[Congressional Record Volume 160, Number 17 (Wednesday, January 29, 2014)]
[Senate]
[Pages S600-S601]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Ms. COLLINS (for herself and Mr. Nelson):
  S. 1970. A bill to amend the Internal Revenue Code of 1986 to modify 
safe harbor requirements applicable to automatic contribution 
arrangements, and for other purposes; to the Committee on Finance.
  Ms. COLLINS. Mr. President, I rise to introduce the Retirement 
Security Act of 2014, legislation I am sponsoring with my good friend, 
the senior Senator from Florida and the chairman of the Special 
Committee on Aging. Our bill would encourage small employers to offer 
retirement plans, encourage employees to save more for their 
retirement, and ensure that low- and middle-income taxpayers are able 
to claim tax benefits for retirement savings already authorized in law.
  I thought it was interesting last night that the President, in his 
speech, highlighted what is a growing problem in this country; that is, 
that people who have not saved sufficiently to have a comfortable 
retirement.
  The legislation we are introducing today is an outgrowth of our work 
together on the Special Committee on Aging. Last fall, the committee 
conducted a hearing on retirement security, where we heard from 
witnesses that far too many American seniors have real reason to fear 
that they will outlive their savings. According to the nonpartisan 
Center for Retirement Research at Boston College, there is an estimated 
$6.6 trillion gap between the savings American households need to 
maintain their standard of living in retirement and what they actually 
have. That is an enormous gap that speaks to the fact that we need to 
shine a light on this problem.
  Nationally, one in four retired Americans has no source of income 
beyond Social Security--in Maine, the number is one in three. Four in 
ten seniors rely on that vital program for 90 percent of their 
retirement income. Yet Social Security provides an average benefit of 
just $1,294 per month--less than $16,000 per year. It is hard to 
imagine stretching those dollars far enough to pay the bills--certainly 
a ``comfortable retirement'' is out of the question.
  According to a Gallup survey published in 2012, more than half of all 
Americans are worried they will not be able to maintain their standard 
of living in retirement, up sharply from 34 percent two decades ago. 
They are right to be concerned: projections published in 2010 by the 
Employee Benefit Research Institute (EBRI) show that nearly half of 
``Early Boomers''--those between the ages of 56 and 62 when the study 
was conducted--are at risk of not having enough money to pay for basic 
costs in retirement, including uninsured health care costs.
  There are many reasons for the decline in retirement security facing 
American seniors, including the severity of the recent financial 
crisis, rising health care costs, the need for long-term care, and the 
fact that Americans are simply living far longer than they did in the 
past. The shift from employer-based ``defined benefit'' plans--
pensions--to ``defined contribution'' plans like 401(k)s, also has 
played a role.
  Another contributing factor we found is that employees of small 
businesses are much less likely to participate in employer-based 
retirement plans. According to a recent GAO study, more than half of 
the 42 million Americans who work for businesses with fewer than 100 
employees lack access to a work-based plan to save for retirement. Cost 
and complexity are among the reasons plans are not more widely offered 
by small businesses.
  Chairman Nelson and I believe that making it easier for smaller 
businesses to provide access to retirement plans for their workers 
would make a significant difference in the financial security for many 
Americans. That is why the bill we are introducing today focuses on 
reducing the cost and complexity of retirement plans, especially for 
small businesses, and on encouraging individuals to save more for their 
retirement. Let me describe some of the provisions of our bill:
  First, our bill would allow small businesses to enter into multiple 
employer plans (MEPs) to jointly offer retirement programs to their 
employees. This allows small companies to share the administrative 
burden of a retirement plan, which helps to lower costs. Current law 
discourages the use of MEPs because it requires a connection, or 
``nexus,'' between unrelated businesses in order to join a MEP, such as 
membership in the same trade association. Our bill would waive the 
nexus requirement for businesses with fewer than 500 employees. So as 
not to discourage growth, our bill provides a long phase-out, under 
which businesses are not automatically disqualified from a MEP when 
they hire their 500th employee.
  Second, our bill makes joining a MEP a more attractive option for 
small businesses. Under current law, if one employer in a MEP fails to 
meet the minimum criteria necessary for retirement plans to obtain tax 
benefits, all employers and their employees could lose their tax 
benefits. These benefits are substantial. For employees, they include 
delaying the taxation of income contributed to a plan until funds are 
withdrawn. For employers, plan disqualification could result in limited

[[Page S601]]

deductions and a higher tax burden. Our bill directs Treasury to issue 
regulations to address this uncertainty, and protect members of a MEP 
from the failure of one bad apple to meet its obligations.
  Third, our bill reduces the cost of maintaining a retirement plan. 
Current law requires that participants in a retirement plan receive a 
variety of notices. Our bill would direct Treasury to simplify, 
clarify, and consolidate these required notices, which creates savings 
that can be passed on to employers.
