tv Senate Finance Subcommittee Holds Hearing on Retirement Security CSPAN December 10, 2020 8:00am-10:01am EST
>> a senate finance subcommittee heard from financial experts about the state of retirement savings in the u.s. they also discussed legislative proposals to help small businesses and create opportunities for their employees to save more. this runs two hours. >> special thanks to sherrod brown and the staff are working together with us to plan this hearing. as some of you know, i have been looking forward to this hearing for a long time. i appreciate the finance committee allowing us to move forward with it now. we've got some great witnesses, and i'm sorry we have to be remote, because i'd love to be in person talking to you, but i think this is best given where we are with the covid-19 challenge. and we've had plenty of opportunities to speak and will continue to, but this, i think, is really exciting because retirement security, to me, is not only just critically important for all americans and, frankly, savings has taken a hit, as you know, during the coronavirus, but also, this is an opportunity for bipartisan work, and i think we'll hear
about this later from senator brown, senator cardin, and others. but regardless who gets the majority in the senate come january, this is an area where i think we have the potential to make some real progress, because i think it has been, and will be, bipartisan. and when you look at the support it has among the american people, it is really impressive. i mean everybody talks about who supports what in terms of tax policy, i can tell you the idea of being able to save more for your own retirement is just broadly popular, so this is an opportunity for us. i have worked a lot with senator cardin, over the years, on these issues. i notice he is in the hearing. well, he is in his office, so i wouldn't say he is in the hearing, but he is joining us remotely. and you know, we've done some good things, helped people save more for retirement, and it has improved retirement savings considerably. last year, we introduced the latest iteration of portman-cardin, and that's called the retirement security and savings act, which has had
some broad support, bicameral and bipartisan. in fact, 27 of the portman-cardin provisions were included in this new secure 2.0 legislation introduced by the ways & means chairman, a democrat, richie neal, and the ranking member, kevin brady on the house side. if that's not bipartisan, i don't know what is. so, the two of them coming together i think is terrific and there are some provisions in ours they do not include and there are some in theirs we do not include, but i think that, in my view, is an opportunity when you have so much common ground between the two proposals. so i think it's a really good starting point and again it gives us a real opportunity to get something done. a lot of our other colleagues have worked on this issue. sherrod brown has worked on it on a bipartisan basis. senator daines and senator warren have a retirement lost and found bill that i think is interesting; senator collins and senator hassan have their assistance to military spouses, which i like. so i think there are a lot of opportunities for members of the committee and even outside of the committee to come together on something here. the one that ben cardin and i have introduced recently focuses on what i think are the four big
problems that can be identified and addressed through legislation. one is to help lower-income and part-time workers. and this is an obvious issue, you know you only have 20-some percent of people who are part-time and low-income saving now, so when people are living paycheck to paycheck, it's tough to set money aside and so we help in that regard in a number of ways. second, it focuses on small businesses. why? because that is where the opportunity is. less than half of workers employed by small business have access to an employer-sponsored plan. think about that. that's compared to 88 percent of workers employed by large businesses. so, it's small businesses, that's where we really got to target and focus to expand coverage for so many working americans. and eric talked about his restaurant business, a lot of them are small businesses like that, that just can't afford to put together a plan so we help them in that regard. and they're also concerned about the complexity of it. third, we've got an issue with the baby boomers.
a few of us on this call would fit into that category. and we just aren't saving enough as a generation, and haven't been. and therefore, we do some things to help encourage people who are getting ready for retirement, near retirement, to save more. and then finally, as folks are living longer, retirees, even those who have accumulated some savings, are finding that they are outliving those savings. living longer is good news, longer, healthier lives is great, but it's tough on our bank accounts, especially when current laws force americans to start depleting and taxing their retirement savings accounts at age 72. that's an issue too, and you know that long-term savings piece, how do you ensure that nest egg is adequate for people living longer and healthier lives, is a key issue. so, we've made progress on some of these issues, but the lack of sufficient retirement savings remains an urgent problem for our country and it's an opportunity, again, for us. in 2020, we've moved this legislation to this point, now, in 2021, we've got to get it across the finish line. unfortunately, the pandemic, as we talked about, has just
exacerbated the need to improve savings. we may not be seeing a v-shaped economic recovery in this pandemic. i think we're going to see more, as we have so far, a k-shape recovery. and it's k in terms of savings, meaning it's not just going down like it normally would in a recession and then back up the same way. you have some people who are doing well and others who are not. and many of these who are not are some of these middle and low-income part-time workers we talked about. that's why we allow those workers to have more opportunities through both expanding savings plans for them, but also allowing part-time folks to be able to access plans more easily, lowering the number of hours someone works where they qualify, in particular, in a retirement plan. we also make the savers credit refundable, which is not without controversy, i understand that. and some of my republican colleagues have concerns there and we can talk about that later why i think that's important as part of an overall balanced
plan. we also have a provision that allows recent graduates to receive matching retirement contributions from their employers as they pay off student loans. this is a good connection between an obvious problem out there with student loan debt and retirement, so it's a way to approach both. our second set of solutions on small business i talked about makes it easier to establish plans. we increase the tax credit. we have a lot of companies who want to adopt auto-enrollment and encourage their employees to save more for retirement. but that can be expensive, so it does enhance the start-up credit for small businesses. it makes offering auto-enrollment features much more cost effective for employers. we like auto-enrollment, we make it more cost effective. for those near retirement we talked about, we want to be sure that those who are saving money have the opportunity to be able to spread that out over time. so that's part of what we do
here through qlacs and also changing the minimum required distribution laws to take you up to 75. by the way, before the pandemic, 9.7% of americans 75 and older were working. it's, i'm sure, more than that now, but that's up from just 7.5% ten years ago. so again, we have more and more americans, again, working into their 70s. that's just the reality. like all good legislation, we have taken ideas from senators from both parties, and we know there's more to do and more to improve it. i think we can learn about that today in this hearing because we have some great witnesses and great colleagues who are on the dais. so with that, let me recognize my colleague, and my friend and fellow ohioan, ranking member sherrod brown, for his opening statement. >> thank you senator portman for scheduling this hearing and to our witnesses for participating today. i'm especially appreciative that
mr. barr is here from queens hill ohio account summer to the one i i grew up in in mansfield and i appreciate mr. stevenson being here from columbus, ohio, from nationwide so thank you and appreciate our colleague senator casey ben cardin and others being on the call. thank you for your public service and leading the same. and mr. luskin thank you. the focus is retirement security. we can't talk about that without acknowledging the looming crisis on the minds of millions of retired americans and workers in ohio and across the country. literally tens of thousands of f the highways are affected by this. these workers and retirees in the multi-employer pension system are in danger of losing the retirement security they earned over a lifetime of work. this crisis affects thousands of ohioans. it affects the massive central states pension plan, the ironworkers local 17 pension plan, the ohio southwest
carpenters pension plan, the bakers and confectioners pension plan, and so many others. and it touches every state in the country. it touches most firmly or most destructively in the part of the country senator portman and i represent. if the entire multi-employer system collapses, it won't just be retirees who will feel the pain. current workers will be stuck paying into pensions they'll never receive. small businesses will be left drowning in pension liability they can't afford to pay. businesses that have been in the family for generations could face bankruptcy, and workers will lose their jobs. these plans were already in danger before the pandemic, and now the economic emergency we're in has only put them in a worse position. they were hit by the financial crisis and the recession that followed, and now they're being hit again by an economic crisis that's disproportionately hurting small businesses and workers, while wall street recovers. the house has done its part. they have passed a bipartisan solution. the senate needs to do ours.
