australians
    between the ages of 30 and 34 are projected to have more than $540,000
    in today's dollars in their version of our 401(k) accounts, known as
    Superannuation, by the time they are ready to retire; those between 20
    and 24 will have nearly $700,000.\1\
    ---------------------------------------------------------------------------
        \1\ Australians between narrative is from ``The AMP Superannuation
    Adequacy Index Report,'' Access Economics Pty Limited, 2008.

    How do those six-digit projected nest eggs for the typical Australian
    ---------------------------------------------------------------------------
    compared with of a typical American approaching retirement?

    _______________________________________________________________________

            Australians are scheduled to retire with nest eggs of $500,000
            to $700,000--more than five times that of their American
            counterparts. The reason? Employers are required to contribute
            three times as much to Australian retirement accounts.

    Here's the bad news: according to the Federal Reserve Board's Survey of
    Consumer Finances, the median amount saved in account and rollover
    balance forthose age 55 to 64 was around a measly $86,600 in 2009 when
    the median wage for that age group is about $65,000. But even before
    the market slump in 2007 when the median balance was $103,600, that low
    six-figure number is less than twice the median Boomer salary when it
    needs to be 10-13 times that amount.\2\ In other words, if you're 65
    and earning $65,000 $650,000 in retirement savings isn't a windfall--
    it's the goal.
    ---------------------------------------------------------------------------
        \2\ Survey of Consumer Finance, Federal Reserve Board, 2007 and
    2009 is from conversation with Ken McDonnell of EBRI, October 14, 2011.

    Here are our findings--corroborated by leading pension actuaries--about
    34 million people who can't retire. Unless they work in the public
    sector or are the tiny percentage of the private sector workforce that
    has long job tenure at a company that still offers an old-fashioned
    pension or in academia, most of those 38 million Boomers born between
    1946 and 1956 who are scheduled to turn 65 between 2011 and 2020 will
    have to stay on the job another eight to 10 years to achieve adequate
    401(k) savings. And that's if reform takes place. This means that a big
    chunk of nearly 40 million young adults born between 1989 and 1998--a
    larger Baby Boom--who are graduating during that period will very
    likely not be able to find jobs. If reform DOESN'T place those nearing
    retirement age will have to work another 20 years. To make matters
    worse, 53% of the population in the private sector isn't covered by any
    ---------------------------------------------------------------------------
    plan.

    The reason why Australians' nest eggs are fuller than those of their
    American counterparts? Very simply: Australian employers are REQUIRED
    to contribute to their version of a 401(k) account--the current
    contribution rate is 9% of salary up to a salary ceiling of $137,880 up
    to age 75.\3\ In addition, the employer contribution is made regardless
    of whether the employee contributes--it's not simply a ``matching
    contribution.'' One in four Americans whose employers offer a plan
    don't contribute to a 401(k) account and therefore ends up with
    nothing. While the Obama Administration has supported ``automatic
    enrollment'' to get non-participants saving in these plans, the typical
    ``default'' employee contribution is only 3%, less than one-third of
    what is needed. The reform that's needed is not to get non-savers to
    participate in their employer's plan at an insufficient savings rate
    but rather to require employers to contribute more generously to
    employee accounts.
    ---------------------------------------------------------------------------
        \3\ Australian employers are required narrative is from ``A Super
    Guide,'' National Information Centre on Retirement Investments Inc.,
    2007.

    ---------------------------------------------------------------------------
    _______________________________________________________________________

            Baby Boomers are also faced with greater financial burdens than
            their parents in the Greatest Generation--from mortgages to
            college costs for their kids.

    While some retirement reformers might instead want to consider
    requiring all employers to offer conventional pensions, a more generous
    401(k) plan is the right plan for a mobile 21st century workforce
    because portability is crucial. Employees reap absolutely no benefit
    from a generous defined benefit plan if they don't work at a company
    long enough to be vested in it.

    My prediction is that most Boomers will run out of money in less than 5
    years. Why? They have more expenses than their parents, the post-World
    War II ``Greatest Generation.'' Whether it's because they postponed
    buying their first home or because they ``traded up'' to McMansions,
    more than 50% of Boomers between the ages of 55 and 65 were still
    making mortgage payments in 2007--on average owing more than $140,000,
    according to the Federal Reserve Board's Survey of Consumer Finances.
    That amount is nearly three times what was owed by that age group in
    1989, when only 34% were still making mortgage payments.\4\ Boomers are
    also likely to be paying off college loans for their kids. According to
    a 2007 Ameriprise survey of 1,000 affluent boomers, 74% said they were
    helping adult children with college loans.\5\ Again, this financial
    burden was not as great a generation ago. While federal grants
    subsidized 70% of the cost of a degree 30 years ago, loans are now
    needed to cover 64% of the cost.\6\
    ---------------------------------------------------------------------------
        \4\ Boomers with a mortgage narrative is from http://www.money-
    zine.com/Financial-Planning/Retirement/Retiring-With-a-Mortgage/.
        \5\ Helping adult children with college loans narrative is from The
    Ameriprise ``Financial Money Across Generations Study,'' Ameriprise
    Financial, September, 2007.
        \6\ The 70% of a cost of degree narrative is from ``Going Broke by
    Degree/Why College Costs So Much,'' The AEI Press, Washington, DC,
    2004, p. 8.

    What follows are proposed reforms that would increase benefits, improve
    coverage and portability and lower fees and ``leakage,'' or tapping
    into savings for retirement.

          Action Plan: The 401k Security Act: Retirement Plan for Life

    Part I: Boost Employer Contributions to Accounts

    1. Mandate employer contributions to 401(k) accounts equaling 9% of pay
    for Fortune 500 companies. While some may claim this mandate would be
    too burdensome in these recessionary times, America's largest
    corporations are doing just fine. In 2011 the Fortune 500 saw an 81%
    jump in profits--the third largest gain in the group's history; Apple
    boasted a 145% jump in profits and moved up 21 places to number 35.\7\
    The nation's high unemployment rate is driven by the fact that rich
    companies are offshoring or outsourcing jobs. Take Apple, which is
    sitting on $80 billion in cash: for every Apple worker in America there
    are 10 in China.\8\
    ---------------------------------------------------------------------------
        \7\ 81% jump in profits, Apple narrative is from ``Fortune 500,''
    by John Berman, Nightline, May 4, 2011.
        \8\ For every worker narrative is from ``Make it in America'' by
    Andrew Liveris, Kindle Edition, Location 468.

    ---------------------------------------------------------------------------
    _______________________________________________________________________

            Only six member nations of the Organization for Economic
            Cooperation and Development have lower pension wealth than the
            U.S.

    2. Non Fortune 500 companies with 10 or more employees that have been
    in business for 5 years or more must contribute the equivalent of 6% of
    pay. Those employers who contend that a 6% contribution rate is too
    burdensome should consider that the U.S. has one of the least generous
    pension systems in the advanced world; only six member countries of the
    OECD have lower pension wealth. What's more, seven of the eight OECD
    countries that have a mandatory 401(k) style system feature employer
    contribution rates that are more generous than ours. Denmark's is
    11.8%, Hungary's is 8%, Mexico's is 6.5%, Poland's is 7.3% and the
    Slovak Republic's is 9%.\9\
    ---------------------------------------------------------------------------
        \9\ Narrative on U.S. pension generosity versus other countries is
    from ``Pensions at a Glance: Public Policies Across OECD Countries,''
    Paris, France, OECD, 2007.

    3. Any company that currently offers only a regular pension--known as a
    defined benefit plan--must convert to a generous 401(k) plan by first
    freezing the pension and using any assets to contribute more generously
    to an existing or new 401(k) plan. Why? While defined benefit plans
    have traditionally been more generous than 401(k) plans, their vesting
    rules--typically requiring that employees work for the employer for at
    least 5 years to be eligible for a benefit--make it impossible for the
    majority of American job-hoppers to end up with a sufficient retirement
    assets. (Employers are free to offer a supplementary defined benefit
    ---------------------------------------------------------------------------
    plan in conjunction with a 401(k) plan if they wish.)

    _______________________________________________________________________

            A more generous 401(k) plan is better than a regular pension
            because it usually takes 5 years to ``own'' benefits in a
            pension.

