[Congressional Record Volume 143, Number 82 (Thursday, June 12, 1997)]
[Senate]
[Pages S5601-S5604]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. GRAHAM (for himself, Mr. Grassley, Mr. Hatch, Mrs. Boxer 
        and Mr. Jeffords):
  S. 889. A bill to provide for pension reform, and for other purposes; 
to the Committee on Finance.


            THE RETIREMENT SECURITY FOR THE 21ST CENTURY ACT

  Mr. GRAHAM. Mr. President, today, as I did once before in January of 
this year, I rise to speak about an issue which is of vital importance 
to this Nation, the retirement security of our people into the 21st 
century.
  Mr. President, the facts are startling. Fifty-one million working 
Americans are not covered by any type of retirement plan. An incredible 
87 percent of workers employed by small businesses, businesses with 
fewer than 20 employees, have no private retirement or pension 
coverage. Less than 40 percent of the 33 million Americans, age 65 and 
older, today collect a pension. These numbers are very, very 
disturbing.
  There are three foundations for a secure retirement: Social Security, 
personal savings, and a pension. Each one of these foundations is 
eroding. Social Security is unlikely to increase. Personal savings 
rates are falling. Fewer of today's workers will retire with a lifetime 
pension.
  In January, I spoke and mentioned some of the reasons that pension 
coverage fails to reach so many workers. Some of those reasons include 
the fact that our work force is changing. For the most part, our 
pension laws have not kept pace with the changes in the American work 
force. Think about current workers in an era of tremendous employee 
mobility--you don't work an entire career for one company, as was the 
typical pattern for our parents and grandparents. Small business is a 
tremendously vital part of our economy. Yet, those very small 
businesses are faced with obstacles in establishing retirement plans.
  There has been a decline in union membership, and unionized workers 
are the most apt to be covered under a defined benefit retirement plan. 
There is a shift away from manufacturing jobs toward service and 
retail, and, again, pension coverage is higher in manufacturing sectors 
than in these new expanding areas of the American economy.
  Knowing that these trends will continue, it is obvious that we need 
to make certain that our pension laws have kept pace with the changing 
American work force. My goal is to ensure that each American who works 
hard for 30, 40 years, or more, has every opportunity for a secure and 
comfortable retirement. I share this goal with many of my colleagues, 
including Senators Orrin Hatch, Charles Grassley, and John Breaux, all 
of whom join me today in introducing this bipartisan bill.
  To achieve the goal that every American who works hard for a lifetime 
will have a secure retirement and pension, we have focused on five 
areas: Expanded coverage for small businesses, women's equity issues, 
portability, pension security and enforcement, and simplification. 
Those, Mr. President, are the five areas of impact for the legislation 
that we introduce today.
  I have been honored to participate with some of my colleagues' 
efforts to build retirement security for American workers. Senator 
Daschle has created a Democratic pension task force, which led to the 
introduction of S. 14 on the first day of this session.
  Senators Moseley-Braun, Murray, and Snowe have furthered the debate 
in helping women achieve a sound retirement, with the Comprehensive 
Women's Pension Protection Act.
  Senators Conrad and Hatch have focused on clarifying 
nondiscrimination rules for governmental plans.
  Senator Boxer has fought to protect pension assets from abuse in 
401(k) plans.
  Senator Gregg's leadership has guided the Republican pension task 
force to introduce its pension proposal earlier this week.
  The attention that this issue has received in the Congress highlights 
its importance to the American people. I am ready to work together and 
find the common ground that will form the foundation for a secure 
retirement for millions of Americans.
  We will take a common bipartisan approach that will be necessary for 
both sides of the aisle, both employers and employees, in order to 
build that foundation for the future. We need to be able to offer 
businessowners and their workers uncumbersome portability, 
administrative simplicity and the confidence that their plans are 
secure and well funded.
  To be honest, when I first saw the statistics of how many people are 
ill prepared for retirement, I was amazed. I started asking ``Why?'' 
Why do we have over 50 million Americans not prepared for their 
retirement? I asked Floridians directly. I have spoken with large and 
small chambers of commerce.
  In my career, I have had the opportunity to spend a workday working 
directly with the people of our State at