a pensions solution should be part of the work we're doing on covid relief. there's no reason we shouldn't be able to do this as part of a year-end deal. i ask my colleagues to think about the workers whose lives and livelihoods will be devastated if we don't do our job. those workers and retirees in ohio and round the country have rallied in the name of butch lewis, a great ohioan who helped lead this fight, and passed away far too soon, fighting for his fellow workers. he was in cincinnati. his wife rita has continued his fight, and become a leader and inspiration to so many. rita once told me that retirees and workers struggling with this crisis feel like they are invisible. these americans aren't invisible to me. and they aren't invisible to my colleagues who have worked with us for years now, trying to find a bipartisan solution. we just can't give up on that.
though the multiemployer system is the most urgent retirement matter, we also have a lot of work to do to protect and expand retirement security for all workers. over the past few decades, we've watch what happens when wall street runs the economy: corporate profits go up, ceo pay soars, and stock buybacks explode, but wages are flat, and the middle class shrinks. that's the fundamental problem underlying this whole crisis,, that wages are flat and the middle class shrinks. and as americans' economic security has eroded, so have their retirement options. too many workers have no retirement account through their employer. fundamentally, our tax system is set up to reward the already wealthy with more wealth, instead of to help everyone save and invest for their futures. 40% of adults don't have $400 to weather a financial emergency, let alone save for retirement. instead of focusing on those who already have plenty saved, we have to do more to help everyone else get started in the first place.
that i hope is what this hearing will mostly be about. and we've had four years of an administration that made things worse, not better. in his first months in charge, president trump, with help from the republican-controlled congress, made it harder for states to get auto-enrollment programs off the ground. president trump and congressional republicans' massive tax cut for the wealthy and corporations threatened deep cuts to social security and medicare. just yesterday, the senate voted i to confirm a trump appointee to the federal judiciary who has advocated for abolishing social security. but this november, 80 million americans decisively rejected that approach. people are tired of a system where wall street runs the show. they voted for a new president had a new direction. next year we have a real opportunity to do something concrete for middle-class families and low-paid workers who need help saving. we know what some of these solutions are. we have to do more on auto-enrollment and on auto-escalation.
the states that have introduced auto-enrollment plans, like senator wyden's state of oregon, have seen real success in the early years. autoenrollment is a best practice in helping people save. and we have to do more on portability, so our retirement policies reflect the workforce we have today. job flexibility shouldn't be a corporate pr term for having no economic security. we have an opportunity to do big things for the american people: fix the multiemployer pension crisis, instead of allowing it to grow. protect and expand the social security benefits that people earn, instead of threatening so-called entitlement cuts in the name of new-found religion on the deficit. build a defined contribution system that is inclusive, that is equitable, and that meets the needs of today's workforce. instead of relying on the status quo that works well for some but i leaves too many behind. that's our mission that should be our goal and i thank very
much senator portman for doing this hearing today. thanks, rob. >> thank you, senator brown. let me say the focus of this hearing as you know is on the contribution plans and that's that we've got folks here talking about and we talked about the portman carden legislation which we can try getting on for some time. i totally agree with senator brown on the multi employer front. we've got to solve that problem. my understanding is there discussions ongoing with the house leadership in the senate leadership, and my fervent hope is in this final package whatever it is come with this continuing resolution i hope it's not the weather it's that for on the spending bill or whether it's a covid-19 package in some way that we include smalltime employer pension reform. i think we have good compromise that is consistent with the plan will talk to in connection with the select committee which was formed to look at this but this is urgent for our businesses, urgent for retirees and is
urgent for our economy so we cannot let the multi-employer plan, program under water which is what's going to happen if we don't solve the problem. so with that i can thanks to my colleagues are being on. we'll get to our witnesses. i thank you for your opening comments, senator brown. we got a great group of witnesses who are as as a set expert on this issue particularly on each of how to help people save more for their retirement. i'm pretty take a couple minutes to introduce them. the first is scott barr, , i financial advisor serving small businesses, employees and individual investors at his zanesville, ohio, branch. he began his career with edward jones in 1999. i really appreciate edward jones helping us on these bills over the years in thanks or become scott. he's a licensed accredited asset management specialist pick use making it for graduate of miami
university. the next witness is mr. eric stevenson. we talked to eric hurley. is president of plans at nationwide insurance. eric brings more than 15 years of industry experience to his position currently managing the team responsible for nationwide retirement plans operations with nearly $115 billion in assets under his management. eric served as senior vice president of nationwide distribution across both 401(k) and 457 businesses come join nationwide in 2006 in life insurance marketing and soon after that enjoyed -- join the retirement plan. our third winces as mr. michael kreps, advises a wide fried clients and initially led to retirement and health matter. >> he specializes in plan governance administration investment fun and restructuring. michael routinely represents
clients before regulators to his professional expense includes serving as a senior pensions and employment council for the use senate committee on health, education, labor and pensions, the h.e.l.p. committee. he holds a j. d. with honors from the george washington university law school. last but not least, we have mr. joshua luskin who is director of plan administration for 12 12 governmental defined contribution and defined-benefit funds. the fun drugs that more than 1200 employers who include public-sector workers, teachers, university staff and more. his past experience in the private sector was in retail banking, investment management, financial education, and fiduciary oversight. so we've got to get some witnesses that at some real-world experience to bring to bear here. we appreciate them coming. mr. barr, why don't start with you. we will not ask witnesses to be sworn in today.
mr. barr, you are up. >> thank you, senator portman. chairman portman, ranking member brown, members of the subcommittee, thank you for inviting him to testify on the important issue of retirement security ear my name is scott barr and i've served as financial advisor with edward jones in my hometown of zanesville, ohio, for the past 21 years. as a native ohio is my pleasure great honor to address both the men who served me and the people of our great state. i would like to express right from the outside edward jones strong support of the retirement security and savings act of 2019. edward jones offers a wide variety of products and services that help individual investors and small business owners achieve retirement security. over 19,000 financial advisors served more than 7 million clients and care for more than $1.3 trillion over the assets. i did today because i've had the privilege of helping hundreds of my clients plan for energy financial security.