    4. Employees working in companies with fewer than ten employees in
    business less than 5 years would be enrolled in a Universal 401(k)
    featuring a government matching contribution equivalent to 6% of pay. A
    new entity, a clearinghouse akin to the Federal Thrift Savings Plan
    (TSP), which manages very low-cost 401(k)-style accounts invested in
    index funds for three million federal military and civilian personnel,
    would receive all deposits.

    Part II: Turn 401(k) Plans Into One-Stop Retirement Plans for Life

    1. Retirement Plans for Life: Along with requiring more generous
    employer contributions to 401(k) accounts, we want to improve
    investment performance and lower costs AND ``leakage'' by pooling the
    assets of multiple employees at a mutual fund company. This will also
    make it possible to keep track of retirement assets--and therefore
    adequacy--throughout an individual's career, which is currently
    impossible for most Americans.

    _______________________________________________________________________

            Employees should be able to choose a ``mutual fund for life''
            that employers are required to contribute to--lowering the risk
            of constantly having to replacean underperforming fund.

    Pick a fund for your entire life that outperforms the others: While
    employers can continue to offer a ``menu'' of options in their plans,
    typically resulting in employees selecting three or more funds--
    employees must be given the option of choosing a ``mutual fund for
    life,'' so that they don't have to select new investments each time
    they change jobs, which will lower the risk of making bad investment
    decisions.

    Not only will a high-performing plan-for-life help frequent job-
    changers, it will help the minority of Americans who stay at the same
    employer throughout their careers because their employers often select
    inferior funds that they wind up replacing--forcing employees to sell
    their shares and invest in new funds--which likely will be replaced
    again. According to Deloitte's 2009 401(k) Benchmarking Survey, 62% of
    employers replaced an underperforming fund within the previous 2 years
    and 39% did so within the previous year.

    More than likely this Plan for Life will be an index fund, because
    years of research have demonstrated that actively managed funds
    underperform benchmark index funds. For the 20-year period ending in
    December 2010, 72% of managed funds underperformed index funds.\10\
    What's more, this Plan for Life fund must include international stocks
    as a reflection of the fact that ``the world is flat'' when it comes to
    investing. Not only are two thirds of the world's largest publicly held
    companies based overseas but that's been the case since Fortune
    magazine launched its Global 500 ranking 22 years ago. My preference is
    to choose an index fund that replicates Fortune magazine's Global 500--
    the closest match would be the Vanguard Global Equity Fund (VGEF),
    comprised of 854 securities from 22 countries; 40% of them U.S.-based.
    While Americans who only invested in the S&P 500 during the last
    decade--also known as the ``lost decade''--saw near-inflation-rate
    returns of 2.71%, the 10-year return for the VGEF fund was 6.89%.
    Unfortunately, while most of Vanguard's clients offer international
    funds, only 30% of participants invest in them.\11\ What's more,
    international investing is typically viewed as a currency hedge, as
    opposed to an investment strategy that reflects the 21st century
    economy.
    ---------------------------------------------------------------------------
        \10\ 72% of managed funds is from ``Why 401(k)'s Should Offer Index
    Funds,'' by Ron Lieber, New York Times, May 13, 2011.
        \11\ Only 30% of participants invest is from ``How America Saves
    2011,'' Vanguard Group.

    Offering employees a one-stop-savings vehicle isn't a radical change
    from recent investing trends in 401(k) plans; in the last few years
    virtually all mutual fund companies have started to offer one- stop
    investing funds known as target date funds, which automatically
    decrease exposure to equities as participants approach retirement age.
    However, the pooled asset approach would outperform target-date funds
    because such a shift away from stocks wouldn't be necessary (although
    the funds would need to keep 5-10% of assets in cash to meet
    redemptions, which for the most part would only occur when individuals
    ---------------------------------------------------------------------------
    retire.)

    By continuing to receive employer contributions at the same fund
    (unless they choose a different one), it will also make it easier for
    workers to keep track of retirement assets and to see if they are on
    track to a secure retirement, which very few Americans have the tools
    to figure out and most of them desperately need. Why is this necessary?
    Americans are job-changers; the average American born in the latter
    years of the baby boom worked for more than 10 employers between the
    ages of 23 and 44 alone, according to the Bureau of Labor
    Statistics.\12\
    ---------------------------------------------------------------------------
        \12\ Americans Are Job Changers is from ``Number of Jobs Held,
    Labor Market Activity, and Earnings Growth Among the Youngest Baby
    Boomers: Results From a Longitudinal Survey,'' Bureau of Labor
    Statistics, September 10, 2010.

    Unfortunately, when I asked selected mutual fund companies whether they
    offer software that enables participants to ``aggregate'' 401(k) assets
    at rollover accounts and at previous employers spokespeople for
    Vanguard Group and Principal Financial said they did not. And while
    Fidelity Investments, the industry leader, does offer this software,
    only about 6% of its participants use it and based on my own experience
    it's very likely that users frequently encounter error messages when
    ---------------------------------------------------------------------------
    they attempt to enter account data.

    _______________________________________________________________________

            Americans are job-changers; the average American born in the
            latter years of the baby boom worked for more than 10 employers
            between the age of 23 and 44 alone, according to the Bureau of
            Labor Statistics.

    2. Even those employees who choose not to select a fund-for-life would
    be encouraged to roll over existing account balances either to the new
    employer or to single rollover account at a mutual fund rather than
    having multiple rollover accounts, making it difficult to keep track of
    their assets.

    Part III: Employer Contributions Must Be Immediate, Consistent and in
                        Cash

    _______________________________________________________________________

            More than half of employers make employees wait up to 6 years
            until they ``own employer contributions,'' depriving the
            majority of Americans--who are job changers--of retirement
            benefits.

    1. Employer matching contributions must start when the employee is
    hired, not after 1 year. As of 2010 25% of employers surveyed by the
    Vanguard Group require employees to have 1 year of service before the
    match starts in order to ``minimize compensation costs.''\13\ However,
    this practice results in ``minimizing nest eggs'' since it could
    deprive someone who changed jobs every 4 years of a total of 11 years
    of employer contributions and investment returns.
    ---------------------------------------------------------------------------
        \13\ Vanguard narrative on employer matching contributions is from
    ``How America Saves 2011,'' page 8.

    2. Employee ``ownership'' of employer contributions--otherwise known as
    ``vesting''--must be immediate. According to How America Saves 2011,
    54% of Vanguard's clients make their employees wait between 1 to 6
    years before they are completely vested in employer contributions.\14\
    ---------------------------------------------------------------------------
        \14\ Vesting practices are from Ibid., page 13.

    3. Employers would not be permitted to ``suspend'' contributions during
    economic downturns as many of them did in 2002-3 and 2008-9. This
    practice both deprives employees of retirement assets but frequently
    results in not being fully invested in the stock market once it
    rebounds, so employers wind up buying fewer shares of stock once they
    ---------------------------------------------------------------------------
    resume contributing.

    4. All employer contributions must be in cash, not company stock. As
    was the case with Enron employees, a stock match carries the risk that
    the contribution will be worthless if the company goes out of business.
    While the Pension Protection Act has resulted in employees being able
    to divest out of employer stock, 11 million of the nation's more than
    52 million 401(k) participants have more than 20% of their balances in
    company stock, revealing a lack of understanding of the risks of not
    diversifying\15\ (Either that or employees figure that a stock match is
    better than no match.) Unlike a traditional defined benefit plan, or
    pension, in which no more than 10% of plan assets can be in company
    stock the Pension Protection Act doesn't place any restrictions on
    company stock in 401(k) plans. The law only requires that employers
    send employees a warning that their savings ``may not be diversified''
    once more than 20% of their assets are in company stock.\16\
    ---------------------------------------------------------------------------
        \15\ Percentage of participants with company stock is from ``Remove
    exemption for company stock, 4 academics urge,'' by Phyllis Feinberg,
    Pensions and Investments, February 21, 2005.
        \16\ Invest more than 20% of their assets narrative is from ``Some
    plans company-stock heavy,'' by Robert Steyer, Ibid., July 12, 2010.

    ---------------------------------------------------------------------------
    _______________________________________________________________________

            Despite the destruction of Enron employee's 401(k) savings,
            which were exclusively in company stock, it's still ``legal''
            for employers to match in company stock--more than one in five
            Americans have more than 20% of their 401(k) assets in it.

    Part IV: Boost Retirement Savings By Defining the Contribution Rate,
                        Removing Contribution Limits, etc.

