[Congressional Record Volume 143, Number 91 (Wednesday, June 25, 1997)]
[Senate]
[Pages S6360-S6362]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. BINGAMAN (for himself, Mr. Jeffords, Mr. Bond, Mr. Mack, 
        and Mr. D'Amato):
  S. 957. 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 perserving and 
increasing retirement savings, and by simplifying pension law; to the 
Committee on Labor and Human Resources.


     The Retirement Security for all Americans Pension Pro-Save Act

  Mr. BINGAMAN. 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. 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.
  In my own State of New Mexico just 29 percent of our work force has 
some kind of pension plan. As this chart shows, New Mexico has the 
worst ranking in the nation in terms of workers covered by pensions. 
Just a few states have private sector working populations with over 50 
percent covered by pensions.
  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. 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 18 years, we have had no increase in the percentage 
of our work force that is participating in a qualified pension program.
  Those who are well off and can look forward to retirement security 
cannot afford to just abandon those who are not. We have a market 
failure that we must address, particularly as the Nation's traditional 
safety net is being rolled back because of budget cuts on so many other 
fronts. I am not opposed to improving and even expanding the pension 
plans of those who have them now. My concerns, however, are focused on 
the reality that we are improving existing pension plans, expanding IRA 
opportunities and creating new forms of individual retirement accounts, 
but we are still doing absolutely nothing to get a large portion of our 
uncovered work force covered by some degree of retirement savings.
  The costs of doing what we need to do will be large. But let's think 
for a moment about the IRA provisions in the tax bill we are discussing 
today. The IRA expansion provisions in the Senate version of the bill 
cost approximately $3.3 billion during the first 5 years and $20.5 
billion in the following 5 years. These costs may be appropriate and 
necessary--but at the same time, we need to confront the revenue impact 
of covering the parts of our society that currently have no retirement 
savings at all. I think that it is poor public policy to expand only 
one-half of the equation like we have been doing.
  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 here to introduce the 
``Retirement Security for All Americans Pension Pro-Save Act.''
  The bill I am 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, a clearinghouse for individual 
pension accounts, 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.

  Mr. President, this plan is not aimed at the existing pension and 
savings structures in this country. This proposal targets those who are 
working their way towards retirement--and will have little or nothing 
to supplement their Social Security benefits. Despite 18 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, workers do not always continue to save their pension 
assets when they can receive them when

[[Page S6361]]

moving from one place of employment to another. Tax penalties 
unfortunately have not been very successful in discouraging the 
spending of these mid-career retirement savings disbursements. Of the 
$47.9 billion in pre-retirement distributions made in 1990, less than 
20% of recipients reported putting the entire distribution into another 
tax-qualified retirement plan.
  The Pension ProSave Clearinghouse 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. Not replacing existing 
pension programs, Pension ProSave is designed to supplement these other 
programs and will increase pension coverage to millions of Americans.
  The benefits of Pension ProSave are first, that this plan 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 $6,000. The employer's contributions also would not exceed 
$6,000. 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 privately 
managed, pension portability clearinghouse. Worker's account balances 
would be invested and managed by private sector firms in diversified 
portfolios.
  Let me explain how Pension ProSave would work. Any employer wishing 
to take advantage of the Pension ProSave Program would furnish the 
names of all employees, employed for at least 6 months and over 21 
years of age, to the ProSave Portability Clearinghouse established in 
this Act. The employer will indicate each employee's salary and the 
uniform percentage of all salaries which the employer will contribute 
to employee ProSave accounts. The employer will have the option of 
changing its percentage contribution each year, as long as 
that contribution equals at least 1 percent. This can help business 
owners--who want to provide pension benefits to their employees--avoid 
getting locked into a rate that remains fixed while the economic 
performance of their small businesses may be volatile.