my clients have confided in me what's most important to them and their trust me to partner with them to guide them towards their financial goals. i have also found that my small business clients to keep about helping their employees prepare for their own retirement. they really are interested in offering retirement savings options both because it helps them attract and retain great employees but also because they know it's just the right thing to do. our nation private retirement saving system has been tremendous success pit pits enable folks to the financial mistakes that will help them supplement their retirement income they expect to social security. congressional efforts to promote and expand the private retirement saving system had clearly worked. edward jones is encouraged by the recent congressional efforts in the secure act, the start of tax credits a a new tax group adoption of automatic enrollment were significantly important to a small surveying firm i recently helped establish a new retirement plan. these efforts build on decades of bipartisan support for our
nation's private retirement saving system spearheaded by the tireless work of senator portman and carden and as somebody who works with clients everyday who strive to save for retirement i would like to take this opportunity to say thank you for these efforts. senator brown, thank you for your leadership and dedication helping the working families of ohio save for secure and dignified retirement. i would also like to thank chairman grassley and ranking member wyden for their leadership on retirement savings. although we've made progress there's more work to be done. to further strengthen the retirement saving system edward jones urges you to advance legislation that will first make it easier and less costly for businesses of all sizes but especially small businesses to operate workplace retirement plans and second, increase opportunities and eliminate barriers that currently prevent americans from adequately saving and preparing for the financial fuster. in pursuit of these goals i
really are strong support for portman-cardin. connect the retirement preparedness of the american worker would improve. edward jones supports provision that would increase the start of tax credit made available to small employers when they establish retirement plans. in my experience employer cost is supposed significant barrier to the gratian of a retirement plan. we support the new incentives for employers to offer more generous automatic enrollment programs by directing offsetting -- by directly offsetting some of the employer costs at tax credit based on employer contributions would be a game changer for employees. we support expanding simple ira offerings to allow roth and post because a reason to die simple ira's which are so important to small businesses the same
benefits enjoyed by participants in larger plan such as 401(k)s, and government 457 plans. we support allowing employers to make matching contributions to their employees retirement accounts based on their employees student loan repayments and the like to acknowledge senator wyden for his leadership on this provision. this would help workers burdened with student loan debt start saving for retirement earlier in their careers. we support provision permitting workers 60 and over making contributions. i have many clients that would take advantage of this important provision. and we support increasing the requirement of distribution age to 75. americans are working and living longer. this change would help address the greatest concern i hear most often, that they will outlive their retirement savings and the, burden. in closing, on behalf of edward jones and myself i would again like to thank chairman portman,
ranking member brown and the rest of the subcommittee for holding this important hearing. edward jones fully supports portman-cardin p we believe will strengthen america's retirement saving systems and help more americans enjoyed the secure dignified retirement it working so hard to achieve. i would be happy to answer questions. >> thank you, mr. barr. to all the witnesses we appreciate your united states keep your oral comments to about five minutes, and then a full written statement will be made part of the record but thanks mr. barr. mr. stevenson. >> good morning, chairman portman, ranking member brown and members of the subcommittee. thank you for convening today to get my name is eric stevenson and president present retiremer nationwide fortune 100 from based in columbus, ohio, providing a full suite of insurance and financial services. we represent over 26,000 plants across the country, small medium large size plans over $150 billion in assets and with the number one provider of plans and
the government of 457 of 457 s. i would like to thank chairman grassley, ranking member wyden, chairman portman, ranking member brown, senator cardin and members of the committee for the work you've done titles over the years or we wouldn't be having this conversation so thank you for your service and leadership. one additional thing we have in common with both you senator portman and senator cardin in particular is around ohio, noi we represent the ohio to find cultivation plan for the state of ohio and we protect 75,000 ohioans, the assets come almost $7 billion across the state, corporate site and the government side. and we employed 15,000 associates in columbus here senator cardin, also in maryland, we represent about $7 billion of assets for residents of maryland, $7 billion in total total assets come 100,000 of your residence and a poorly for the state of maryland, baltimore county, city of baltimore, our county, a number of counties and in
corporations across the state, but most notably the first ever to plan those of you start with the state of maryland's comp in our click for 46 years and is still appointed an attorney story about that a little later. on behalf of all that we are nationwide and myself personally we are proud supporters of s1431 to retirement security and savings act which i look for going to as portman-cardin. this is accomplished by the secure act with the partisans solution to help americans prepare for a live in retirement. at nationwide we have been operationalizing the secure act with new innovative solutions particularly around income solutions inside retirement plans that we help them take that income in a very smart and tax efficient way thanks to the secure act. i would also like as a go for connect the conversation and the provisions you have 23 categories. first is meeting today's financial needs, second, saving
for retirement and then third living in retirement. before you can start saving for retirement the first introduced meet your immediate needs. what is the biggest obstacles as we talked about it student loan debt. it's not just kids graduating anymore about student loan debt but it's those folks now in their 20s, 30s and even 40s out of burdened with this and we believe adjusting the retirement service can play an important role in alleviating some of the pressure. and particularly we support employers making matching contributions to retirement plan based on student loan repayments. this provision will help workers who otherwise could not and would not start saving for retirement. i mentioned the state of maryland plan. we have a participant who join that plane four is after it started. his highest salary given made was 83,000, and i can tell you today after 20 years in retirement he still has $900,000 saved in that plan. that's simply because he started
early and that's why we're so supportive of that legislation. when it comes to saving for retirement portman-cardin provisions rent increase catchup conjugations are beneficial. someone mentioned earlier but we know how come no half of americans don't have $400 state into some studies suggest it's a lot higher. anything we do to get more people enrolled in helping get started and avoid some of the traps is important. along with our friends come were excited to make collective investment trust available to four 3-d plans, to more american workers say. especially those in education, healthcare and charitable organizations. cats are proven cost-effective way to a people save and are widely available in 401(k) plans and we think we should make those. as reflected my written testimony we strongly support priorities around ensuring government retirement plans have
a level playing field compared to 401(k) plans and ira's. it's to our partnership with magda that we felt to sponsor and find the public retirement research lab as provided much of the data we share today. and finally living in retirement nationwide is think about how we can help participants reach the goals and we know 25% of people that are 65 years old with it to be at least 90. the provisions to increase r&d to 75 helps by giving more time for those working and living longer. hopefully you can tell nationwide and me personally a great site helping americans achieve financial wellness and security. i am proud of your work and the partnership and we hope be a resource today and going forward. >> thank you very much, mr. stevenson. great comments. mr. kreps, you are up. >> good morning. i want to thank chairman portman and ranking member brown for
inviting me to testify today and for the dedication to improving retirement security for all americans. the topic of this he is critically important. i think we can all agree that the lifetime of hard work of you and deserves the opportunity to live at the goldman years with dignity and financial independence. in 1935, at another time of the great national hardship, president roosevelt working with congress created social security to stamp out elder poverty. it's been 85 years and social security is still the bedrock of a our retirement system. it's the most effective antipoverty program in the united states. but social security benefits on their own are not enough to most older americans to maintain their standard of living when they retire. that's what we need a robust, equitable, and inclusive private retirement system. over the years are private retirement system has evolved and third in many important improvements. the system is working well for great many people but there's
still more work that needs to be done for those falling through the cracks. many working people still do not have access to or are participating an employer provided play. that's true private sector employees who are younger, part-time, in lower wage occupations and not a member of a union. there's nothing stopping us from taking affirmative steps to reach this uncovered workforce and give them the opportunity to prepare for retirement. several states including california, illinois, oregon and others were trying to address the problem through state-basedd systems to provide for universal or near universal access to payroll deduction savings plans. washington state working with seiu established savings plan specific help home care workers, most of whom earn very little this by providing critical to our sick, disabled, and elderly family members. we cannot forget that millions of working people struggle to
pay the bills, let alone save for retirement. congress took an important step to address the issue in 2001 by creating the savers credit to provide a non-refundable tax credit to low income taxpayers for certain retirement plan contributions. but the savers credit does not reach nearly enough people because many lower income workers just don't have taxable income. we can fix that. we can make the credit refundable. we can never directly deposited into people's savings plans. that approach has bipartisan support and document chairman portman, ranking member brown, senator cardin, committee chair, ranking member wyden for the leadership on this issue over the years that we should also put some of the holes that drain people's savings. close to half of plan participants withdrawal part or all of the retirement plan assets following a job change. the lost savings due to these cash outs amounts between
60-$100 billion annually. fortunately the development of auto portability will help preserve savings for job change it by allowing people's accounts to automatically follow them from one employers plan to the next. thanks to guidance from the department of labor and strong bipartisan support from members of congress including many members of the subcommittee, auto portability will be a reality for millions of plan participants early next year. finally and most important simply cannot ignore the fact that we are on the brink of over an million americans losing their hard-earned pension benefits. most multiplayer pension plans are secure but some plants including some very large plans will become insolvent in the next few years. the federal pension insurance program administered by pbgc only guarantees a a fraction of multiemployer pension plan participant benefits. worse yet, is that the multiemployer insurance program will be insolvent in 2026. when that happens pbgc will only be able to pay pennies on the
dollar meeting participants and retirees in insolvent plans will see their benefits slashed to the bone. it's not the participants false the plants are failing. it worked hard, play by the rules and the significant wage concessions also that they could have some measure of economic security in retirement. they did every of unique or toe the american dream but they're living a nightmare. unless congress acts soon, retirees, the families and communities will be devastated. the crisis is upon us and only congress has the power to do something about it. we are the richest country in the history of the world, and we owe it to our fellow americans to find a solution. that's going to require putting aside politics and ideology and doing what's right for retirees. there's simply no time left to lose as every day that takes by the problem becomes more difficult and costly to fix. i urge members of this subcommittee and every member of congress to act as soon as possible to address this crisis.