    1. Mutual fund managers must communicate the necessary employee
    contribution, or ``co-pay,'' depending on participant's investment time
    horizon, to achieve at least ``10 times final'' in their accounts.
    Based on calculations by pension actuary James Turpin, even with the
    implementation of the contribution equivalent to 9% of salary by
    Fortune 500 employers, 401(k) participants need to sock away 4% of pay
    if they start contributing to their accounts at age 25, 7% of pay if
    they wait until age 30, 11.25% at age 35, 17.25% at age 40, and 42% at
    age 50 to achieve a minimum next egg of 10 times their final pay.
    Employees at smaller companies with the less generous 6% employer
    contribution rate would have to cough up even more: 7% if starting at
    age 25, 10% at age 30, 14.25% at age 35, 20.25% at age 40 and 45% at
    age 50.

    [GRAPHIC] [TIFF OMITTED] T2821.011

    .eps[GRAPHIC] [TIFF OMITTED] T2821.012

    .eps___________________________________________________________________

            Employees must be given the most important investment advice
            they're currently not getting--how much to save in their
            accounts based on when they started participating in the plan.

    2. Unfortunately the necessary employee contribution rates aren't
    ``legal'' under the current system because of counterintuitive
    ``ceilings.'' We need to remove the low ceiling on employee
    contributions along with the ceiling on ``catch-up'' contributions for
    those over 50, which currently don't enable a single American to catch
    up--a fact that apparently hasn't registered with any of the companies
    advising these plans. The limits in 2011 were $16,500 for those under
    50 and $22,000 for those over 50 and they only increase by a measly
    $500 in 2012--as a result, most employees aren't allowed to contribute
    enough to afford to retire. On the other hand, baby boomer Australians
    can sell a home or another asset and add the proceeds to their
    accounts; workers over age 60 can make after-tax superannuation
    contributions of $150,000 a year, or $450,000 over 3 years.\17\
    ---------------------------------------------------------------------------
        \17\ Baby Boomer Australians is from ``A Super Guide,'' Ibid., page
    16.

    ---------------------------------------------------------------------------
    _______________________________________________________________________

            All employees must be offered the Roth option--because
            otherwise they're paying income taxes when they can least
            afford them, at retirement.

    3. Get rid of ``non-discrimination testing.'' If highly paid people
    have waited too long to start saving, they should have the opportunity
    to save. (What's more, testing would no longer be necessary because
    employer contributions would no longer be voluntary.)

    4. Remove the tax deductibility feature from the plans--or at least
    give every employee the option of investing in a Roth, which forces you
    to ``get taxes over with.'' Otherwise, people don't have an accurate
    picture of how much they've accumulated. Rather than ``incentivizing''
    participants to participate, the ability to deduct contributions from
    taxes results in deferring tax obligations to retirement, when people
    can least afford to pay them. While a 30-year old who contributes
    $5,200 a year to a Roth 401(k) could accumulate $870,000 by age 67, all
    tax free, in a ``deductible'' account that person would owe more than
    $261,000 to Uncle Sam at retirement, assuming a 25% tax rate and a 5%
    state income tax. What's more, tax deductions are an overrated tactic
    to ``incentivize'' Americans to save, as opposed to doing so to avoid
    pension poverty; fewer than 5% of Americans contribute to a deductible
    IRA. Finally, switching to a ``get taxes over with'' approach would
    also put a dent in our federal deficit.

    5. There should be no loans, hardship withdrawals, or ability to ``cash
    out'' of account balances when changing jobs. (The temptation to do so
    will also be lowered because the money will likely stay at the same
    mutual fund when changing jobs.) Currently nearly half of job changers
    surveyed by Hewitt Associates cashed out of at least part of their
    account balances rather than leaving money in the plan or ``rolling it
    over'' to an IRA or new plan. Not only is it self-destructive to spend
    your nest egg, but half of the proceeds could be owed to Uncle Sam;
    someone in the 25% tax bracket living in a state with a 5% income tax
    who cashes out a $20,000 account balance is left with $12,000.

    Part V: Ensure That Workers Don't Retire too Early, Help Protect Their
                        Nest Eggs

    1. Fund managers must communicate to workers that unless they have
    other sources of retirement savings they most likely cannot afford to
    retire unless they have accumulated AT LEAST 10 times their salary--13
    times for those with six-figure salaries--because they should only
    spend 4% of their assets each year in retirement.

    2. Workers who have accumulated enough that they can afford to retire--
    at most 10% of the private sector population--should be encouraged to
    invest in a managed payout account or an annuity. However, while
    annuities offered at the workplace are likely to be fixed-rate
    commission-free products, buyers should be warned that once they leave
    the workplace they should avoid retirement seminars in which they may
    be convinced to buy a new (most likely variable) annuity, an example of
    ``churning,'' in which a broker attempts to sell annuity holders a new
    product in order to generate commissions.

    _______________________________________________________________________

            All employees must be advised that they cannot afford to retire
            until they've accumulated AT LEAST ``10 times final pay'' in
            their accounts and rollover accounts.

    Here are just a few of the examples of questionable practices by
    annuity sellers. A federal judge ruled in 2009 that Allianz Life
    Insurance used deceptive practices in selling an equity-indexed annuity
    to about 340,000 people nationwide. In 2008 Allianz Life paid $10
    million to settle charges it had sold unsuitable annuities in
    California.\18\ In Texas AARP criticized then-Governor Rick Perry for
    vetoing a bill that would establish new safeguards for buying
    annuities.\19\
    ---------------------------------------------------------------------------
        \18\ Allianz narrative re federal jury and California example is
    from ``A split decision in Allianz Life annuity lawsuit,'' by Chris
    Serres, Star Tribune, October 14, 2009.
        \19\ Texas annuity narrative is from ``AARP blasts Texas Gov. Rick
    Perry's veto,'' by Terrence Stutz, Dallas Morning News, June 24, 2009.

    In 2008, Florida Governor Charlie Crist signed a law increasing
    penalties on annuity salespeople who pressure clients to buy annuities.
    In 2006, then-New York Attorney General Eliot Spitzer announced an
    agreement in which the Hartford Financial Services Group would pay $20
    million in fines for improper annuity sales. In 2005, New Jersey
    enacted a law that limits how long annuity sellers can impose surrender
    charges in the event the annuity owner wants to sell the product.\20\
    Finally, the fact that the Dodd-Frank financial reform legislation did
    not include language that permitted the SEC to have oversight over
    annuities was regarded as one of the ``battles that we lost'' by
    Barbara Roper, director of investor protection for the Consumer
    Federation of America.\21\
    ---------------------------------------------------------------------------
        \20\ Narrative on reforms in Florida, New York and New Jersey is
    from, ``America, Welcome to the Poorhouse'' (FT Press 2009), pages 29,
    30.
        \21\ Barbara Roper quote re financial services reform is from ``For
    consumers, federal protection with some teeth,'' by Tomoeh Tse,
    Washington Post, June 26, 2010.

    3. The Department of Labor should include tips on its website that
    guide workers on issues they should consider while contemplating
    retirement. These might include: how much do people need to save if
    they have a working spouse versus a non-working spouse or what is the
    impact of divorce, disability, etc. The website also should include
    ---------------------------------------------------------------------------
    information about annuities.

    _______________________________________________________________________

            Employees must be warned of the risks of buying an annuity--
            that they will likely be sold a new one in order to generate
            commissions for a broker.

    About Retirement Solutions

    Retirement Solutions LLC is an advocacy and educational organization
    dedicated to the retirement adequacy of 401(k) participants. Retirement
    Solutions president and founder Jane White is a regular blogger on
    retirement and other personal finance issue for the Huffington Post and
    has appeared on Fox Business News, CNN and CNBC, and is the author of
    ``America, Welcome to the Poorhouse,'' (FT Press, 2009), which has been
    favorably reviewed by the New York Times, Newsday and other
    publications.

    With the input of pension actuary James E. Turpin of the Turpin
    Consulting Group, White developed formulas for contribution rates
    required based on the current typical employer match of 3%. At the
    invitation of the U.S. Department of Labor's (DOL) ERISA Advisory
    Council White offered recommended contribution rates based on
    participant starting ages to the in the fall of 2007. As a result, the
    Working Group recommended to the DOL that employers communicate to
    employees how much 401(k) participants need to contribute to achieve a
    multiple of their salary nearing retirement.

