[Congressional Record Volume 152, Number 34 (Thursday, March 16, 2006)]
[Senate]
[Pages S2323-S2324]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. BAUCUS:
  S. 2431. A bill to amend the Internal Revenue Code of 1986 to 
encourage all Americans to save for retirement by increasing their 
access to pension plans and other retirement savings vehicles, and for 
other purposes; to the Committee on Finance,
  Mr. BAUCUS. Mr. President, today I am introducing legislation to make 
America more competitive by increasing savings. The bill encourages 
savings at work, and requires that the Government consider the Nation's 
savings in the budget process.
  That great American philosopher Yogi Berra once said: ``If you see a 
fork in the road, take it.''
  Well, we are at that fork in the road. Private savings are at an all 
time low. And the government just spoons out more and more red ink. If 
America does not change its ways, we will find ourselves on the wrong 
fork.
  For the past 10 months, I have been talking about competitiveness. I 
have been talking about the steps that we must take to keep this 
country strong. And I have been talking about the steps that we must 
take to make it stronger.
  One key component of my competitiveness agenda is savings. We must 
improve our national savings rate because capital is critical to 
growth. And continued deficits lead ultimately to a downward spiral.
  The 2005 personal savings rate was negative--minus 0.5 percent. 
Taxpayers have joined their government in engaging in deficit spending. 
We have to turn our savings rates around. The question is how to do it.
  With regard to Federal Government budget deficits, we have talked a 
lot over the last few days about the need for a pay-as-you-go process. 
We all know that it is important. The only question is whether we are 
willing to take the tough steps that pay-go requires, and not leave the 
burden to our children and grandchildren.
  Pay-go does not necessarily mean tax increases. It could mean 
collecting the taxes that are already owed. The most recent IRS 
estimate of the tax gap--the difference between what taxpayers owe and 
what they pay on time--is $350 billion each year.
  Collecting that difference would pay for a lot of the Government. 
Several times, the Senate has passed legislation that would close 
corporate loopholes and other abuses that contribute to the tax gap. 
Instead of looking for additional taxes, we should work with our 
Colleagues in the House to enact proposals like these that will simply 
get taxpayers to pay what they already owe.
  Today, I want to focus on the lack of personal savings for 
retirement. We all know it is inadequate. And we must address this 
problem if American workers are to be able to retire with confidence 
that they can maintain their living standards.
  The ``Savings Competitiveness Act,'' which I introduce today, will 
make it easier for millions of workers to save for retirement. It will 
create an automatic opportunity for workers to have savings withheld 
from their paychecks.
  We cannot improve the personal savings rate by providing tax 
incentives that simply shift savings from one type of account to 
another, or from one investment to another. We can improve the personal 
savings rate only by creating new savings, especially savings by 
workers who would otherwise not save. I believe that this bill will do 
just that.
  Data on retirement savings show that workers who can save at work 
through payroll deduction arrangements--such as 401(k) plans--usually 
take advantage of the opportunity to save. About two-thirds of eligible 
workers contribute to a 401(k) plan. That percentage jumps 
dramatically--to more than 80 percent--if eligible workers are 
automatically enrolled in these plans. Automatic enrollment makes 
saving the default. Workers can opt out. But those who do not opt out, 
start saving.
  In November, we passed the pension bill by an overwhelming margin--
97-to-2. That bill included provisions to encourage opt-out 401(k) and 
403(b) plans, instead of opt-in plans. This is a very important first 
step. Separate bills introduced by Senators Bingaman and Snowe, and 
Senators Conrad and Smith were the basis for the Senate provisions. And 
I applaud their efforts to move these ideas along. Since the House also 
included automatic enrollment language in its bill, I expect that the 
final conference bill will take this dramatic step toward increasing 
savings.
  That, however, is just a first step. Automatic enrollment in 401(k) 
and 403(b) plans will help only those who are eligible to join an 
employer-sponsored plan. That is about 60 percent of working Americans. 
Unfortunately, that leaves 40 percent of workers out in the cold. For 
small employers, the situation is worse. More than half of workers with 
small employers--those with fewer than 25 employees--have no employer-
sponsored retirement plan. And for firms with fewer than 10 employees, 
only 16 percent of workers participate in an employer-sponsored plan.
  Those who have no employer-sponsored retirement program are far less 
likely to save for retirement than those who do; 85 percent of workers 
eligible for an employer-sponsored plan are actually earning benefits 
in those plans. But less than 20 percent of eligible taxpayers 
contribute to an IRA.
  Many more own IRAs--because funds from employer plans have been 
rolled over to an IRA. But the truth is, most retirement savings came 
from employer-based retirement plans.
  The high participation rates in employer-sponsored 401(k) plans, and 
the

[[Page S2324]]

low rates for IRAs, leads to a clear conclusion. We can increase 
retirement savings--create new savings--by making payroll deduction 
retirement savings available to more workers.
  This is not a new idea. President Clinton's USA accounts were one 
attempt to bring retirement savings to all working Americans. Senator 
Bingaman first proposed universal access to retirement savings in his 
Secure Retirement for America Act in the 107th Congress. But it is time 
that we stopped talking. It is time that we started doing something to 
change the direction of the personal savings rate.

  Access to payroll savings is important, but it is not enough. The 
Savings Competitiveness Act that I introduce today will expand savings 
opportunities and more.
  This bill helps workers by providing an opportunity to save for 
retirement through payroll deduction at work. Employers are not 
required to contribute. Employers just withhold contributions and 
forward them to an IRA. We provide a modest credit to help small 
employers with the start-up costs.
  This bill helps children by allowing Young Saver's Accounts to be 
used for kid's savings.
  This bill helps small employers who want to contribute toward 
employees' retirement savings get started with a 3-year start-up credit 
for 50 percent of contributions to workers who are not highly 
compensated. And small employers who use ``SIMPLE'' plans can share the 
profits in a good year by making discretionary contributions to 
employees' SIMPLE IRAs.
  This bill helps lower-income taxpayers by replacing the current 
Saver's Credit with a refundable credit, deposited to the taxpayer's 
retirement savings account. Families earning up to $50,000 would be 
eligible for a 50 percent credit. Those earning up to $60,000 would be 
entitled to a portion of the credit. Low-income savers would not be 
penalized by losing eligibility for food stamps and other benefits.
  This bill helps retirees with modest savings by exempting $50,000 of 
their savings from minimum distribution requirements.
  This bill removes traps for the unwary by simplifying distribution 
rules. It would conform 401(k) and IRA penalties so that workers who do 
not have advisers to lead them through a series of hoops do not get hit 
with excise taxes that those with a guide can avoid.
  This bill takes some of the guesswork out of choosing an IRA. It 
would create a seal of approval for IRAs that have investment options 
similar to those in the Thrift Savings Plan and modest fees.
  The Senate's automatic enrollment provisions are not law yet. So I 
have also included them in this new legislation.
  I encourage my Colleagues to join with me to provide workplace 
savings opportunities for working Americans that now have none and to 
stop the unlimited growth of the deficit by adopting a pay-as-you-go 
requirement. I ask you to support the Savings Competitiveness Act.
                                 ______