[Congressional Record Volume 142, Number 98 (Friday, June 28, 1996)]
[Senate]
[Pages S7302-S7304]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

       By Mr. BINGAMAN (for himself and Mr. Jeffords):

  S. 1922. A bill to amend the Employee Retirement Income Security Act 
of 1974 to establish a Pension ProSave system which improves the 
retirement income security of millions of American workers by 
encouraging employers to make pension contributions on behalf of 
employees, by facilitating pension portability, by preserving and 
increasing retirement savings, and by simplifying pension law; to the 
Committee on Finance.

  S. 1923. A bill to establish a Pension ProSave system which improves 
the retirement income security of millions of American workers by 
encouraging employers to make pension contributions on behalf of 
employees, by facilitating pension portability, by preserving and 
increasing retirement savings, and by simplifying pension law; to the 
Committee on Labor and Human Resources.


                        The Pension Pro-Save Act

  Mr. BINGAMAN. Mr. President, I appreciate very much the chance to 
speak, address the Senate today on the very important issue of 
retirement security. The Senator from Vermont, Senator Jeffords, and 
myself are introducing today two bills. I will just read the title for 
people so that they will get an idea what these bills will do:

       To establish a Pension ProSave system that improves 
     retirement income security for millions of American workers 
     by encouraging employers to make pension contributions on 
     behalf of employees, by facilitating pension portability, by 
     preserving and increasing retirement savings, and by 
     simplifying pension law.

  Mr. President, before I describe our proposal, let me describe the 
problem, because I think the problem we are attempting to confront is 
severe, is serious, and affects many of us in this country. This first 
chart I have here describes the problem very well. This is a chart with 
the title, ``More Than 50 Million Workers Are Not Earning A Pension.''
  This pie chart shows that over half of the private sector workers in 
this country today, 50.8 million people, as of April 1993, so I am sure 
it is even larger now, but over 50 million people are not covered by 
any kind of pension. This, of course, is separate from Social Security, 
which is not a pension program. But as regards any other type of 
pension, more than half of our workers are not covered today.
  Let me show another chart that sort of breaks this down by State and 
shows the problem as it exists from State to State. You can see the 
percentages. This chart shows on a map here the percentage of people 
covered by some type of pension plan in each of our States. People 
might ask, why is a Senator from New Mexico even interested in this 
issue? I can tell you why. When you look at New Mexico, we have the 
lowest percentage of our workers covered by pensions of any State in 
the Union; 29 percent of our private sector employees in New Mexico 
actually have some degree of pension coverage.
  Let me show another chart here, which tries to make the same point 
somewhat differently and just shows the percentage of workers who do 
not have coverage: ``State Differences In Pension Coverage.'' Starting 
from the top, the State with the largest percentage of workers not 
covered is New Mexico, with 71 percent; next Louisiana, 69 percent; 
then Nevada, 67 percent; and on down the list.
  I see my friend from North Dakota on the floor. In his State, 61 
percent percent of the people in that State do not have any pension 
coverage. So this is a serious, serious problem.
  The final chart I will show is a chart to make the point that the 
problem is not getting better or getting solved. In fact, it is getting 
worse. This shows two different figures here, first the figure for 1979 
and then the figure for 1989. The red is the percentage of coverage 
that existed in 1979, the yellow is the percentage of coverage that 
existed 10 years later, in 1989, for different groups in our society 
depending upon the extent of the education they have received.
  We can see for those with less than a high school education, in 1979, 
44 percent of those people were covered; in 1989, 28 percent. And on 
and on down through the list. Again, it is clear that our Nation has a 
severe problem to confront.
  Second, it is clear the problem is getting worse. The reasons for 
inadequate pension coverage are what we need to focus on. I believe 
there are four key reasons why so many of our citizens have no pension 
coverage.
  First, present law does not provide adequate incentives for employers 
to contribute to a pension plan for themselves and their employees. 
Many of our small businesses, the vast majority of our small 
businesses, do not contribute at the present time because those 
incentives are not there.
  A second reason is that, in addition to inadequate incentives, 
present law imposes significant administrative duties on employers who 
wish to assist in providing pension coverage.
  A third reason is that the rapid pace of job change, combined with 
significant waiting periods before retirement benefits vest, results in 
many employees losing their rights to retirement benefits when they 
move from job to job.
  The fourth reason is that present law greatly limits the amount of 
pretax savings that a person can achieve unless his or her employer 
does take on this administrative duty of establishing a pension plan.
  Let me describe briefly the proposal that Senator Jeffords and I are 
putting before the Senate today and are having referred to committee. 
This Pension ProSave proposal seeks to increase the number of Americans 
with some level of pension benefits by curing the deficiencies that are 
presently in the law. First, it provides an additional tax incentive to 
an employer if he or she commits an amount equal to at least 1 percent 
of each employee's salary to a pension for all employees. The maximum 
amount each year that an employer may contribute for each employee 
would be $5,000.