    A Congressionally appointed delegate to the 2002 National Summit on
    Retirement Savings, White first observed the 401(k) crisis in 1993 as
    the associate editor of Standard and Poor's ``Your Financial Future,''
    distributed to half a million 401(k) participants at Fortune 500 firms.
    Previously she was a syndicated personal finance columnist for Gannett
    News Service and her articles have appeared in The New York Times,
    Barron's, Working Woman, Newsday, Employee Benefit News, Contingencies
    and The ASPPA Journal.

    Acknowledgements: I could not have completed this research without the
    vital input of James Turpin and Ken Steiner, EA, FSA, MAAA, retired
    resource actuary for Watson Wyatt Worldwide (now Towers Watson).
    Steiner has testified before the House Committee on Education and the
    Workforce regarding pension security and defined benefit plans and has
    served on several committees at the American Academy of Actuaries. He
    is the creator of a vital website that enables users to figure out how
    much money they can spend from their nest egg: http://
    howmuchcaniaffordtospendinretirement.webs.com/.

                                     ______

                       Small Business Council of America

                               4800 Hampden Lane

                               Bethesda, MD 20814

                                 (202) 951-9325

        The Small Business Council of America (SBCA) appreciates the
    opportunity to submit this statement. The SBCA is a national nonprofit
    organization which has represented the interests of privately-held and
    family-owned businesses on federal tax, health care and employee
    benefit matters since 1979. The SBCA, through its members, represents
    well over 100,000 small business enterprises in retail, manufacturing
    and service industries, virtually all of which provide health insurance
    and retirement plans. The positions and priorities expressed in this
    statement were developed through a survey of SBCA members conducted the
    week prior to this submission.

        The SBCA applauds this Committee's commitment to pursuing
    bipartisan solutions to help American workers more easily and
    effectively save for retirement.

        First and foremost, the SBCA believes that, while there is
    certainly room for improvement, the present qualified retirement plan
    system has been very successful in providing retirement security.

        Unfortunately, most of the data used to measure the success of
    retirement plans makes it hard to get a clear picture of how the small
    business retirement plan system is performing for a few reasons. First,
    traditional analysis fails to distinguish between new and established
    small businesses. Approximately half of all new small businesses fail
    in their first 5 years--before most small business owners have even
    considered sponsoring a qualified retirement plan or other employee
    benefits.\1\ The inclusion of these infant-stage, and typically
    smaller, businesses depresses the data. Moreover, most analyses ignore
    the fact that not all employees meet the retirement plan eligibility
    requirements. Part-time employees, employees under age 21 and transient
    employees are generally ineligible to participate in a retirement plan.
    The statistics cited for the low retirement plan coverage, however,
    most often include the entire workforce and do not differentiate
    between the entire workforce and that percentage of the workforce that
    is actually eligible to participate in a retirement plan based upon
    current law. When these ineligible employees are excluded, the coverage
    numbers improve significantly.
    ---------------------------------------------------------------------------
        \1\ See U.S. Small Business Administration, Office of Advocacy,
    Frequently Asked Questions About Small Business, August 2018, available
    at https://www.sba.gov/sites/default/files/advocacy/Frequently-Asked-
    Questions-Small-Business-2018.pdf.

        A 2015 study,\2\ which used actual data from employees' W-2 forms,
    found that 80% of all employees who work in companies with 10 or more
    employees are offered a retirement plan and that of these employees,
    65% made 401(k) contributions.\3\ The predecessor study to the 2015
    study which was conducted in 2011,\4\ revealed that, when asked, only
    49% of employees who worked for companies with 10 or more employees
    thought they were participating in a retirement plan, whereas the W-2
    data indicated that 62% of employees were actually participating in a
    plan. This means that 13% of all employees making 401(k) contributions
    through payroll deduction did not even realize that they were making
    401(k) contributions.
    ---------------------------------------------------------------------------
        \2\ Dushi, Iams and Lichtenstein, Social Security Bulletin, Vol. 75
    No. 2, 2015, Retirement Plan Coverage by Firm Size: An Update.
        \3\ The size of the company makes a significant difference. W-2
    data, which is accurate only to 401(k) plans and 401(k) contributions,
    reflects that 51% of small businesses with more than 10 employees but
    less than 25 offer a retirement plan. The same data reflects that 63%
    of small businesses which employ 25 employees but less than 50 offer a
    retirement plan. 73% of small businesses which employ 50 employees but
    less than 100 offer a retirement plan. 87% of businesses with more than
    100 employees offer a retirement plan. There is no further breakdown
    given for over 100 employees so we do not know how many small to mid-
    size businesses--often defined as up to 500 employees--offer plans
    compared to the large businesses.
        \4\ Dushi, Iams and Lichtenstein, Social Security Bulletin, Vol. 71
    No. 2, 2011, Assessment of Retirement Plan Coverage by Firm Size, Using
    W-2 Tax Records.

        The foregoing numbers reflect that while there is room for
    improvement the small business retirement plan system is far more
    successful in delivering benefits for small business employees than the
    data most often cited reflects. This success has been largely dependent
    ---------------------------------------------------------------------------
    on federal tax laws.

        A qualified retirement plan, whether small or large, creates
    significant rights for the plan participants and generates significant
    costs for the sponsoring entity. Funds in a retirement plan are not tax
    sheltered, rather they are tax deferred until the participants receive
    them, at which time they are brought into the participant's gross
    income. Retirement plan assets are not subject to favorable capital
    gains treatment, nor do they receive a step up in basis at the owner's
    death. Most small business plans are adopted to provide a tax-
    advantaged way for the owners to save for their and the other key
    employees' retirement. The rules of retirement plans force the owners
    to make significant contributions for the non-highly compensated
    employees and it is important to note that this is not the result of
    the top-heavy rules. Thus, in the small business qualified retirement
    plan world, it is not unusual for the company (in addition to
    contributions made by the employee) to make contributions for its
    employees in the 3% to 8.5% of compensation range.

    Tax Incentives in the Retirement Plan System Are the Primary Motivation
       for Small Business Owners to Sponsor Retirement Plans and Must be
                                   Maintained

        Despite common misperceptions, considered as a whole, the tax
    treatment of retirement plans is not particularly attractive since all
    retirement plan funds are eventually subject to ordinary income.
    Retirement plan assets do not receive a step up in basis upon the death
    of the owner. Further reducing the tax advantage of sponsoring a
    retirement plan will incentivize small business owners to freeze or
    terminate their plans while, conversely, reducing burdens and
    increasing contributions will encourage the maintenance and formation
    of small business retirement plans. Because of this, it is important
    that all existing tax incentives for retirement plans be preserved and
    administrative burdens be reduced. This includes, but is not limited
    to:

            -  Maintaining or increasing existing contribution levels--The
            SBCA members strongly supported the 2020 version of the SECURE
            Act 2.0 which would have allowed additional catch-up
            contributions for older employees. However, the SBCA and its
            members believe that the provision contained in the 2021
            version of the SECURE Act 2.0 is too restrictive. The SBCA
            suggests reducing the additional $10,000 limit to say $5,000 or
            $7,500 and increasing the age corridor from ages 60 to 70 or
            the Required Beginning Date, rather than just 3 years from ages
            62, 63 and 64. These changes would significantly improve the
            ability of older employees to ``catch up'' for earlier years
            when they could not afford to make significant contributions
            for themselves. This would be an important change for small
            businesses and their employees. However, the provision as
            written would be of little help for the vast majority of
            employees of small businesses since it is so narrowly drafted.

            -  Allowing for pre-tax catch-up contributions--Requiring all
            catch-up contributions to be Roth contributions would be a very
            negative change for small businesses. First, there are so many
            provisions of the SECURE Act 2.0 which, while somewhat helpful,
            are not worth the cost of this single provision. Unfortunately,
            this provision was not considered in light of how many small
            business retirement plans operate. Many small businesses have
            deliberately chosen not to include a Roth option because of the
            extra in-house administrative work it generates. Thus, this
            type of provision will force some of these plans to choose not
            to include catch-ups and others to increase the amount of
            burdens imposed upon them in order to add the Roth provision.
            It is also likely that employees who might have made the catch-
            up contributions while pre-tax will decide against it when
            forced to make them after tax. The SBCA suggests that this
            provision should be changed so that at most only the additional
            contributions after age 60 would be subject to the new Roth
            provision. As a general comment, the SBCA finds the 2020
            version of the SECURE Act 2.0 to be far more preferable to
            small business retirement plans than the 2021 version.

