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


                                                        S. Hrg. 117-678

                   BUILDING ON BIPARTISAN RETIREMENT 
                  LEGISLATION: HOW CAN CONGRESS HELP?

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                                HEARING

                              BEFORE THE

                          COMMITTEE ON FINANCE
                          UNITED STATES SENATE

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             JULY 28, 2021

                               __________

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            Printed for the use of the Committee on Finance

                              __________

                                
                    U.S. GOVERNMENT PUBLISHING OFFICE                    
52-448-PDF                 WASHINGTON : 2023                    
          
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                          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.
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    \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\
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    \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.
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                    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.
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                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 [email protected] 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.
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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 
[email protected].

                                 ______
                                 
             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

                      [email protected]

                    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
[email protected]            [email protected]

                   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: [email protected]

                                 ______
                                 
                        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
            [email protected]
            Phone: 704-248-1131
            Fax: 704-353-9800

                                 ______
                                 
                       Retirement Solutions, LLC

                           235 Main St., #158

                           Madison, NJ 07940

                          Phone: 973-796-4230

                  E-Mail: [email protected]

   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.

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        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

                            [email protected]

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 [email protected].

                                   [all]