[[Page S7303]]

  A second way we are trying to correct deficiencies is that the 
administrative duties on the employer wishing to participate in this 
Pension ProSave proposal are kept to an absolute minimum. Employers are 
given the flexibility to increase the amount of the contribution to the 
pension plan or to suspend payments entirely for a single year, if that 
is necessary because of economic hardship in the business. The employer 
participating in Pension ProSave is free of any future pension 
obligations to employees once those employees leave the job. That is a 
very important benefit to employers, as we see it.
  A third way we are trying to correct deficiencies is that the 
employee will become eligible to accrue pension benefits whenever those 
pension benefits are made by the employer. If the employer wants to 
participate in Pension ProSave, the employer would have to go ahead and 
make contributions for each employee once the employee has been 
employed for 6 months. But those payments would vest immediately once 
they were made into the ProSave account of the employee.
  When an employee not covered by Pension ProSave leaves a job where 
benefits have accrued, that employee would have the right to direct the 
employer to transfer the cash equivalent of accrued pension benefits to 
an account in the name of the employee and the Pension Portability 
Clearinghouse which we are establishing under this act.
  Under Pension ProSave, an employee may save additional pretax dollars 
for his or her own retirement in the amount twice what the employer 
contributes each year, to a maximum of $5,000, whichever is less. 
Amounts employees are permitted to save are in addition to what might 
be saved in an IRA or some other pension plan.
  To accomplish this set of objectives, we are proposing to establish a 
nonprofit, private corporation chartered by an act of Congress, which 
would be designated the Pension Portability Clearinghouse, to 
administer the Pension ProSave system. The corporation would be 
governed by a board, the members of which would be appointed by the 
President, with the advice and consent of the Senate.
  Payments into the clearinghouse would occur, first, when an employee 
who has chosen to participate in Pension ProSave makes a payment to the 
account of an employee;
  Second, when an employee makes a payment, as permitted, which could 
be up to twice what the employer has made that same year;
  And third, as I indicated before, when an employer who does not 
participate at the direction of the employee transfers cash payments to 
a Pension ProSave account when the employee leaves that employer's 
company.
  There are some similarities in what we are proposing to the TIAA-CREF 
model, with which many people are familiar. TIAA-CREF is the largest 
pension plan for administration of pension benefits that currently 
exists in this country, and I believe in the world. TIAA-CREF, 
originally established by Andrew Carnegie to help those teaching in 
universities to have pension coverage when moving from one educational 
institution to another, current manages more than $136 billion for 
approximately 1.7 million participants at more than 5,500 institutions.
  The similarities between the Pension Portability Clearinghouse and 
TIAA-CREF are that we would have central administration of accounts for 
multiple employers.
  Also, we would provide the ability of employees and employers to use 
the mechanism of Pension ProSave accounts if they chose to.
  We differ from TIAA-CREF in several significant ways also. First of 
all, Pension ProSave would be open to all employers, not just to those 
in a particular industry or particular field. TIAA-CREF, for example, 
is limited just to those involved with higher education or research.
  Pension ProSave is limited strictly to maintaining records of account 
balances and not to managing funds or selling annuities. Again, that 
would be a significant difference between what we are proposing and 
TIAA-CREF.
  We also have some similarities in this proposal to the Federal thrift 
savings plan in that we do provide a means to establish a retirement 
account and to add to it as a person proceeds through their career.
  We differ from the thrift savings plan in obvious ways also in that 
we have designed Pension ProSave for contributions to retirement 
savings even as a person moves from job to job. The thrift savings 
plan, of course, is limited to Federal employees, people working for a 
single employer.
  Pension ProSave provides for immediate vesting of employee 
contributions. The thrift savings plan for Federal workers does not.
  Pension ProSave does not have any requirement on employers to match 
contributions by employees as the thrift savings plan does.
  So what we are proposing is not a carbon copy of TIAA-CREF; it is not 
a carbon copy of the Federal thrift savings plan either. Instead, it is 
a new mechanism which employers could choose to take advantage of or 
not, as they see fit. For those who do choose to participate, it 
provides a hassle-free way for the employer and the employee to save 
more pretax dollars for retirement.