             The Laws Governing Retirement Plans Can Be Simplified

        There is still much room for simplification with the goal of
    reducing or eliminating complexities that are unnecessary or that
    result in burdens that outweigh the desired policy objectives. This is
    often best achieved by providing plan administrators with the
    opportunity to take advantage of optional simplification such as the
    401(k) safe harbor provisions. This allows companies to weigh the
    advantage of reducing complexity with the costs of possible plan
    amendments, required contributions, redoing employee communications and
    software and educating plan participants, if necessary.

        The SBCA suggests that the following proposals would encourage
    small and mid-size employers (and assist larger plans as well) to
    establish qualified plans by simplifying the rules and reducing
    unnecessary administrative burdens:
                Eliminate Top-Heavy Rules for Defined Contribution Plans
               The SBCA was disappointed to see that repealing the top-
            heavy rules for defined contribution plans was not included in
            the latest version of SECURE Act 2.0. When first enacted, the
            top-heavy rules imposed additional minimum contributions and
            accelerated vesting on small and mid-size retirement plans,
            which were virtually always top-heavy due to the mathematical
            tests used to determine such status. Over the years, the
            contribution rules and the discrimination tests have changed so
            significantly that the top-heavy rules are now an archaic
            appendage similar to that of the appendix in the human body--
            they do nothing but cause problems. Nevertheless, those who are
            not immersed in the technicalities of retirement plan law
            insist that the top-heavy rules in the defined contribution
            world still operate so as to benefit non-highly compensated
            employees. This outdated view has resulted in inertia on the
            Hill when it comes to repealing these unnecessary and
            complicated rules.
                Simplify the 401(k) Discrimination Testing Referred to as
                        the ``ADP'' Tests
               The anti-discrimination rules for 401(k) plans (the ADP
            tests) are more complicated than needed. For instance, the
            tests set forth in the proposal referred to as the ``ERSA''
            (Employer Retirement Savings Accounts--see below) would satisfy
            the policy goals of the ADP while reducing some of the
            complexity currently inherent in these tests. This could be an
            optional ADP test so that companies who are able to deal with
            the current ADP tests are not required to change retirement
            plan documents, software and procedures.

               The ERSA proposal called for the contribution percentage for
            eligible highly compensated employees (HCEs) for the plan year
            not to exceed 200% of such percentage for the non-highly
            compensated employees (NHCEs) if the contribution percentage of
            the NHCEs does not exceed 6%. If the contribution percentage of
            the NHCEs exceeds 6%, then no testing would be required. The
            proposal also has two safe harbors to avoid the simplified
            nondiscrimination test which are similar to the current 401(k)
            safe harbors.
                Eliminate Yearly Safe Harbor Notices for 401(k) Safe Harbor
                        Match
               This notice required by statute is costly and burdensome.
            The match safe harbor notice does serve a policy purpose in
            that it can affect the amount of 401(k) deferrals an employee
            may choose to make in order to receive the match. However,
            rather than yearly notices, the notice could stay in effect
            unless and until revoked. The notice could be part of the
            Summary Plan Description.
                Reduce Extensive, Burdensome and Unnecessary Reporting to
                        Participants and Employers

               The SBCA would recommend that the retirement plan system be
            rid of unnecessary notices that are not conveying timely or
            worthwhile information as follows:

              -  Amend ERISA to eliminate summary annual reports.

              -  Eliminate the requirement for quarterly investment
            statements (and make an annual notice) if participants have
            Internet access to their investment account information.

              -  Reduce the number of required notices by consolidating and
            simplifying existing notices. The SBCA welcomes the provision
            to simplify and reduce redundant and unnecessary disclosures in
            the SECURE Act 2.0.
                Change the Law so that All or a Portion of a Retirement
                        Plan Distribution Is Subject to Capital Gains Tax
               In order to induce employers to provide qualified retirement
            plans that are inherently costly to administer and
            administratively burdensome, the final tax consequences should
            be as advantageous as possible. Today, some owners either balk
            at putting in a plan because they believe that it is easier and
            just as cost-effective to take an after-tax bonus and invest it
            in the market where it will ultimately receive favorable
            capital gains treatment or they are told by advisors that it is
            better to invest in insurance or other assets. Retirement plans
            are not tax shelters; rather, they are trusts that simply defer
            taxation for a time. If a portion of the distribution from a
            retirement plan was subject to capital gains rather than income
            tax, it is likely that contributions going into small business
            retirement plans would significantly increase.

        Additional Changes Will Further Help Promote Retirement Security

      Modify the Required Minimum Distribution Rules (RMD)
        The SBCA supports the concept of extending the Required Beginning
    Date but suggests that the transition to age 75 in the current version
    of SECURE 2.0 is phased in too slowly. For individuals, particularly
    small business owners who are still working, being forced to take out
    money from the retirement plan or IRA before it is needed, can often
    reduce the amount of retirement income available in later years when it
    is essential for these senior citizens. Presently, the law requires
    small business owners (and only small business owners) to start
    receiving RMDs while they are working. The demographics of the group
    comprised of small business owners are such that money saved in a plan
    or an IRA will be crucial to their retirement security. The SBCA
    suggests that this provision be changed so that the age 75 is made
    effective within a few years. The SBCA also suggests that the 2020
    version of the SECURE Act 2.0, which exempted retirement plan
    accumulations of $150,000 or less from the required minimum
    distribution rules, be brought into the final 2021 version of the
    SECURE Act 2.0. This again would be a welcome change by reducing
    administrative burdens while at the same time allowing these
    individuals with these relatively smaller accumulations to remove the
    money from the retirement plan or IRA when most needed.
      Auto Enrollment and Auto Escalation Provisions
        While forcing new plans to adopt auto enrollment and auto
    escalation is definitely more burdensome to small business retirement
    plans, the data clearly reflects that these provisions increase
    participation in retirement plans. Thus, the additional burdens that
    will be imposed are outweighed by the increased participation that will
    result. The SBCA applauds the SECURE Act 2.0 for including provisions
    for helping small businesses with the inevitable mistakes that occur
    with these provisions.
      Maintaining and Strengthening ERISA Preemption
        ERISA preemption is essential to the proper working of the entire
    qualified retirement plan system. This is particularly true where a
    small business is operating in different jurisdictions which have
    imposed new rules regarding retirement plan coverage.
       Expanding Cafeteria Plans Will Help Individuals Obtain the Benefits
            Necessary to Be Cared for During Their Retirement and Make
            Their Savings Last
        The SBCA supports the recommendation made to this Committee by The
    ERISA Industry Committee (ERIC) that cafeteria plans be expanded to
    allow for additional pre-tax benefits--such as long-term care insurance
    and disability insurance. The SBCA would add a critical missing element
    to this which is to allow small business owners of pass-through
    entities to participate in the cafeteria plans that they sponsor.

        While employees of large businesses, mid-size employers, non-
    profits, schools, universities and the federal, state, and local
    governments can take advantage of the valuable benefits provided by
    cafeteria plans, only small business owners are not allowed to
    participate in a cafeteria plan. Under current law, cafeteria plans can
    be utilized by common-law employees, but not by sole proprietors,
    partners in a partnership, S-corporation shareholders holding an
    interest of 2% or greater (and by attribution, their family members)
    and members in a limited liability company which has elected to be
    taxed as an S Corporation or as a partnership.

        As a result, because most small business owners are not able to
    participate in cafeteria plans, employees of small businesses are often
    not offered this valuable employee benefit at all or are only offered
    the health premium option. This is true discrimination against small
    business owners, which additionally harms the employees employed by
    that business. This rule is bizarre in that small business owners are,
    of course, allowed to participate in qualified retirement plans. It
    should be noted that there are many more employees of small businesses
    in qualified retirement plans than in cafeteria plans, indicating that
    by disallowing most small business owners from participating in a
    cafeteria plan, their rank-and-file employees are at a significant
    disadvantage.