  As ranking member of the Special Committee on Aging, I have heard 
countless stories of retirees whose savings did not go as far as they 
anticipated. Adequate savings reduce poverty among our seniors during 
what should be their golden years. As the HELP Committee noted in a 
July 2012 report, elder poverty also increases Medicare and Medicaid 
costs and strains our social safety net. Giving those not yet at 
retirement age more opportunities to save, and to save more, may help 
to ease this additional burden on entitlement programs that already are 
projected to be unsustainable.
  The Retirement Security Act of 2014 encourages those still in the 
workforce to save more for retirement. Retirement plans are often 
designed to comply with existing safe harbors to prevent the IRS from 
challenging the tax benefits that flow to employees and employers. The 
existing safe harbor for so-called ``automatic enrollment'' plans 
effectively caps employee contributions at 10 percent of annual pay, 
with the employer contributing a ``matching'' amount on up to 6 
percent. Our bill creates an additional safe harbor for these plans 
that would allow employees to receive an employer match on 
contributions of up to 10 percent of their pay. Employees would be able 
to contribute more than 10 percent, albeit without an employer match 
for contributions above 10 percent.
  I recognize that businesses that choose to adopt a plan with this new 
optional safe harbor may face additional costs due to the increased 
employer match. That is why our bill helps the smallest businesses--
those with fewer than 100 employees--offset this cost by providing a 
new tax credit equal to the increased match.
  I wish to emphasize that the new retirement plan options for 
businesses included in our bill are just that--options. No business, 
large or small, would be required to offer a retirement plan under the 
Retirement Security Act of 2014. Some firms, facing an uncertain 
economy and rising health care costs, may choose to spend their limited 
resources elsewhere. Accordingly, our bill ensures that current 
measures to encourage savings are functioning as they were intended. 
One such measure is the so-called ``saver's credit,'' which reduces the 
tax burden on low- and middle-income individuals who contribute to 
retirement plans, including IRAs and 401(k) plans. Yet this credit 
cannot be claimed on a Form 1040EZ, which is used by individuals with 
income under $100,000. A 2013 survey found that only 23 percent of 
people with household incomes of less than $50,000 per year, the group 
most likely to qualify, was even aware of the saver's credit. To 
address this, our bill directs Treasury to make the credit available on 
Form 1040EZ.
  In light of the positive effects this bill would have in 
strengthening retirement security for millions of Americans, I urge my 
colleagues to join Chairman Nelson and me in supporting the Retirement 
Security Act of 2014. I am very pleased we have a number of groups that 
have endorsed our bill. I expect to have more to say about that next 
week. But at this point I encourage my colleagues to take a look at the 
hearing that Chairman Nelson and I held in the Special Committee on 
Aging that focused the spotlight on this problem. We simply have too 
many of our seniors who are in their retirement years without 
sufficient funds for a comfortable retirement, and that can and should 
change.
  Thank you.
  The PRESIDING OFFICER. The Senator from Florida.
  Mr. NELSON. Mr. President, first of all, I thank my coleader of the 
committee, the great Senator from the State of Maine, who has been not 
only a great leader but also a terrific copartner as we try to offer 
leadership to the Special Committee on Aging.
  We are literally trying to make bipartisanship work. It is only 
because of folks such as Senator Collins that this is working and, as a 
result, we have a terrific committee. The members participate, they 
come, they are engaged, they ask the questions of the witnesses. As 
Senator Collins said, as a result of one of these hearings, under her 
leadership, she suggested putting together this important piece of 
legislation.
  Our committee held a hearing last fall called ``The State of the 
American Senior.'' We wanted to look at the financial security of the 
average senior in retirement. We didn't like what we heard. Fewer than 
half of the workers even have access to a retirement plan, and those 
numbers shrink when we talk about employees who work for small 
businesses. One-third of the private sector employees work at small 
businesses, and nearly 72 percent of businesses with under 100 
employees offer no savings plan. I will repeat that: Of businesses 
under 100 employees, 72 percent do not offer a savings plan.
  So what do seniors then end up with? They rely on Social Security to 
get by in retirement, and that is simply not enough money to pay for 
housing and medical care and other expenses. Take, for example, my 
State of Florida, where more than three in five people get half of 
their retirement income from Social Security. Here is a shocker: One-
third of Floridians only receive Social Security income--one-third of 
all of the 20 million people in Florida receive Social Security income. 
That is all they receive is their Social Security.
  So there is a problem that needs to be fixed. Too many people are 
getting by with too little. So Senator Collins and I have come together 
on this legislation aimed at increasing access to savings plans and 
creating more opportunities for those in retirement, to put more money 
aside ahead of their retirement.
  Senator Collins explained it: We are going to try to pool all the 
small businesses together with their resources to take advantage of the 
economies of scale to create one plan, and it increases safe harbors 
for things such as automatic enrollment and escalation contributions, 
which have been shown as ways to get people to save more.
  This is commonsense legislation. It is bipartisan. It is a great 
privilege for me to work with Senator Collins on this legislation and 
on our committee work.
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