[Congressional Record Volume 144, Number 71 (Thursday, June 4, 1998)]
[Senate]
[Pages S5634-S5635]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. GRAMS:
  S. 2130. A bill to amend the Internal Revenue Code of 1986 to provide 
additional retirement savings opportunities for small employers, 
including self-employed individuals; to the Committee on Finance.


                  small employer nest egg act of 1998

  Mr. GRAMS. Mr. President, I rise today to acknowledge the National 
Summit on Retirement Savings which is taking place here in Washington 
today and tomorrow. I also want to use this occasion to introduce 
legislation that will empower a greater number of working Americans to 
save for their retirement through employer-sponsored retirement plans.
  In the course of the next 2 days, the 239 delegates to the National 
Summit on Retirement Savings will address an issue of great importance 
as the baby boom generation draws closer to retirement age and the 
future of Social Security remains uncertain.
  With savings rates at a 59-year low, and the revelation in the 1998 
Social Security Trustees Report that Social Security is actuarially 
bankrupt, it is evident that we face what amounts to a retirement 
crisis.
  The less individuals save for their retirement, the greater the 
strain on an ailing Social Security system that is incapable of 
sustaining the fast-growing retired population.
  Yet studies show that an increasing number of Americans are depending 
on Social Security for their retirement income. According to the 
Employee Benefit Research Institute, Social Security is the primary 
source of income for 80% of retired Americans, and practically the only 
source for 40% of retirees.
  Those who depend on Social Security for their retirement can expect a 
standard of living far lower than the one they enjoyed while in the 
work force.
  For instance, an individual who has an annual income of $15,000 per 
year who retires in 1998 at age 65 can expect Social Security to 
provide only one-half their previous income, and the replacement rate 
drops steadily when moving up the income bracket.
  Indeed, Social Security was never intended to be the major source of 
retirement savings that it seems to have become--its purpose was to 
serve as a single leg in a three-legged stool that would sustain 
Americans in their retirement years.
  Social Security's original purpose was to provide Americans with the 
minimal level of income in retirement that when combined with personal 
savings and employment-based pensions would give retirees the living 
standard they enjoyed before retirement.
  Mr. President, given these facts about Social Security and the 
decline in savings among Americans, it is crucial that steps be taken 
to ensure that the three-legged stool does not collapse under the 
weight of the growing retired population.
  It is true that recent steps taken by Congress, particularly the 1996 
enactment of the SIMPLE retirement plan, have succeed in increasing 
employee participation in employer-sponsored retirement plans.
  However, the complexity of qualification requirements under current 
law and the administrative expenses associated with setting up 
retirement plans, including the SIMPLE plan, remain significant 
impediments to widespread implementation of these types of employer-
based retirement systems.
  This is particularly true for small employers with less than 100 
employees, for whom the resulting benefits do not outweigh the 
administrative costs. Consequently, only 42% of all individuals 
employed by small businesses now participate in an employer-sponsored 
plan, as opposed to 78% of those who work for larger businesses.
  To address this problem, I am introducing the Small Employer Nest Egg 
Act of 1998.
  This legislation will create a new retirement option for small 
business owners with 100 or fewer employees and it would be similar to 
the SIMPLE plan

[[Page S5635]]

and the SMART plan President Clinton proposed in his fiscal year 1999 
budget.
  However, my proposal differs somewhat from these two plans in that it 
would allow the same level of benefits--both to employers and 
employees--as larger employers who maintain traditional qualified 
plans.
  Furthermore, upon retirement or separation of service, employees 
would receive 100% account value.
  To offset the high costs associated with starting a pension plan, at 
the centerpiece of this proposal is a tax cut equal to 50% of the 
administrative and retirement education expenses incurred for the first 
five years of a plan's operation.
  In addition, participating businesses would be exempt from some of 
the more burdensome administrative requirements associated with 
qualified plans.
  That exemption would be in exchange for the employers' agreement to 
provide a minimum benefit of 3% to all employees who satisfy a minimum 
age requirement of 21 years old and the minimum service requirement of 
1,000 hours during the preceding calendar year.
  Mr. President, small businesses are the lifeblood of our communities, 
providing millions of jobs nationwide.
  This bill I am introducing has been endorsed by the U.S. Chamber of 
Commerce. It has also been endorsed by the National Association of 
Women Small Business Owners and also of 220 small businesses in 
Minnesota alone. So it has very strong endorsement from the small 
business community.
  Small business owners want to help their employees to save for their 
retirement, yet many are unable to do so as a result of rigid 
Government policies that seemingly have little regard for the plight of 
the small employer.
  I urge my colleagues to support this legislation and to give small 
employers the ability they have long sought to help their employees 
save for their retirement.
                                 ______