        Because IRC Section 125 does not specifically include self-employed
    individuals in its definition of ``employee,'' the Internal Revenue
    Service decided that Congress had intended to prohibit small business
    owners as ``employees'' for purposes of IRC Section 125. We doubt that
    Congress intended any such result since at the time Section 125 was
    enacted, small business owners, regardless of whether they were working
    in a pass-through entity or not, were deemed employees for purposes of
    qualified retirement plans (IRC Section 401(c)). There is no good
    reason to think they should be treated otherwise for a similar type of
    employee benefit--the cafeteria plan and their underlying plans (IRC
    Sections 79, 105, 106, 125, 129, and 132), particularly given that
    everybody else can be covered by a cafeteria plan. As a result of IRS'
    interpretation of Section 125, as mentioned above sole proprietors,
    partners, shareholders owning 2% or more in S-corporations, and members
    of most limited liability companies are all unable to participate in
    cafeteria plans. This creates a significant disincentive for small
    business owners to provide cafeteria plans which can offer a variety of
    qualified benefits from which their employees can choose those most
    needed.

        Since IRS has been unwilling to change its interpretation, the SBCA
    urges Congress to pass a law which specifically calls for small
    business owners of pass-through entities to be deemed ``employees'' for
    Section 125 and the relevant underlying Code Sections (79, 105, 106,
    129, and 132). We also agree with ERIC that this is an appropriate time
    to expand the list of qualified benefits, particularly benefits such as
    long term care and supplemental insurance benefits which will become
    increasingly important to our more senior citizens to help them live
    comfortably in their retirement years.
                Other Provisions Which Would be Helpful Include:
              -  Changing the family attribution rules

              -  Increasing the time to adopt beneficial discretionary
            retirement plan amendments

              -  Adding a new tax credit for employers encouraging
            contributions by small businesses with up to 50 employees

              -  Expanding the ability of plans to self-correct plan errors
            by expanding EPCRS and VFCP

              -  Allowing self-certification for deemed hardship
            distributions

              -  Increasing the small business plan start-up credit

              -  Treating student loan payments as elective deferrals for
            the purpose of matching contributions.

        The SBCA appreciates the Committee's consideration of these
    important issues and stands ready to lend its expertise and assistance
    to the members of the Committee and their staff members.

                                     ______

               South Carolina Small Business Chamber of Commerce

                              1717 Gervais Street

                               Columbia, SC 29201

                                  803-600-6874

                                fknapp@scsbc.org

    Statement of Frank Knapp Jr., President and CEO, National Coordinator,
          ``Reform the SBA: BIGGER Mission, Authority and Resources''

    On behalf of the of the national, state, and local business
    organizations listed at the bottom of this statement, I want to thank
    you for your attention to this issue. We support the federal
    government's efforts to encourage Americans to save for retirement.

    This hearing, ``How Can Congress Help?'' is of particular interest to
    our national campaign that addresses the country's 40-year low in new
    business startups, a small business and economic crisis that has
    received bipartisan recognition.

    Our recommendations are for reforms at the federal level that will
    serve to break down the barriers to entrepreneurs starting businesses.

    We believe that one of those barriers to entrepreneurs making the
    decision to leave their existing jobs is the issue of retirement. If
    the entrepreneur's current job offers a retirement program, how will
    they affordably replace such a program for themselves and offer the
    same to future employees. The latter is especially problematic as
    offering employee benefits can be critical to competing with bigger
    businesses for talent.

    While legislation such at the Encouraging Americans to Save Act seek to
    encourage retirement savings by providing government matching
    contributions for low- and middle-income workers, it does not address
    the most important reason for Americans not saving for retirement--a
    convenient, portable, and automatic retirement program through their
    employers.

    AARP has long promoted their Workplace Retirement Plans at the state
    level. Their research clearly shows that employees are far more likely
    to participate in a retirement plan if it is offered through payroll
    deduction. AARP's state efforts seek to address the cost and
    administrative efforts of small businesses implementing a 401(k) type
    plan or IRA, barriers that cause most small businesses to not offer
    retirement programs even if doing so would enable them to better
    attract employees.

    Unfortunately, even the concerted professional efforts of AARP to gain
    the cooperation of state legislatures have met with very limited
    success over the years. Millions of small businesses and their
    employees can no longer wait for their individual states to address
    this issue.

    The federal government should create a universal, portable retirement
    program that every small business can opt into. A defined contribution
    plan administered at the national level would encourage employees to
    save via payroll deduction. Employers would also be eligible to
    participate in the plan and have the option of contributing to their
    employees' plans.

    In 1986 Congress passed the Federal Employees' Retirement System Act
    which has provided Federal employees and members of the uniformed
    services an easy payroll deduction method of saving for retirement. The
    Federal Retirement Thrift Investment Board has shown how to effectively
    manage a national retirement savings program.

    Saving for retirement should be everybody's responsibility. We can make
    it easier with a universal, payroll deduction retirement program. In
    this way we also promote entrepreneurship and a more level playing
    field for small businesses to compete with larger businesses for
    employees.

    Thank you for your consideration of our recommendation. Please let me
    know if there are any questions. We would be happy to further discuss
    this issue.

    American Independent Business Alliance
    American Sustainable Business Council
    Gullah Geechee Chamber of Commerce
    Latin American Chamber of Commerce--Charlotte (LACCC)
    Latino Communications Community Development Corporation
    Local First Arizona
    North Carolina Business Council
    Sumter Black Chamber of Commerce
    South Carolina Hispanic Chamber of Commerce
    South Carolina Small Business Chamber of Commerce
    Triad Local First
    U.S. Green Chamber of Commerce

                                     ______

                             SPARK Institute, Inc.

                                 9 Phelps Lane

                               Simsbury, CT 06070

                                 July 28, 2021

    The Honorable Ron Wyden             The Honorable Mike Crapo
    Chairman                            Ranking Member
    U.S. Senate                         U.S. Senate
    Committee on Finance                Committee on Finance
    Washington, DC 20510                Washington, DC 20510

    Re: Senate Committee on Finance Hearing ``Building on Bipartisan
    Retirement Legislation: How Can Congress Help?''

    Dear Chairman Wyden and Ranking Member Crapo,

    On behalf of the SPARK Institute, I would like thank you for holding
    today's hearing on the critical issues involved in improving retirement
    security for millions of Americans. Our members deeply value your
    leadership and look forward to working with you and the Committee to
    advance solutions that improve, simplify, and modernize retirement
    savings.

    The SPARK Institute believes that retirement security is the shared
    responsibly of individuals, employers, government, and the providers,
    consultants, and advisors who serve them. We represent the interests of
    a broad-based cross section of retirement plan service providers and
    investment managers, including banks, mutual fund companies, insurance
    companies, third-party administrators, trade clearing firms and
    benefits consultants. Collectively, our members serve approximately 100
    million employer-sponsored plan participants.

    Today's hearing underscores that the work to enhance retirement
    security is not finished. As Congress reflects on recent enactment of
    the Setting Every Community Up for Retirement Enhancement (SECURE) Act,
    we are excited to share with you a number of suggestions for additional
    improvements and enhancements. Attached you will find the SPARK
    Institute's Legislative and Regulatory Agenda which was the product of
    extensive input from our members. We are pleased that a number of these
    proposals have been included in various introduced bills.

    In the Senate, SPARK has endorsed the Retirement Security and Savings
    Act of 2021 introduced earlier this year by Senator Ben Cardin and
    Senator Rob Portman. SPARK is especially supportive of a number of
    provisions in Retirement Security and Savings Act that have been
    identified by our members as key improvements such as expansion of the
    small business start-up credit, increasing the required beginning date
    to 75 and additional catch-up contributions for certain older
    employees. SPARK noted our support for a provision to integrate student
    loan repayment solutions into workplace savings plans. SPARK also
    commended the provisions in Retirement Security and Savings Act that
    will streamline and simplify retirement plan operations, including
    expanding self-correction, limiting notices for unenrolled
    participants, and permitting 403(b) plans to invest in collective
    investment trusts (CITs).

    SPARK is committed to working with Congress to continue advance the
    many improvements contained in the Retirement Security and Savings Act
    of 2021 and to incorporate additional improvements and simplifications
    as the Finance Committee develops its comprehensive retirement savings
    legislation. For example, SPARK has long championed the expanded use of
    default electronic delivery for retirement plan documents because it
    simplifies plan administration, reduces costs, and provides retirement
    savers access to online tools and real-time information on their
    retirement benefits. SPARK believes the 2020 Department of Labor E-
    Delivery Rule struck an appropriate balance between expanding default
    e-delivery and protecting the rights of retirement savers who prefer
    paper documents. We strongly encourage Congress to advance legislation
    that would harmonize e-delivery rules across the federal agencies,
    including at the Treasury Department and IRS.