  There is one other feature of Pension ProSave that I want to 
highlight, and that is the opportunity it provides for employers to 
engage in profit sharing with their employees. Suppose, for example, 
that I am a small business owner and I am not sure from one year to the 
next how well or how poorly my business will do. Under Pension ProSave, 
I would have the option of setting up Pension ProSave accounts for each 
employee by committing to contribute as little as 1 percent of their 
salary into those accounts each time I issue a paycheck to them.
  By making that 1 percent contribution, I give each employee the 
opportunity to contribute an additional 2 percent from their own 
resources. But if I do contribute the 1 percent each pay period from 
January, say, through December and then decide that it has been a very 
good year for my business and I want to share some of the profit with 
employees, I could increase that contribution into Pension ProSave for 
my employees to 2 percent or to 5 percent, as long as I did not exceed 
the $5,000 total limit per employee.
  This proposal does provide a hassle-free way to save pretax dollars 
for retirement, a hassle-free way to participate with profit sharing 
programs for employees. It promotes savings. It will help more people 
to reach retirement with pensions. It will help to buffer individuals 
against the turbulence of this economy we live in. It will provide more 
employers with a good vehicle for profit sharing. All of those are 
major benefits to our Nation.
  Mr. President, one cause of the extraordinary economic anxiety in our 
Nation is related to the eroding sense of financial security at 
retirement. A recent study of worker's views of their present and 
future economic circumstances found that most people believe that 
despite the twists, turns, and pitfalls in our rapidly changing 
economy, that they can chart a successful course to retirement. But 
their anxiety levels were extremely high when concerns about the 
solvency of Social Security and about the great number of Americans 
without pension benefits were mentioned.
  Americans include retirement security in their personal strategies 
for economic success. I believe that America is calling for a credible 
proposal that will get more of our Citizens covered by some kind of 
pensions.
  There is no doubt that increasing retirement savings will help 
bolster national savings, which will help spur more long-term 
investment and economic growth. I urge my colleagues to review this 
proposal which Senator Jeffords and I are offering and join us in this 
effort to improve retirement security for many millions of Americans.
  Mr. JEFFORDS. Mr. President, the problem of retirement security is an 
ever mounting challenge to the future welfare of our Nation. More than 
51 million Americans are not covered by any kind of pension plan. The 
aging of the baby boom generation will dramatically increase the 
retired population in proportion to the working population early in the 
next century.
  Our Nation is facing certain crisis if we fail to take steps to 
correct this problem of people working until retirement--and finding 
that their Social Security benefits fail to maintain adequate and 
acceptable living standards.

[[Page S7304]]

 Despite the proliferation of retirement products in various forms of 
IRA's and 401(k) plans, patterns clearly show that those who earn 
enough to save probably do. Our problem is that over the last 15 years, 
we have had no increase in the percentage of our workforce that is 
participating in a qualified pension program.
  Mr. President, in order to ensure that this Congress does face the 
issue of retirement security for all working Americans and not just the 
fortunate minority who are saving, I am introducing with my colleague, 
Senator Bingaman, the Retirement Security for All Americans Pension 
Pro-Save Act.
  The bill we are introducing outlines a concept for pension expansion 
and portability that has been discussed in this Chamber several times 
over the last several decades but which has not evolved until now as 
legislation. The Pension ProSave System would improve the retirement 
income security of millions of working Americans by encouraging 
employees to make contributions on their behalf, by facilitating 
pension portability, by preserving and significantly increasing 
retirement savings and by simplifying pension law.
  Despite 17 years of availability of simplified pension plans, pension 
coverage remains low in the small business sector. Even when covered by 
a tax-advantaged pension plan, many workers cash out their own 
contributions made to the pension plan when they leave one job rather 
than roll them over into another retirement vehicle. Tax penalties 
unfortunately have not been entirely successful in discouraging the 
spending of these midcareer retirement savings disbursements. Of the 
$47.9 billion in preretirement distributions made in 1990, less than 20 
percent of recipients reported putting the entire distribution into 
another tax-qualified retirement plan.
  The Pension ProSave System is modeled after the highly successful 
Teachers Insurance and Annuity Association-College Retirement Equity 
Fund (TIAA-CREF), the largest private pension system in the world with 
assets over $136 billion and about 1.7 million participants at about 
5,500 institutions. This proposal targets those who are working their 
way toward retirement--and will have little or no private pension plan 
to supplement their Social Security benefits. Pension Pro-Save is 
designed to supplement other pension vehicles and will increase pension 
coverage to millions of American workers, especially for those who work 
for small businesses.
  The benefits of Pension ProSave are first, it would provide an 
incentive and a simple, hassle free way for employers to provide 
portable pension benefits to their workers. Employees could also make 
matching contributions to their accounts on a 2:1 basis to a maximum of 
$5,000. The employer's contributions also would not exceed $5,000. Mr. 
President, I want to emphasize that these are the employee's accounts--
not the Government's and not the employer's. These accounts will remain 
with those workers the duration of their lives.
  Second, Pension ProSave would stop the leakage of retirement savings 
by furnishing employer's pension contributions into a portability 
clearinghouse. Worker's account balances would be invested and managed 
by private sector firms in diversified portfolios.