thank you for your time today, your attention to these issues, and for your commitment to making retirement more secure for americans. i would be happy to answer any questions you have. >> appreciate your insights. esther luskin, you are up. >> good morning. my name is joshua luskin and of the current president of the national association of government defined contribution administrators, or nagdca. web 132 local entities including towns, cities, schools the six, and utilities. our plan sponsors minister deferred compensation and defend it by conservation plans including 457, 401(k), 401(k) and 403(b). on behalf of nagdca we thank chairman portman ranking member brown and the members of the subcommittee for holding this important meeting to explore ways to improve federal law that can create greater benefits for our plans. additional appreciation is expressed to chairman grassley and ranking member wyden and the
members of the full committee, finance committee for the ongoing commitment to improving retirement systems for america. what is most effective ways nagdca supports our government plan is in a long tradition of partnering with private sector firms to help identify new opportunities to improve retirement outcomes. we collaborate with an ongoing basis on everything from training and education to policy development. as an example nagdca is excited about a new public retirement research lab which results cofounded with -- we are thankful for the critical support from a number of our great partners including nationwide who is with us this morning. we're building the largest aggregation of retirement plan didn't allow plan sponsor to commit resources for data-driven decisions. nagdca is grateful for the opportunity to testify today and support of our bipartisan proposals. the proposals are directly aimed at improving retirement outcomes
for approximate 16 million teachers come first responders, public health workers and hard-working middle-class americans and state and local government service. date day in and day out these individuals provide countless special services that support immunities we live in. i will focus on a few of our policy proposal. these proposals were developed in bed by many dedicated transit volunteers over many years. we are happy to say g20 been incorporated into the retirement security and saving sex. which you interviews, mr. chairman, together with senator cardin. we thank you for your passion leadership in retirement space and for your partnership with nagdca. i will highlight a proposal and briefly mention three more. one of the proposals potentially to make significant improvement is to amend the securities law to permit for 3-d plans to invest in collective investment trust. nagdca members prefer to be a
priority because of the potential benefits for 403 be participants. the same benefits advertisements and other plans are currently benefiting from. 403 bees are currently limited by statute to just mutual funds and annuity contracts. these plans are able to invest in cats can realize lower administrator pekoske, fees and greater flexibility. this is one example estimate that lower fees by just 20 basis points can result in more than $100 million in aggregate savings per year for these plan participants. participants having ten, 20, 30 plus years careers, the time value of the savings could really impact people's lives. i like want to mention to maker provision which we believe would make it easier for these plan participants to consolidate the retirement assets. consolidation of retirement assets is a proven method to help participants maintain a unified investment strategy as well as potentially providing lower cost and fees within their
employer -- the changes we suggest our permit nonspouse beneficiaries to roll assets into the pc plant until the participants nrdc plan to roll roth ira assets into their employer-sponsored plans to we encourage congress to help clean up and -- known as the first day of the month rule. this requires participants if they want to change you have to make the change before the first day of the month in which then the change will go into effect. this provision was enacted as administrative convenience prior to the advent of modern technology. not only will eliminate and make life easier for plan participants but we believe also participants make better savings decisions. chairman portman and senator brown thank you again for this opportunity to some of our ideas about how to improve retiring system to other 40 q&a and continued to work together to
support changes which can result in better outcome for so many hard-working people. thank you. >> mr. luskin, thank you very much a thanks to all the witnesses for their helpful testimony. we will now go to questions. because i will beer until the bitter and and enjoying every minute of it except when have to run up for votes, i am going to invest my questions later because some colleagues on the line and they will have to run. we have a vote scheduled for 11 which is about 20 minutes from now, and when quinn asked my colleagues to do is some of you work with me, i can rent up and vote in the capital but some of you will have to take the gamble here so we can be continuous. i don't want to stop this hearing. they're such great affirmations only people interested. the order the order we have is based on when colleagues showed up with a corporate will start with senator brown and then senator grassley, senator bennet, lankford, casey, courts his master, young and white house. not all you are on the line of it as as a commodity they wille
that opportunity. let's start with you, senator brown. >> -- majority party and chairman of the committee, if chuck wants to go first i am fine with that. chuck, would you like to go first? >> are you on, chuck? i think he is on mute. >> i'm glad either way. >> senator grassley, if you are on we would love to hear from you first. that would go to senator brown. >> before i ask questions, there's a couple short things i want to announce. first of all, thank you, chairman portman and senator brown for this hearing. it's very important. and i applaud your and senator cardin for your leadership on retirement security issues. in the coming days i plan to introduce legislation that built on the secure act and the important provisions of portman-cardin as well as stuff in the recently introduced house
ways and means bill that chairman neal and ranking member brady put into place. then secondly, before ask questions, just a follow on what senator portman had said about our efforts to get a multi employer pension thing. we had been negotiating with our democratic colleagues for more than a week to find a solution on multi employer pension, and i were selected like to find a way to reach a deal. both sides have very much been working diligently and very much in good faith. i appreciate that, we plan to keep at this problem until we find a solution. i want to go to covid-19's impact from the first question is for all witnesses. the pandemic continues to cause pain for many individuals and businesses, , and i've heard frm a number of iowans that pandemic
care has affected the retirement savings or even reduce their retirement savings. i know many provisions have already been mentioned, but what each of you see as the most relevant and urgently needed given the current crisis we have with the pandemic? any order you want to jump in, please. >> senator grassley, this is scott barr with edward jones in zanesville. i think i would like to take a shot answering your question. i think it's a great question, and our firm believes the portman-cardin bill was packaged to structure to address the needs of a lot of different sectors of the economy and sectors of workers. so folks that are affected by
the pandemic, i think will benefit from the bill as it stands right now. i think it's a great question. >> anybody want to add to that? >> this is michael kreps. thank you so much for the question and obviously the pandemic has had a pretty profound impact on working people both moderate, upper and lower income working people. in the cares act congress provides some helpful relief to allow people to access to their retirement savings but i do think -- those of the helpful to read up and think about doing it again but it's income went to recognize that a large portion of the population doesn't have a lot sit in the retirement plan and we need a strong social safety net to take care of folks and to support families in crises like this. >> do either of the other two of you like to -- >> sure, chairman grassley. i'll try not to be redundant. a couple things i would call out, number one, the student