[[Page S5602]]

more than 300 businesses. I have worked side by side with small 
business owners, with executives, and their employees.
  My staff, visiting a chamber of commerce in central Florida, recalls 
the answer given as to why small businesses have few pension plans: 
``Administrative costs and red tape.''
  When I traveled to Orlando to discuss this bill, I had the arduous 
task of bringing along the United States Code books and current 
regulations dealing with pension and retirement. They are overwhelming 
just by their weight alone.
  Our Nation's small businesses need simple options. They should be 
focusing on what they do best--growing their businesses, growing our 
economy, not attempting to apply a pension law that was written 30 or 
more years ago for large businesses to their current circumstances. It 
is crucial that we make it as uncomplicated as possible for our 
Nation's businesses to offer their employees retirement security.
  We need to cut back on paperwork, eliminate obstacles to starting 
pension plans, streamline the complex regulations, and provide 
employers with the guidance and support they need to continue their 
valuable efforts.
  In the end, all of these provisions will encourage employers to offer 
pension plans because of the lower administrative costs and reduction 
of red tape.
  Let me mention a few specific ideas which are incorporated in this 
legislation.
  Small businesses are the most vital sector of today's economy. This 
is where job growth is, and all indications are where it will 
accelerate in the future. Yet, small businesses face many challenges in 
providing a secure retirement for their employees: Higher 
administrative costs to manage a plan; a fluctuating income stream--
some years profits are up; and sometimes they are down--and a lack of 
resources to keep current with changing laws and regulations.
  This chart demonstrates the problem. Workers in America with a 
retirement plan: According to the Small Business Administration, if you 
work for a company that employs 20 or fewer persons, your chances of 
having a retirement plan are 13 percent; if you work for a firm with 
between 21 and 100 employees, your chances are 38 percent; if you work 
for a firm that employs over 500 people, 72 percent of the time you 
will be covered by a pension and retirement program.
  We need to make it a wise business decision for small businessowners 
to establish a retirement plan for themselves and for their employees. 
We need to offer simple creative solutions to expand pension coverage 
for small businesses.
  Payroll deductions for individual retirement accounts is one example, 
Mr. President, of the kind of change which is made in this legislation.
  Even with every effort made for simplification, some businesses won't 
be able to establish a retirement plan. But even the smallest of small 
businesses can help their employees. Any step we take to facilitate 
putting money away for retirement is a step in the right direction.
  Payroll deductions are the easiest manner of savings. This provision 
will facilitate the contributions to IRAs by direct deduction from 
payrolls.
  Modification of the topheavy rules is another step that will 
facilitate small businesses providing retirement programs. What are 
topheavy rules? These are rules which were created to assure that 
private pension plans were not disproportionately tilted toward highly 
compensated individuals. These rules affect small businesses much more 
than large companies. Because topheavy rules are excessively 
cumbersome, small businesses simply don't offer retirement plans for 
any of their employees.
  Our provisions attempt to address this inequity by repealing the 
family aggregation rules and simplifying the definition of key 
employees and compensation.
  It is important that retirement plans benefit all employees--but, if 
we can modify these rules to help small family businesses prepare for 
retirement, millions of Americans would be better off in their 
retirement years.
  Another area of special concern, Mr. President, in this legislation 
is the impact that old pension and retirement policies have on women. 
We know that women are coming into the work force in much larger 
numbers than they did in previous generations. We know that women are 
the most mobile component of our work force. They change jobs more 
frequently. They move in and out of the work force as family and other 
responsibilities dictate. Women tend, during their career, to care for 
children and aging parents, which makes it difficult for them to stay 
in one job long enough to secure the benefits that require long periods 
of employment.