    We greatly appreciate your interest in and commitment to these
    important retirement security issues. As retirement savings reforms and
    enhancements advance through the legislative process, we look forward
    to working with the Committee to ensure the retirement reforms are as
    effective as possible to help all Americans achieve a financially
    secure retirement.

                Sincerely,

                Tim Rouse
                Executive Director

                                     ______

                     Legislative and Regulatory Agenda 2021

    The SPARK Institute represents the interests of a broad-based cross
    section of retirement plan service providers and investment managers,
    including banks, mutual fund companies, and insurance companies.
    Collectively, our members serve approximately 95 million participants
    in 401(k) and other defined contribution plans. We focus on promoting
    the important benefits of employer-sponsored retirement plans, which
    are critical to the financial security of Americans saving for
    retirement.

    The SPARK Institute believes that retirement security is a shared
    responsibility of individuals, employers, government, and the
    providers, consultants, and advisors that serve them. Building on the
    successful enactment of the Setting Every Community Up for Retirement
    Enhancement (SECURE) Act in 2019, the SPARK Institute is committed to
    working with Congress and federal regulators to advance solutions that
    implement the five pillars of the SPARK Institute's Legislative and
    Regulatory Agenda detailed below.

            w PRESERVE AND EXPAND INCENTIVES FOR RETIREMENT SAVINGS

    The SPARK Institute seeks to preserve the current tax incentives for
    retirement savings and opposes financial transaction taxes that would
    harm retirement savers. The SPARK Institute supports efforts to
    increase coverage through expanded tax incentives so that more workers
    have access to, and utilize, employer-sponsored savings vehicles, like
    401(k), 403(b), and 457(b) plans.

                    w ELECTRONIC DELIVERY & ADMINISTRATION:
                   MODERNIZING RETIREMENT PLAN COMMUNICATIONS

    The electronic delivery of retirement plan documents empowers employees
    by providing them access to real-time information on their retirement
    benefits and online tools to assist them with retirement planning. The
    2020 Department of Labor E-
    Delivery Rule struck an appropriate balance between expanding default
    e-delivery and consumer protections. Additionally, the ongoing pandemic
    has highlighted the value of electronic delivery and the need for other
    modernizations to facilitate the greater use of technology for
    notarizations and other plan operations.

    The SPARK Institute supports the expansion of default e-delivery. We
    will continue to work for the harmonization of e-delivery rules across
    the federal agencies, including at the Treasury Department/IRS. The
    SPARK Institute will advance a nationwide remote notarization standard.

     w FINANCIAL WELLNESS & LITERACY: MEETING THE HOLISTIC FINANCIAL NEEDS
                              OF RETIREMENT SAVERS

    Retirement savings are part of the holistic financial needs and
    challenges that plan participants face. With sensible changes to
    federal rules, employers and service providers can do more to help
    improve the financial wellness of all employees and implement policies
    that support an employee's participation in retirement savings plans
    while meeting their existing obligations, such as student loans.

    The SPARK Institute supports legislative and regulatory solutions to
    integrate student loan repayment solutions into workplace savings
    plans. The SPARK Institute encourages efforts to expand access to
    financial wellness programs inside and outside of retirement savings
    plans and the growth of financial literacy programs. The SPARK
    Institute will advance emergency savings solutions to address the
    economic needs and concerns of employees and supports the expansion of
    workplace savings programs to include other non-retirement savings
    priorities.

     w SIMPLIFICATION: ADVANCING REFORMS TO MAKE RETIREMENT SAVING EASIER
                              AND ENHANCE OUTCOMES

    Simplifying and modernizing the rules and regulations that govern
    retirement plans will make it easier and less expensive for employers
    to offer retirement plans so all Americans can enjoy a financially
    secure retirement.

    The SPARK Institute supports efforts to streamline retirement plan
    operations, including plan design simplification, notice consolidation,
    testing relief, and streamlined reporting requirements. The SPARK
    Institute also supports changes that would permit 403(b) plans to
    invest in collective investment trusts (CITs). The SPARK Institute will
    work to advance missing participant solutions and expand access to
    self-correction for plan errors.

     w LIFETIME INCOME: ENCOURAGING INNOVATIVE WAYS TO GENERATE INCOME IN
                                   RETIREMENT

    To ensure that retirees have the lifetime income they need to enjoy a
    comfortable retirement, more should be done to ensure that retirement
    savers have access to lifetime income options in their retirement
    plans. This means offering lifetime income investments during the
    accumulation phase and offering lifetime distribution options at
    retirement. We believe not in supporting one product, but rather in
    supporting a robust market where plan fiduciaries can choose what best
    meets the needs of participants. We need rules that support, not
    impede, innovative solutions.

    The SPARK Institute supports legislative and regulatory changes that
    would facilitate the inclusion of annuities and other lifetime
    guarantees during the accumulation phase and through retirement.

                                     ______

                          State Street Global Advisors
    The Honorable Benjamin Cardin       The Honorable Rob Portman
    509 Hart Senate Office Building     448 Russell Senate Office Building
    Washington, DC 20510                Washington, DC 20510

    May 18, 2021

    Dear Senators Cardin and Portman:

    I am writing to thank you for your leadership on retirement policy and
    in particular for your bipartisan efforts to ensure that Americans are
    able to retire with dignity. State Street Global Advisors (State
    Street) is one of the largest asset managers working with U.S. Defined
    Contribution (DC) plans today. With nearly 40 years of experience in
    the DC market, we manage more than $650 billion in DC assets around the
    world, of which over $496 billion belong to participants in the U.S.\1\
    Given our industry depth, we have a unique appreciation for the
    opportunity the Setting Every Community Up for Retirement Enhancement
    (SECURE) Act of 2019 holds for employers and participants and the
    foundation it affords subsequent measures, namely the newly introduced
    Retirement Security and Savings Act of 2021 (RSSA). We applaud this
    policy progress as being requisite for Americans' retirement security.
    ---------------------------------------------------------------------------
        \1\ As of March 31, 2021.

    The last year has seen tremendous upheaval in our country and its
    impact on Americans' employment and financial situation has been
    significant. Weathering this crisis has been of paramount importance;
    however, we must also consider the long-term impact this crisis has had
    on retirement savings. As such, your legislation would significantly
    ---------------------------------------------------------------------------
    improve the financial standing of many workers.

    We believe there are four main areas that need to be addressed in order
    to ensure that working Americans can retire when and how they would
    like: (1) having access to an employer-sponsored retirement plan; (2)
    saving sufficiently in that plan; (3) having mechanisms in place that
    ensure that retirement savings will last throughout retirement; and (4)
    ensuring financial wellness through vehicles that address other
    critical financial needs. The SECURE Act contained many provisions
    addressing all four of these areas and we are already seeing progress
    being made to implement those provisions. The RSSA takes more critical
    steps to address these issues and we strongly support those efforts.

    While backing the bill as a whole, we have identified six priority
    provisions that represent meaningful avenues for retirement industry
    progress:

          Enhanced catch-up contributions for workers over age 60;
          The changes to the qualified longevity annuity (QLAC) rules that
    will enhance lifetime income opportunities;
          An increase in the age at which required minimum distributions
    must commence from 72 to 75;
          Permitting employers to match student loan repayments;
          Allowing 403(b) plans to invest in collective investment trusts
    which, in many cases, are a more cost-effective investment vehicle; and
          Allowing 403(b) plan sponsors to participate in multiple
    employer plans.

    By extending employer options and broadening individual horizons, we
    believe that together we can ensure Americans retire with dignity. We
    look forward to and are committed to working with you as you move this
    legislation forward.

    Sincerely,

    David Ireland
    Global Head of Defined Contribution
    State Street Global Advisors

                                     ______

                              XY Planning Network

                               24 E. Main Street

                               Bozeman, MT 59715

      Statement of Michael Kitces, Co-Founder and Executive Chairman; and
                         Alan Moore, Co-Founder and CEO

    Introduction

    On behalf of our 1,500 independent financial advisors, XY Planning
    Network thanks Chairman Wyden, Ranking Member Crapo, and members of the
    Senate Committee on Finance for holding this important hearing.