loan provision and portman-cardin would be an important piece to that. people just have to give an habit of saving more. that's a great way to start. the second one is the volatility we've seen in covid nudges people taking money out by people invest poorly when the market went down, they sell. when the market goes up they buy. the first secure act, the income allowed us to put guarantees inside retirement plans will really help us reduce some of that volatility for participants and help them be much better prepared over the long term in terms of adjusting. >> thank you. >> go ahead, sir. >> as my colleagues just mentioned, we do believe that in the portman-cardin package was structured very carefully to address the different needs that many people struggle currently. there's a lot of different populations that are impacted. having multiple tools to be able to address it, there is some
value so thank you very much for the question, mr. chairman. >> before a cookie of the question can remind senator portman i don't have a clock in front of me so when i use my time you'll have to tell me. mr. stevenson, you note both the opportunity and the means to save are needed in what you call the beginning planning stage of savings. i agree with you that both are essential. question come in your opinion, how important is automatic enrollment in this equation? >> yeah, i think it's very important and i would add another one of the provisions in the bill is around the savers credit. i think that's an important provision. we need both the means and opportunity. auto enroll and as click reach the opportunity, and if we can expand the tax savers credit especially the part that allows the refund to go right into the account for retirement savings and not spent i think is critical.
>> okay. i guess i tie for one more question. so to mr. barr. in your testimony you cite data for said 37% of the businesses .2 the cost as the main reason for not starting a retirement plan. the current small start up business credit seems to do freight some of those cost in your view would be the most helpful in bridging the small business coverage gap? >> that's a great question, senator, thank you for your question. i think the start of credit is a major player in this. i think the number one issue that i run into with my small business clients is cost, how much is the expense going to cost the business to start the plan. the firm supports entirety of portman-cardin because it really very closely addresses those issues. in addition, the auto enrollment and the auto escalation, both of
those provisions go a long way toward encouraging businesses with the tax credit that is associate with that come encourages businesses to make that as part of their plan so that they can help their retirees say. or their employees safe, rather. >> thank you, senator portman. >> thank you, mr. chairman. >> mr. chairman, we gave you some leniency because you are mr. chairman, by thank you for raising the question of the clock. the finance committee is not able to put the clock on the screen today. however, we're keeping a clock here, and if it's okay what i want to colleagues is limit the questions to five minutes and then at the five-minute mark i will indicate when we are probably a minute out. or 30 seconds outcome about that? so we can try to keep as many questions as we can get in today. we're happy to have a second if people able to stay. senator brown, you're up.
>> there is a clock on the screen, list some of us can see. >> there is? >> for some of us. mr. stevenson, you said in response to the first question people should get an habit of saving more. if you and mr. barr would both answer this question, what is edward jones, what is nationwide my doing to help low income families say for a dignified retirement? >> i will jump in. it's a great question, senator brown. the key for us is we have to get people started early. the education, how we shall come how we provide retirement education and engaging them, employers, businesses than dona great job of providing incentives and then it's up to us to make sure to go out and engage them and get them enrolled in the plans and get them started and keep them in the plans. the provisions in this bill around again whether it's a
savers credit, whether it's out of control, auto escalate, evil can see the progress they are making that's amazing. in the previous secure act one of the provincial start off showing people what their savings look like in terms of monthly income. that's been a huge ad to the plans so we can show them pensions, other social security show the almighty one picture, it's very encouraging for people to get started instead engage in the process. >> mr. barr, would you add to that? >> i think he had a great answer. i would point out from what is edward jones doing, senator, in my practice edward jones i think as much as any firm out there, opens the doors to serious long-term investor across the entire income spectrum and social economic spectrum of folks who value the service and advice that we provide. in addition, we support the
entirety of portman-cardin and we believe that the savers credit provision and enhancement to that is a great way to help folks, low and middle income savers saving for retirement. >> thank you both. mr. kreps, i wondered as to the the multiemployer pension crisis in thing straight, it's doing your testimony. what's the effect on the economy if congress doesn't act soon? with that impact be limited to union workers and retirees in these plans or does it go broader than that? >> thanks for the question. it's an important point. when 1 million participants come over 1 million participants lose their pension benefits, that's going to be devastating for those families obviously. people will be forced with the horrible choice of trying to decide whether to use the limited assets had and to keepe lights on or by the medications. that's not a busy we want anyone to be in but it's going have a
devastating impact on communities as well. in the midwest and across the country that are multiemployer plan participants that are affected by this all over the country. when their pensions are ripped away from that it will be like taking the leg up from a table, full committees will be destabilized ecosystem becomes wobbly. children will have to support their parents and it will be burdened. the government, governmental systems can support systems we have in place to the extent we have them are going to be taxed. trying to support these commuters, the businesses that rely on the dollar being spent in the communities, the employers who are going to be faced with increasing liability if they are unable to continue to keep people employed, it's going to ripple effects echo across the economy which is why it's so important to deal with it now and not wait any longer. >> and dealing with the no meaning it gets worse the longer we wait, correct? >> it gets worse every day we wait. >> a note to my colleagues have for years we've been hearing
this the longer we wait the worst it's going to be. it would been cheaper to fix three years ago, what event cheaper to fix last you and i were in the middle of an economic crisis that is draining people's savings and retirees can't wait. let me in the last minute go one more place with you, mr. kreps. we know people change jobs more often than they used to. when they do their often denied a chance to build retirement savings that mr. barr and mr. stevenson talked about getting people in early. many corporations have made part of this plan to deny responsibility for millions of the workers using independent contracting and subcontracting to get out of their part to contribute by doing the part to contribute to their employees retirement. what can congress to about the so-called missing participant problem and improving portability for workers who move from job to job over 20 or 30 years? >> this is a great question and an important one.
often times when people change jobs to lose track of their retirement accounts. it's happened in my family members. they have missing accounts elsewhere, and that lost savings can add up over time and so the best thing we do one of the best things we can do is to encourage the use of automatic building so that as people change jobs, their accounts follow them from job to job. by negative consent. additionally, there are some legislation about registry that could be very helpful in addressing that problem. >> thanks, mr. chairman. thanks to all four of you. >> thank you, senator brown. senator bennet. senator bennet, are you on you or you you not with this any longer? senator lankford. >> senator portman, thank you very much. and senator brown both for hosting visiting.