  Statistics show that women will live longer in retirement than men. 
Therefore, they need more, not less, financial resources for their 
retirement years. Historically during a career, women will earn less 
than men, thus making it more difficult for them to save for 
retirement. The provisions that we include in our women and family 
equity section help both women and men, but they disproportionately 
help women.
  Some of the specific concerns women face during their working 
careers:
  Time away from work for child care, lower salaries, or divorce.
  This section can provide a growing sector of our working population a 
fair chance at a productive and secure retirement.
  It provides for faster vesting of employers' matching contribution. 
Under current law, employers may require up to 5 years of service 
before an employee is entitled to the employer's matching contribution 
to the business' defined contribution plan.
  Twenty percent of our work force age 45 to 64 have been in their 
current jobs less than 4 years. That is a huge sector of the work force 
who are most likely not to stay long enough to vest in their retirement 
plan. Women are a disproportionate share of that huge portion of the 
work force. By reducing the vesting period from 5 years to 3 years, we 
more accurately reflect the changes in our work force.
  Spousal IRA is another example of a provision in the current law 
which particularly adversely affects women. In an American culture 
where we see more and more two-career couples, we need to encourage 
each of them to save in every way possible.
  Under current law, if one spouse is participating in a retirement 
program at his or her job, no matter how small, the other spouse is 
precluded from a tax deductible individual retirement account. Senators 
Roth and Breaux have worked long and hard on this issue, and we have 
included the results of their efforts in this proposal. It eliminates 
one barrier that has stood in the way of many two-career families 
providing for two individuals' pension and retirement security. 
Individual retirement accounts have proven to be one of the most 
effective ways to plan for future financial security. Working couples 
should be encouraged to plan and save through this option. We want to 
eliminate this barrier to save.
  Another aspect that particularly affects women is the fact that they 
are subject to periodic discontinuity in their employment careers.
  As the father of four daughters and eight grandchildren, I know all 
the joy a child can bring a family and how much planning is needed for 
the new parents to assure that they and their children can provide for 
their future years.
  Many employees today are taking unpaid leave to spend a few weeks or 
months with a newborn or a newly adopted child. But by doing so, they 
may be taking a step away from their own retirement security by not 
being able to make their usual contributions to their retirement plan. 
Our provision allows them to do so when they return to the job.
  This proposal is modeled after legislation that Congress adopted 
after the gulf war in which returning veterans were allowed to make a 
contribution to their retirement programs to cover the period that they 
were away from their job serving their Nation. We will help our 
Nation's new parents in the same way that we helped returning veterans.
  Saving for retirement is not an easy task. It takes dedication month 
after month. Under this provision, we will make certain that the good 
savings habits that parents have started can be sustained even if they 
take time away from work to be with a newborn child.
  Another factor that peculiarly affects women is the issue of 
portability--the ability to move retirement benefits from one job to 
the next.

[[Page S5603]]

