Statements On Introduced Bills And Joint Resolutions

Floor Speech

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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 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.

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