tremendous asset to get in this conversation to senator portman and senator cardin piece of legislation he worked on for a long time. i appreciate all the work that's gone in on it. i have several questions both a new type of site and on the emergency fund side but have really pressing question for mr. if they understand you're born in oklahoma but you now live in ohio, is that correct? >> that's correct. >> so if i were to say the letters osu to you come is at oklahoma state or ohio state we are talking about? >> with all respect that would be oklahoma state, my little brother. >> i would be my assumption as well. i just wanted to clarify that because that's an important feature in this particular hearing with those who are hearing it -- >> who is that flag record that's an ohio flag your cats were i live. >> just thought i would check. >> i'm not try to get you in trouble, just trying to bring clarity industry as well. mr. stevenson, let me ask you -- >> he had additional 30 seconds if you acknowledge this coffee
mug. >> i will be careful with my time then. [laughing] mr. stevenson want as you about emergency fund. i noticed from your testimony that you're saying about 20% of the withdrawals you are seeing right now from retirement funds are covid related issues of people who didn't have emergency funds. we talked a lot about retirement funds. i want to bring up the issue on emergency funds for you. how do we encourage people to set aside more liquid assets as an emergency fund while we are all still trying to deal with retirement funds as well? >> thank you for the question and i think while it's not part of this provision is bill yet i think it is a very important piece that would go a long, long way. what we have seen, we've seen almost $900 million in covid related withdrawals since april and the last 60 60 days we've n those numbers increase each week. what we talk about, nearly half of americans don't have $400, i think there is a pretty straightforward way we can
create some legislation that would allow that to be part of our 401(k) can for 57, 403b plans were that many of the first $400 come come first $1000 is available to the participant for emergency savings, for a non-emergency. that would really encourage people to start saving early. and when one of the berries because one of the barriers people to like is they can't get access to the money. if we make that first 1000 available available i think will help, we'll see less impact from an event like covid. >> so is 1000 a correct number or should that number be higher? it sounds like using at least 1000. how'd you come to that number? >> i don't have the position it on the exact number. i'd love to work with you and others in terms of determining that number of we think that is in the right ballpark. we don't want to take away from the long-term savings that we do think it's an important
provision and it's very expensive and time-consuming for participant to go through the process of requesting a load or do, and think about that, when you are right out of college and your transmission goes out and you need $400 or $800 to repair that can you go to credit card, your parents or go to a lot out of your 401(k). we think there's a much easier, much more efficiently. >> let me ask one more question on this and want to open us thp to the whole. mr. stevenson, you have expansion retirement and employees. many individuals that are in hourly jobs are just getting started or in restaurants and other places i would assume many people that are even on this conference right now started work in a restaurant as i did years and years ago on that. but very rarely would you start retirement planning at that point as well. it's not easy to do. your part-time, hourly and even setting aside small about is more complicated. are there ways we can actually
engage with that individual who may be 19, 20, 222 years old just getting started or someone just out of college at an entry-level job to be able to do retirement savings but they soon they're going to switch jobs so it's difficult to do retirement plans with an entity you are then trying to be able to move his or or in easy way to get? >> a couple thoughts. a couple of been talked about. one is the ability for portability across, adding that. that would make a big difference. number two, we talked about emergency savings. number three, any of those -- these are all -- two are provisions that are already in the portman-cardin act. if we can move that forward we can make a a difference. the other one is reducing the time from three years been to two years, even when you're part-time work can start saving. that's important and we are
extremely supportive of. >> other individuals that have response to that as well for that part-time working or that person just getting started for saving? >> senator lankford, yes, if you don't mind i'd like to respond to that also. we support the entirety of the portman-cardin bill and that the provision i believe in my experience is something that's going to be very important for part-time employees. .. any other responses to that. all right. thank you, mr. chairman, i appreciate your indulgence and
our conversation about the correct osu and i appreciate you all holding the hearing. it's extremely important to us. >> not at all. i'm glad we have you outnumbered 2-1 today at least. >> thank you lankford. senator carden. >> thank you, mr. chairman and first, i really do want to thank you and senator brown for conducting this hearing. senator portman and i have been working on pension issues since we were in the house of representatives so it's really gratifying to have this hearing where we can explore going to the next plateau on pension reform and to senator brown, we really do need to deal with the multi-employee issues. i know it's not the subject for today's hearing, but i thank you for your leadership on that critically important issue. there are many provisions in the portman cardin bill, but i want to follow up on senator
lankford's point. and one of the challenges is getting the younger workers to get engaged in savings. some are part-time workers, so therefore, expanding eligible for part-time workers will help in offering them an opportunity to start saving for retirement at an earlier age. and many of those work for small companies that do not have pension plans. and by offering additional incentives for small businesses to set up plans will mean we'll have more workers participating in plans and again, a lot of these are younger workers that today don't have that opportunity. and although it's extremely important that the tax deferral concept of saving for retirement, we find the most effective way to get younger people engaged in savings for retirement is when there's a match. if that match comes from an employer, very few people want to leave money on the table. very few workers want to leave money on the table, but if the
employer doesn't offer the plan, there's not a match unless they file for the saver's credit and it's been a godsend getting younger people engaged as we can see our federal plan on savings, on the thrift savings plan. so, my question is to-- i believe it was brought up, but i think others did as well. we have a provision in portman-carden with a savings account. i want your view how effective you think that would be in getting younger workers and lower wage workers to participate more in retirement savings, particularly at a younger age? >> i'll address that quickly
and maybe others can weigh in if we have time. i think what you and your colleagues have done in that bill to making that for the proposal savers credit refundable is one of the most important things we can do. right now, the saver's credit white well-intentioned and helping a lot of folks, and misses the people who probably need it the most and need the most help savings, anything week do to boost them up, to give them a shot, to have a safer and secure retirement is critically important, and i -- i hope congress will look at that piece of it to help lower income people as soon as possible. >> mr. chairman, i wanted to highlight that because i know that's an area that we are going to have further debate in our committee and i do think it is a measure that can have a major impact on reaching a population today that are just
not saving for retirement at early enough age and i know the other members want to ask questions and i've had opportunities to talk to many of the people in this panel about our bill, but once again, senator portman, thank you for your partnership and leadership on these issues and i thank all of our participants. >> thank you, senator cardin. and i want to talk about that and so much that helps in this bill to both deal with the small business issue and deal with the specific issue of lower inmany could and part-time workers who are not currently accessing plans and therefore, not saving. with that, we have votes that have started, i'm going to continue to chair until senator young is ready to spell me. he said he wanted to do that so let's move on to senator danes and senator young, if you're on, can you let me know and i'll run out and vote.