  Just looking at some of the current statistics, we know that the 
average American worker over the course of a 40-year career will have 
seven different employers. The average worker in a 40-year career will 
have seven different employers. Our pension laws were written in an era 
that didn't anticipate this modern mobility of the work force.
  Americans' retirement dreams can be dimmed by the consequences of 
moving from job to job. They will have less retirement assets. Often 
there is no choice but to make a job change. A spouse gets transferred 
to another city to keep the family together; the other spouse moves as 
well. We in Congress have been in favor of keeping families together. 
Let's make certain that the family is not hurt in later years by a 
difficult retirement, a constrained retirement, because of that very 
mobility. An employee can be downsized. Companies can go bankrupt. 
Hard-working recent college graduates can move up the career leader. 
Each of these involve job changes.
  Mr. President, one of the things that has distinguished the American 
economy from many other industrialized nations has been this very 
factor of our mobile work force, that people were willing to move where 
there were new opportunities, where the changes in the economy dictate 
that it was to their advantage as well as to the Nation's advantage for 
people to move from one job to the other. We shouldn't constrain that 
by imposing a penalty on their long-term retirement security because 
they have done what is in their interest and what is in the interest of 
our dynamic economy.
  When such moves occur, we need to mobilize the pension money, to put 
wheels under it, to make it as portable as the people who will benefit 
by those retirement savings. Providing employees with a vehicle to take 
their pension money with them during their working careers will allow 
the accrual of larger pensions making it easier on the worker and the 
employers to keep track of retirement funds.
  How can we do this? We can do it through several proposals which are 
incorporated in the bill that I introduce today. Similar defined 
contribution plans should be able to roll over one into the other. 
Money in a retirement stream should be kept there until retirement. 
When you leave one job for another, your retirement savings should be 
able to travel with you.
  Mr. President, today American workers have their retirement plans in 
many different types of specific forms. Well known is the 401(k) plan; 
also, plans for workers who are employed by nonprofit organizations, 
workers who are employed by the Government, individual retirement 
accounts.
  What we provide in our legislation is that, if a worker moves, for 
instance, from a Government employment to a private employment, they 
would be able to carry with them their accumulated retirement benefits 
from their previous plan into their new employment.
  This will require the consent of both the employees and the new 
employer to do so. But the law will no longer erect arbitrary barriers 
against such transition of employment benefits.
  All of these plans have their own specific but generally relatively 
marginal differences. But they all have one common purpose--that is, 
allowing workers to save for retirement. This ability to move plans as 
employment history requires a movement will facilitate achieving that 
objective.
  Mr. President, we also need to encourage businesses to allow their 
employees to do this. We will eliminate the fear among businesses that 
by accepting a new employee's previous retirement assets, the business 
risks the disqualification of its own plan.
  Once a pension plan is in place, Congress needs to assure that the 
assets are invested wisely and securely. America's workers are 
depending on the assets that are accumulating in retirement plans. Our 
laws protecting pension assets need to give them the confidence that 
they need to rely on these plans in retirement.
  There should be stronger penalties for fraud and embezzlement of 
plans. We say clearly to the pension fund managers and administrators: 
If you are guilty of fraud or embezzlement, then your own pension will 
be at risk. Workers who are hurt by your action will be compensated out 
of your pension. America's pension fund managers have a sacred trust to 
millions of employees who will depend on their expertise and skills for 
a sound retirement. If that trust is broken, harsh sanctions are in 
order for the guilty party, or managers.
  There should be greater access to information by employees as to what 
is the status of their pension retirement fund. Pension security will 
be enhanced by an educated work force. Employees with the necessary 
information will be able to watch over their own retirement assets. A 
vital aspect of retirement security is keeping pension participants 
fully informed of what they have in their plans and what to expect when 
they retire.
  Senator Grassley is to be commended for his efforts in this area, 
making sure that employees receive accurate information and properly 
computed pensions.
  To help employees plan for their retirement, we propose annual 
benefit statements for all defined contributions plans and every 3 
years for defined benefits plans.
  These statements will help all employees plan carefully and would 
also help to reduce pension miscalculations. We are acting in an 
anticipatory way to cut off what we think could be a future threat to 
retirement security.
  Once we have made every effort to keep our Nation's pension assets 
protected from fraud and abuse, let us protect these assets from 
ourselves.
  There is already a consumer credit crisis in this country. Millions 
of American families are overextended, carrying huge balances on 
multiple credit cards month to month.
  Our measure will prohibit 401(k) or similar retirement assets from 
being tied to credit cards. If these credit cards were allowed, we 
would be putting Americans on the slippery slope, spending retirement 
assets before retiring.
  Mr. President, I mentioned that one of our principal areas of concern 
is simplification, to make it easier for all the participants in the 
retirement security process to know, to be in compliance with the 
standards and therefore to be encouraged to provide more adequately for 
their retirement.
  Summary plan descriptions and a summary of major modifications will 
now be substituted for the detailed reporting requirements which are 
currently required. One less report will be filed. The Department of 
Labor probably has millions of these current detailed reports 
stockpiled.
  Under our proposal, the Labor Department retains the right to request 
one of these reports from a company, but for simplification's sake let 
us not require the reports to be sent in unless they are actually 
needed.
  We are also sanctioning the use of electronic communications. Our 
pension laws should get on the information highway. We have asked the 
Department of the Treasury to look to the use of e-mail and modern 
technology in administering pension plans. It is common sense. It is 
simpler to use. It is less expensive. It will encourage particularly 
small businesses to provide retirement plans.
  Mr. President, common sense is the foundation of this proposal, to 
make the punishment for failure to comply with the standards fit the 
crime. Under current law, the IRS can threaten to disqualify an entire 
pension plan for inadvertent errors. We are proposing intermediate 
sanctions, sanctions which are proportionate to the error that has been 
committed.
  The IRS is to be commended for several programs they have initiated 
to work with businesses in this area. We want to codify elements of 
those plans that are already in practice. As an example, a plan should 
not be disqualified if a company finds and fixes an error prior to an 
Internal Revenue Service audit. Rank-and-file employees will not be 
taxed even if a plan is disqualified.
  Senators Hatch and Conrad have led the effort to permanently exclude 
governmental plans from nondiscriminatory rules. Congress placed a 
temporary moratorium on those rules in 1977. Since then, we have 
addressed this issue every few years. After two decades, common sense 
says let us make this permanent.
  Mr. President, preparing this generation of workers for retirement 
is, in my view, almost an issue of national security. We know that 
beginning early in

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the 21st century there will be a surge of Americans who will reach 
retirement age. How well prepared those millions of Americans are for 
the years after retirement will have a significant impact on the 
economic, personal, and national security of this Nation. A strong 
economic future depends upon this.
  Mr. President, you represent a State with significant numbers of 
persons who have chosen to live there in retirement. That is also true 
of my State of Florida. Every time I go home to my State, I see the 
result of persons who have conscientiously planned for their 
retirement--families that have worked hard, invested wisely, saved 
diligently, and are now enjoying the benefits of retirement in our 
State.
  Collectively, we Americans could learn a lot from this generation. I 
want to provide this generation with every possible opportunity to have 
the same lifestyle as our parents are currently enjoying. To achieve 
this goal, we need businesses to work together with their employees. We 
need Republicans and Democrats to collaborate in a bipartisan solution 
to those inhibitions which are currently resulting in over 50 million 
Americans not having pension retirement plans. We need to work together 
to find the common ground and to take steps now on the items upon which 
we agree. Every time we can make pensions more portable, simpler, 
fairer to women, more attractive to small businesses, more secure, we 
are helping every American reach their retirement goal. We are making a 
significant contribution to a better America.
                                 ______