  Mr. President, the funds contributed by an employer to the retirement 
security of his or her employees by way of a ProSave account will 
remain there and be invested at the direction of the employee until 
retirement. The Portability Clearinghouse will contract with investment 
firms to manage funds through the Clearinghouse. Investment options 
would include a fixed income fund, an equity fund, a Government 
securities fund, small business capitalization fund, an international 
fund, and a public infrastructure fund.
  Employers will have no responsibility for administering a pension 
fund or managing funds for employees who have left their employment. 
This should be very attractive to businesses that do not desire to 
carry long-term responsibilities for workers who have moved on. 
Employer contributions are locked into the Pension ProSave accounts 
until retirement, funds contributed by the employee are available to be 
loaned for certain purposes and under terms established by the 
Portability Clearinghouse Board.
  Mr. President, I have no doubt that some who oppose this plan will 
rattle the cages and make claims that this act is nothing but more big 
Government, another bureaucratic institution that spreads the 
Government further into our lives. These claims would be wrong--and 
will only serve to maintain an economic reality that permits those best 
off in our society to take advantage and save up to $30,000 a year with 
Government provided tax advantages for 401(k)s and other employer 
sponsored private pension plans. Government does have an important role 
to play because the market has failed to provide the extension of 
pension coverage to 51 million Americans.
  It is unacceptable that workers who don't have an employer provided 
pension plan--can only save $2,000 a year in IRA accounts. We must now 
do what we can to provide an incentive to employers to provide modest 
retirement security for more employees. This plan is an enabler--it 
creates a structure, similar in many ways to the TIAA-CREF model 
established at the beginning of this century by Andrew Carnegie to 
provide pension portability for professors and university employees 
moving between one higher education institution and another.
  We have a responsibility not only to create a more equitable savings 
structure for those Americans who have the desire and wherewithal to 
save--but also to the many Americans who are low-income workers who 
move from job to job, finding themselves with little or no private 
pensions to help them in their retirement years.
  Pension ProSave promotes savings, helps more people reach retirement 
with pensions, helps buffer against the turbulence of the economy, and 
provides many employers with a good vehicle for profit sharing. All of 
these are benefits for our Nation as a whole.
  Interestingly enough, any plan that succeeds in establishing more 
retirement security for our working population is scored as costing our 
country short-term tax revenue. By the year 2029, when the youngest 
baby boomers reach age 65, more than 68 million persons will be older 
than 65--accounting for more than 20 percent of the U.S. population, 
compared to just 12 percent today. As a result, the ratio of workers 
contributing to Social Security will fall to two workers for every 
retiree. Rising Medicare and long-term care costs add even more to the 
savings retirees will need.
  Mr. President, I ask you and my other colleagues in this Chamber to 
stop thinking in the short term and not wait until the baby boomers 
begin to retire. If we do not begin to find the way to increase the 
ability of private employers and individuals to finance retirement 
needs the cost to our country will be much greater than revenue loses. 
Establishing Pension ProSave accounts is an investment that will help 
our Nation avoid a social train wreck that is just waiting to happen.
                                 ______