>> senator portman just so you know, this is senator young, i'm indeed here and happy to relieve you whenever you might want to go vote. >> great, you have the gavel and let's turn to senator danes. >> senator danes. next we have senator casey, senator cortez masto and you can go in that order do we have senator danes? if not senator casey if present. we are in the middle of votes, so it's understandable that some of my colleagues are not currently present. senator cortez masto are you present? >> i am here, senator young, thank you. >> thank you. and lets me stay thank you to senators portman and ranking member brown for this great conversation and needed conversation and to my colleagues as well for their legislation in this space. can i--
i know we are going to talk about this later, but i'm interested in the refundable savers credit and mr. kreps. i want to address it this way. i come from nevada, we've been so hard hit, there are 60,000 fewer las vegasworkers, and the bottom line there are too many nevadans who aren't able to put away for retirement. i'm curious if we have people who spent down their retirement savings from covid. how do we help them catch up? would the savers be a way? >> i think that the refundable savers credit would help people catch up. it's effectively a support support for savings that matches their contribution so that would be incredibly
helpful for them, but in the larger context, we have relied in part on addressing the pandemic through allowing people to tap their retirement accounts and that's fine and that helps a lot of people, but at the same point, it highlights that maybe we don't have the strongest support system for folks suffering out there and they were not prepared to address the pandemic in the way we should have been, and the retirement system, by itself, can't address all of these problems. we have to think bigger and in a broader context. >> and i appreciate that. and that's-- and that's my concern. and that's why we have put so much money in other areas to support individuals from direct payments, unemployment insurance, to help them with their rent, to help them with food insecurity. there's so much that needs to be done right now. this brings me to the next question and maybe mr. stevenson, i would like your thoughts because i believe you're the one that identified there's about 20% or about 900
million dollars in covid related withdrawals that you have seen, is that correct? >> that's correct. and that's out of our plans, yes. >> just out of your plans. i'm curious because during this pandemic, there's so much need right now. shouldn't that be higher? i mean, given the fact that we have provided opportunities through the cares act and the heroes act for so many to draw down or take advantage of their retirement accounts because of the lack of income coming in, that doesn't seem as high. i mean, i'm curious, and i'm going to open it up to all of you. is that a reflection of maybe they don't have retirement accounts? or they're unwilling to draw down on their retirement accounts? my concern is that they don't have retirement accounts or the emergency assistance they even need. so i'm curious on your thoughts on that. >> as that relates to the $150 billion that we have.
it's about 20% of the total withdrawals, the people normally would take 20% of their covid related so we thought that was quite high. while we were encouraged by that, it's that more people hadn't-- didn't need to tap into it. it's 100% voluntary and we made it available and that that provision was there and we were in better shape than we might have thought going into it and they didn't need to tap into those at greater rates. >> anyone else, any other perspective based on your experience? >> on the sector experience and with -- we found we had about 50-50 with that provision. we didn't see a whole lot of use of it, but it did disproportionately impact our health care workers and the people needed the most and impacted the most, but also a lot of focus on education because that's the time value of money and any withdrawal you take right now, 10, 20 years,
1,000 now, $5,000 now, and in 20 years that could have been $10,000. a lot of education was focused on that. having more access to retirement plans and more people enrolled in retirement plans and that's a lot of downstream. >> yeah, thank you. let me also add my support for the auto portability. i think that's so necessary, i mean, i think anybody who has been in the work force would appreciate that student. can mr. kreps, i only have so much time left, can you speak to how that might impact someone who is facing a longer gap in between jobs? >> the real benefit is is when they have the gap of jobs. her they're at higher risk of-- as they move from job to job,
that can follow them rather than what they do now often cashing out their savings and paying the taxes and penalties, they'll maintain the savings over the course of their career. they'll build more and more personal wealth and hopefully be able to retire with some dignity. >> thank you. i appreciate that. i know my time is up. i'll submit my questions for the record and gentlemen, thank you so much for the conversation this morning. >> thank you senator cortez masto. well,senator portman will run and i believe will be accepting the gavel once again momentarily, but i have some questions for our witness is. i really thank you for all of your good work and i commend my colleagues senator portman and senator cardin to kick start this discussion with respect to retirement security with their retirement security and savings
act and for holding this hearing today. as we look to lay the groundwork for what we hope will be another bipartisan retirement bill success story in the next congress. the ongoing pandemic is causing a multitude of problems for hoosiers from unemployment, to sadly illness and death among family and friends. i'm hopeful we'll reach a bipartisan deal in the coming days in a relief package that will help to address some of these immediate challenges, but i'm also mindful of the long-term ramifications of the pandemic in a host of areas and including retirement security. i want to ask a question of mr. stevenson, sir. if your testimony you noted the work that nation-wide has undertaken to support workers during this pandemic and the cares act.
could you update us on how you've implemented the cares act to support workers through coronavirus related distributions and other provisions of the law? mr. stevenson? >> thank you, senator young. the cares act was really, as you know, we all know, a very important piece of legislation to support our workers and nation-wide has-- our goal was to make sure that was easy and accessible. when the volatility in the markets first hit we saw incredible amount of phone calls and people calling in, checking on their balances. we made sure we had people and technology to answer those questions quickly and efficiently and deliver the right kinds of content to help people remain calm so they didn't make the mistake so many do, selling when it's low and buying when it's high. we delivered more and more education and work shops and engaging with the participant. a piece that was really
important is our partnership with our client. the small businesses owners the government entities, their voice is even more important than our voice. if we partner with them to tell the story, there's so much credibility there with the participant that helped them make the right decision. and the other part that we moved quickly on, i referenced a little bit earlier. one of the greatest things that happens during the volatility is, participants don't know how to react so people have saved sometimes 100,000, 200,000, a million dollars and they can really blow that quickly. so they're allowing us to be able to deliver annuities or in plan guarantees inside of a retirement plan, an efficient delivery vehicle and we manage the volatility, just like a target based fund, participants saving in that and professionals take over, same way now with this capability. we'll manage that through-- manage that process all the way through retirement into income and really help participants be much better prepared to live in
a retirement after they've worked for 20 or 30 years to save so much-- to work so hard to save so mu much. >> thank you very much. sounds like you've really played an important role to help your clients through this crisis. mr. barr, in your testimony, you mentioned a new study that found the pandemic has altered the retirement timing of nearly 68 million americans, with most of those planning to retire later. in addition, about 20 million americans have paused their contributions to retirement savings during uncertain times. what do you see is the long-term impact of the changes and could you elaborate on the proposals you think would be for americans incentivizing saving or making up for the lost time? >> thank you senator young for
the great question. it's pressing and an ideal issue every day. to be frank not just with covid. covid is a sudden change, covid is a sudden change that's altered with the studies point of now, 20 million have stopped making contributions, but folks do sudden changes all the time. they change jobs, i have clients who are in the middle of what's known as the sandwich generation, they're taking care of children and grandchildren and they're taking care of elderly parents. so there are lots of circumstances in one's life that cause a sudden change. the provisions that the portman-cardin legislation will have a huge impact on all of those things, a, any students--
any opportunities that most of my clients to put money away and most of my clients do when they can and that helps retirement savings on the way in. catching up at age 60, that provision in the portman-cardin legislation is also something i'm certain many of my clients are going to take advantage of because there are times in their life when they don't have the opportunity to put as much away as they normally would. and they would later in life. and then finally, a provision that's very near and dear to me, that the biggest fear that every client has, is running out of money and becoming a burden. we think the provision that increases the required minimum distribution age to 75 attacks the problem from the back end at distribution time. >> thank you so much. my final question is directed