  Once a ProSave account is established for an employee, the employer 
will forward contributions to the account at the time of each paycheck 
or at least prior to the end of that year.
  With the agreement of the employee, an employer who has another 
defined benefit or defined contribution plan for its employees and who 
does not choose to establish ProSave accounts will still be able to use 
the portability clearinghouse as a repository for retirement funds of 
an employee who is leaving its employ. When a worker leaves one job 
where retirement benefits have accrued, the employee may request the 
employer to deposit the cash value of those retirement benefits--or any 
portion of them--in the Pro Save account of the employee at the 
portability clearinghouse.
  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 an infrastructure fund. Accounts would be valued on a daily 
basis, and participants could transfer funds among investment accounts 
at intervals determined by an oversight board, perhaps at monthly or 
quarterly intervals. 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.
  While 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.
  At retirement, account balances would be paid out either in the form 
of an annuity--with survivor benefits--or a lump sum retirement. 
Spousal consent would be required.
  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 will be wrong--and will 
only serve to help maintain an economic reality that permits those best 
off in our society to save up to $30,000 a year on a tax-advantaged 
basis. Others in simple 401(k) plans can save up to $9,500 a year. It 
is unacceptable that workers who don't have an available pension plan--
can only save $2,000 a year in IRA accounts.
  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 eventually to retirement, finding then that 
nothing has accrued to help them in their retirement years.
  Government had a role in establishing IRA's and 401(k)'s. Now we must 
do what we can to provide incentives 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.
  This is an issue in which the Government does have an important role 
to play because the market has failed to provide the extension of 
pension coverage to 51 million Americans. 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.
  For the employer, Pension ProSave provides a hassle-free, no red-tape 
way to make contributions to a pension--and frees employers from the 
responsibility and requirement of administering a pension plan.
  The plan also increases the amount of the tax-deferred savings 
permitted for the employer and each employee. It gives the employer a 
vehicle for profit-sharing, and the employer escapes any and all 
responsibility for the employee's pension. Funds contributed to Pension 
ProSave will be exempt from other savings limits under current law for 
other pension products. This should provide a powerful incentive to 
owners of small businesses who can save more themselves if they make 
equivalent commitments to their employees.
  For the employee, the benefits are most importantly that millions of 
pension-uncovered workers in this country will get coverage. This plan 
increases the amount of tax-deferred savings permitted to each 
employee, provides immediate vesting, and removes the concern that 
employees might have about the solvency of pension plans or their 
previous employers. Among other benefits, Pension ProSave eliminates 
political corruption in the administration of pension funds and 
provides one account that can be permanently maintained and in which 
funds can continually accrue no matter the number of job changes in a 
worker's career.
  By having national visibility, Pension ProSave would make the concept 
of saving for retirement more attractive and appealing to employees. 
This plan would increase employer pension contributions on behalf of 
their workers without existing pension plans, rather than relying on 
401(k) plans that are funded largely by employees' voluntary saving 
decisions. Employers would be able to make voluntary, tax-deductible 
contributions on behalf of their workers and would have flexibility in 
the amount they contribute each year.
  Vesting would be immediate. Plan sponsors would be relieved of the 
expense and responsibility of providing financial education to their 
employees

[[Page S6362]]