    XY Planning Network (``XYPN'' or the ``Network'') is a national network
    of fee-for-service financial advisors that provides them with
    technology, compliance, and business consulting services. XYPN
    represents state-registered investment advisers in all 50 states.
    Network members serve primarily working-age Generation X and Generation
    Y consumers, providing financial advice for which they receive fee-only
    compensation for their services, without asset minimums or product
    sales. Our professional advisors take a fiduciary oath as a condition
    of membership, which includes an agreement not to sell products for
    commissions or engage in other, more opaque compensation arrangements
    in the financial services industry. The majority of our members hold
    the CFP' certification, an intensive program covering all
    aspects of financial planning, including a special focus on retirement
    planning.

    General Statement in Support

    For many of the same reasons that you heard from witnesses in the July
    28, 2021, hearing on retirement legislation, XYPN is supportive of
    bipartisan initiatives such as legislation introduced recently by
    Senators Cardin and Portman,\1\ and referred on May 20, 2021 to this
    Committee. XYPN is also supportive of other related legislative efforts
    to enhance the current U.S. retirement system by encouraging additional
    worker participation, increased savings, as well as tax credits that
    encourage the creation of new qualified plans by small businesses.
    ---------------------------------------------------------------------------
        \1\ See S. 1770, Retirement Security and Savings Act (``RESA'').

    One of the primary areas of advice that is sought by the approximately
    75,000 clients of XYPN members is retirement planning advice. Inasmuch
    as XYPN members typically are compensated by hourly, project, or
    retainer fees, and not for the amount of the client assets under
    professional management, the Network's client base is generally
    comprised of lower-to-moderate income workers, couples, and family
    ---------------------------------------------------------------------------
    households, not high-net worth clients.

    As such, XYPN in particular supports expanding coverage to the part-
    and full-time workers without access to retirement plans, whether it is
    the state-sponsored automatic IRA programs that fill an important gap
    in this effort, and similar legislative initiatives at the federal
    level. Moreover, since numerous studies \2\ confirm that competent and
    ethical financial planning advice can boost savings and expected
    returns by investors in the securities markets, we strongly urge this
    Committee to add a tax credit (as opposed to a tax deduction) which
    would more likely be used by the lower- and moderate-income workers who
    most need professional assistance to ``stay the course'' in meeting
    their long-term retirement goals.
    ---------------------------------------------------------------------------
        \2\ See, e.g., David Van Knapp, ``What Is the Value of An
    Advisor?'', Seeking Alpha, February 13, 2017, reviewing research
    published by Vanguard estimating that investors gain about 3 percent
    per year in value for their investments by working with an advisor
    compared to self-
    directed investing. Another research paper, ``Alpha, Beta, and Now . .
    . Gamma,'' by David Blanchett and Paul Kaplan of Morningstar evaluated
    the financial outcomes of retirees that indicated good financial
    planning decisions increase retirement income by 29 percent, or the
    equivalent of an additional 1.82 percent per year of higher returns.
    ---------------------------------------------------------------------------

    Statement in Opposition to Sec. 112 of RESA

    While sec. 112 of RESA ostensibly supports increased savings and
    investment returns by allowing workers in a private sector, defined
    contribution plan to be able to receive individualized retirement
    planning advice (on both their employer retirement plan, and
    investments held in outside accounts) as an employer-paid fringe
    benefit, XYPN believes this benefit is highly discriminatory by: (1)
    only being available to those who work for companies that choose to
    offer the benefit (rather than empowering workers to make their own
    decision to seek financial advice); (2) being unavailable to those who
    are unemployed, part-time employed, or partially retired, and who may
    still need access to retirement advice; and (3) limiting the ability of
    employees to only choose financial advisors associated with their
    employee benefits provider or other specific firms their employers
    select, rather than allowing employees to choose their own advisor.

    In essence, the issue is that by attaching a tax deduction for
    retirement advice solely to the benefits programs offered by employers,
    then employees themselves would be unable to work with independent
    financial advisors who are not connected to the employer's payroll/
    benefits systems administering workers' fringe benefits. Nor would
    there be an administratively feasible way for employers sponsoring a
    plan--particularly in the large ``mega-plans'' with thousands of
    participants and beneficiaries--to have the flexibility to allow them
    to connect with any advisor of their preference. Instead, most plan
    sponsors would be compelled to rely on their recordkeepers (``RKs'') to
    furnish this advisory service, given that the employer would need to
    negotiate the engagement en masse for all employees when structured as
    an employee benefit and route payments through their existing benefits
    systems to ensure proper tax reporting. In fact, many RKs already offer
    their own in-house advice solutions to plan sponsors using their
    recordkeeping services, leading to both a limitation on advice choice
    for workers, and conflicted advice to those workers as the RK is a
    party in interest (thereby necessitating an additional safe harbor
    under ERISA).

    In other words, while sec. 112 can be read in one way as suggesting a
    401(k) plan sponsor can retain ``any'' registered investment adviser
    offering retirement planning advice (which is technically correct), in
    practice not any advisory firm will have access to provide that advice
    and be compensated for its services due to the aforementioned system
    constraints. Recordkeepers with dominant market-share would not only
    serve as de facto gatekeepers controlling access to advice-givers, but
    also have a direct and conflicted interest to only or primarily offer
    their own advisors in lieu of any other the worker might have
    independently selected.

    This structure is also concerning because ERISA imposes exacting duties
    on the fiduciaries of retirement plans by requiring the principal
    fiduciary (namely the plan sponsor) to prudently select and monitor its
    service providers, and to discharge this duty ``solely in the interest
    of the participants and beneficiaries'' of the plan.\3\ In practice,
    tying financial advisors at the hip to the recordkeeper, by providing a
    tax incentive only to such arrangements that are structured as an
    employee benefit, will make it that much more difficult for the plan
    sponsor to make a prudent selection, and for the individual advisor to
    provide objective advice in assisting workers in meeting their
    retirement goals.
    ---------------------------------------------------------------------------
        \3\ 29 U.S.C. Sec. 1104(a)(1)(A).

    As such, XYPN recommends that this advice-gap issue can be resolved by
    eliminating the fringe benefit approach to expanding retirement advice,
    which both limits consumer choice, favors more conflicted advice
    channels, and provides potentially outsized deductions to the most
    highly-compensated employees (where fees for retirement advice services
    can reach $100,000/year \4\ and would become fully deductible under the
    current proposal). Instead, the Committee should consider more
    inclusive approaches to broaden access to professional, unbiased
    financial planning advice, which might include either: (a) reinstating
    the IRC Section 212 expense deduction for investment advice as an
    itemized deduction for individual consumers who select and pay for
    financial advice (where both workers covered by an employer retirement
    plan, and anyone else seeking retirement advice, can obtain the
    deduction with the advisor of their choosing on an equal footing); or
    (b) expanding the Saver's Tax Credit--intended for use by low-and-
    moderate-income taxpayers--by adding an Advice Tax Credit for the same
    demographic (which again would not necessitate obtaining an advice-
    provider through an employer's recordkeeper).
    ---------------------------------------------------------------------------
        \4\ See, e.g., Bill Dillhoefer, ``Equity Compensation Planning as a
    Niche: Market Opportunity and Differentiated Value,'' referencing the
    types and range of compensation paid to advice-
    providers offering retirement planning services in the employer
    channel, available at https://www.kitces.com/blog/equity-compensation-
    planning-executives-stockopter-option-grants-share-grants-valuation-
    analysis-modeling/.

    To ensure that the advice is provided by a competent and unbiased
    financial intermediary, and minimizes the risk of conflicted advice,
    the criteria could require advice-givers to hold a nationally
    recognized professional certification like the CERTIFIED FINANCIAL
    PLANNER (``CFP'') designation, and to sign a fiduciary oath to ensure
    loyalty of the advisor to the client's best interests.

    Conclusion

    In summary, the XY Planning Network supports the bipartisan efforts of
    this Committee to enhance the efforts of workers nationwide to work
    toward financial independence in retirement. One way to help retirement
    savers reach this goal is to amend and broaden the tax incentives
    available to all workers by making competent and unbiased investment
    advice more accessible to all workers.

    Thank you again for this opportunity to share our perspective on ways
    to ``level the playing field'' for financial advice in the U.S.
    workplace. If you have any questions, please do not hesitate to contact
    me at michael@xyplanningnetwork.com.

                                       [all]