and the legal implications of providing investment options.
  Mr. President, I think that 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 workers' 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, 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 the costs will be high and will impact the 
Nation's short term tax revenue. However, it is also clear that 
increasing retirement savings will help bolster national savings, which 
will help spur more long-term investment and economic growth. The high 
cost of this plan would be true of any plan that succeeds in 
establishing more retirement security for our working population. We 
seem to be willing to sustain high costs for expanding retirement 
opportunities for some; I just think we need to make sure that we are 
doing whatever we can to provide retirement savings coverage to the 
rest of society.
  These are costs that we must consider and should bear--for the long 
term benefit of our Nation in whole. Establishing Pension Pro-Save 
accounts is an investment that will help our Nation better able to cope 
with the retirement savings crisis that we will certainly face in the 
future.
  Mr. JEFFORDS. Mr. President, I am pleased to be an original cosponsor 
of the Pension ProSave Act with Senator Jeff Bingaman of New Mexico. 
Senator Bingaman has done yeoman's work in drafting this bill. I hope 
my colleagues will take time to read the bill and join us as 
cosponsors.
  As the average age of Americans is rising at a steady rate, we all 
have become more aware of the importance of retirement programs and 
retirement security. At the same time, only about half of all workers 
are covered by a retirement program--and of those, many who are 
covered, work for a Federal, State, or local government entity. An 
incredible 87 percent of workers employed by small businesses, those 
with fewer than 20 employees, have no private retirement or pension 
coverage. Less than 40 percent of the 33 million Americans aged 65 and 
older collect a pension, other than Social Security. These numbers are 
cause for concern.
  There are three sources for retirement security: Social Security, 
personal savings and a pension. Our bill has been offered in an effort 
to expand pension coverage, especially among small business 
establishments where coverage and participation is least likely to 
occur. The complexity and expense involved in setting up a pension plan 
is daunting. It is outside the grasp of many small businesses. In 
addition to administrative complexity and the cost of hiring an 
actuary, accountant and a lawyer to set up a plan, a small business 
often decides against plan sponsorship because of laws and regulations 
that actually discriminate against them, such as the prohibition on 
matching contributions for self-employed individuals, or limitations on 
contributions for small plans that are even lower than those permitted 
for the medium-sized or large pension plan.
  Pension ProSave would permit the establishment of either a simplified 
defined contribution or a defined benefit pension plan or both, with 
greatly reduced recordkeeping, reporting and regulatory requirements. 
The ProSave system encourages thrift, through its defined contribution 
provisions, which are individual account plans and similar in concept 
to an IRA or a 401(k) plan, and through its simplified defined benefit 
plan provisions which are traditional pension plans promising a 
specific benefit payment upon retirement.
  In addition, one of the most appealing features of Pension ProSave is 
the portability clearinghouse. The clearinghouse would make it easier 
for workers with ProSave accounts to take their pensions with them as 
they change jobs. True pension portability has been a most elusive 
objective for policymakers and yet it is one of the most important 
features that Americans want in pension programs.
  A lack of portability also discourages long-term pension savings 
because it can encourage leakage. Pension system leakage occurs when a 
worker changes jobs and either cashes out a pension benefit or receives 
a lump sum distribution from a retirement plan and spends the money, 
rather than saving it. Taxing distributions has not stopped leakage 
from the system. The more difficult it is for that worker to transfer 
his account from one plan to another, the more likely it is that the 
worker will just spend the money. The more complicated and punitive the 
laws and regulations surrounding pension rollovers, the less likely a 
worker is to bother to make one. He or she will simply pay the penalty 
tax and spend the money.
  Consequently, pension experts have spent a great deal of time and 
effort trying to figure out ways to ease these pension rollovers and 
overcome obstacles to portability so that people can save their all 
retirement money in a single account.
  Let me pause for a moment to say that while Pension ProSave's 
portability feature is the result of many years of consultation and 
careful drafting, we realize that it would be quite difficult to 
justify a new government sponsored entity in these days of fiscal 
stringency. Our experience with the Pension Benefit Guaranty Corp. 
leads me to suggest that there could be a more efficient means of 
making Pension ProSave accounts portable than by establishing a new 
government sponsored entity to manage and invest them.
  Individual retirement accounts (IRAs) are portable and yet can be 
invested in banks, certificates of deposit, mutual funds, equities or 
any number of other investment vehicles. Should we permit Pension 
ProSave accounts to be managed and invested in the private sector and 
if so, how should that be accomplished? By leveraging the power of the 
private sector, savers have the potential for more investment choices, 
and for higher rates of return on their investments. In addition, there 
currently exists in the private sector, mutual fund/401(k) 
clearinghouses which are used to track individual accounts and keep 
records of investments and account balances. Are these models for the 
Pension ProSave clearinghouse?
  I look forward to hearing about these and other substantive and 
drafting issues from experts who are concerned about increasing 
retirement savings at the individual level and in increasing retirement 
coverage among small businesses where it is needed the most. I am 
especially interested in the concept of a simplified defined benefit 
plan which is portable and hope that we can explore that issue when 
hearings are held on this bill in the Labor and Human Resources 
Committee. Pension ProSave Act is a good bill. I am proud to cosponsor 
it and thank Senator Bingaman for his leadership in bringing us 
together to introduce it.
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