at mr. luskin, i want to thank for your service, sir, to thousands of hoosiers who serve in the public sector in the great state of indiana and rely on the funds you help to oversee for their retirement. as you noted in your testimony, the average employee starts saving for retirement at age 32. many of them accumulated significant student loan debt and you indicated that debt has an impact on their ability to participate in an employer sponsored retirement plan. what can we do to address student loan debt while also encouraging younger workers to begin saving for retirement earlier in their careers? >> thank you for the question, senator young. and because i am representing a few of the provisions that we've approved, i won't go into too much detail as far as with the loans so i do a student
loan, so i do apologize, but i think one of the points you made up, a great point for your question the other witnesses have to do as you look at the retirement, the hoosiers you support, starts out making sure that people are participating and as you get to the end of that retirement cycle, it has to do with what is your balance and how are you able to go ahead and break that down to replacement income. so, we're looking at those two book ends, but during their whole career, as you mentioned, most employees, their career, they need to be able to make choices to either invest in their retirement or pay off their student loan debt and i have to go back to, making it obvious, i've been raised by educators and providing education to them to allow them to make the best decision becomes very important regardless to what is the option. >> well, thank you so much, sir. it's my understanding, senator
portman has returned and if indeed that's the case, i will-- >> that's the case. >> i'll be handing the gavel back to you. you have the con, as we say in the navy. >> excellent, i appreciate handling it and i think you did a superb job in handling this delicate responsibility. good questions. i think we have senator whitehouse next if you're with us, senator whitehouse. >> i am here with you. >> all right. i thank you and senator cardin, senator brown very much. >> thanks for being here. >> the problem of where you set defaults when people are making choices is an important question. if i'm not mistaken, a psychologist won the nobel prize in economics a couple of years ago for his work on choice and where defaults are set and how people make choices. now, i have what we call the auto ira bill, which sets the
default that employees are automatically enrolled in their ira plan unless they opt out, as opposed to automatically not enrolled in their ira plan unless they opt in. the employee retains full choice. it's a question where the default is set. it exempts smaller businesses and businesses in states that already have a similar program operating at the state level. and i think it's one way to address the problem of having 25% of nonretiree adults having no retirement savings or pension at all, and only 55% of workers participating in employer sponsored retirement plans when they have them. so i would like to ask-- let me ask mr. kreps, do you
believe that an auto enrollment ira program would help in that circumstance? and specifically, are there elements that we've learned from the successful state auto enrollment ira programs that if we were to spread one across the federal system, we should use as models? >> well, thanks for that question. clearly, and for your leadership on this issue. clearly if we had a national requirement that employers either provide a plan or automatically enroll their employees in a savings program, more people would save. there's really no question about that. where we set the defaults matters, as you said, and we can look to what they're doing in oregon, illinois, california, elsewhere, to fine tune it at the federal level if we go that direction to make it the most effective, but there's no question that that would get more people saving. >> and it leaves the employee
with complete freedom of choice if they want one or the other. anybody who feels strongly which way they want to go. it's not taking choice away from anybody, it's just following this choice theory problem and setting the default in a way that signals people to their own best interest. >> completely agree. that's the one point i wanted to raise and i look forward to having that default setting question be a part of the conversation as we move forward with portman-cardin. thanks very much. >> thank you, senator whitehouse. and let me say to the panelists, and those that light be tuning in, we had a great turnout of senators today of some had to go vote or go to other hearings, but we had to pass over senator bennett if he's now with us, i'd ask him to speak up.
senator danes, he's not with us. well, to both of them, thank you for being on the hearing call and listening and to all of my colleagues, thanks for participating, as i said, i'm here until the bitter end so i'm going to ask a few more questions, many of which are questions that have been touched on, but i think we need a little deeper dive. the first issue that i mentioned earlier was the fact that we don't have adequate savings among low income and part-time workers. these are people who are working, and yet, they are not saving. and i think it's important that the bill lowers the number of hours that someone has to work before they qualify to be in saving and retirement plan, that was improved by the secure act, by the way, we take it to the next level. a lot of workers have part-time jobs and particularly women work part-time raising their kids and that's particularly true during the pandemic raising this concern, how does
this address the reality. expectation seive as-- expensive, and part-time jobs, all they can do when the schools are closed. i think that's a great opportunity. the matching thresholds being increased for those workers is also important and something that ought to be emphasized as we give employers the opportunity to increase the match so those individuals can save money for quickly and build up their nest egg. only 25% of low income workers are saving and we've heard that over time. some say 22% and whatever the number is, it's too low and the savings credit being made refundable will help there. by the way, again, i've got some colleagues on my side of the aisle who expressed concerns about this. i do think that the savers credit has worked well, but it's sort of run into a roadblock in terms of its ability to help people.
that i think can be answered through refundability and we're careful about it. the money goes into a retirement account, as an example, which i think is very important. it's not easy to administer that, but i think it's very important that it go into retirement. i would also say i'm excited about this provision that would allow recent graduates to receive matching retirement contributions from their employers, if they have student debt to be paid off. again, this goes to a lot of these lower income and part-time workers, too. if they've got some debt and as we've said earlier, by mr. stevenson, some are in their 30's and 40's and they've got this debt still hanging over them. it makes it hard for them to save for retirement and it's a national problem and here we have a partial solution. the small business issue we talked about a lot today and i appreciate, again, the help we've gotten over time from the small business community as to what would make it easier for
them to have a plan and auto enrollment to encourage employees to save for retirement is very important and you know, that was one of our previous reforms and we're excited about the difference it makes. if you're a plan that has 70% of participation, and goes to about 95%. senator white house just talked about that in relationship to his bill, but he's correct in the sense where there's an auto enrollment option people don't have to make the decision. so i think that we're helpful there because for small businesses, that can be expensive. in fact, just starting a plan can be expensive and start up for small businesses and put the auto enrollment in place and put a plan in place and making it more cost effective for them. and those who are at or near retirement, again, data is i think only 55% of baby boomers are close to being prepared for their retirement and again, a lot of those good people are
living longer and haven't been able to save enough. others have saved virtually nothing, but i think it's critical for that person who maybe couldn't save as much money when they were younger, paying off college debt, for instance, or saving for their kids to go to college. and now, they have the opportunity, later in their career, to be able to put some more money aside. and that's why we have the catchup contribution for people 60 and up. and we also think it's important to help manage that retirement. so going from the 75, we think, is really important for the minimum required distribution. my dad was working into his 70's and he would always complain to me why he had to take his money out and pay taxes on it while he was still working well into his 70's and unfortunate unfortunately with this pandemic more and more people are finding themselves in a situation where they've got to work longer, longer hours and more years in order to just
sort of stay up. so, i think it's particularly helpful now and i appreciate what you all have said about those provisions. anyway, those are some of the things that we had a chance to talk about today and i think it's very, very important. on auto enrollment, that goes back to a bill introduced in 1999 with senator cardin and myself and this next generation of auto enrollment and legislation i think will help. it allows employers to increase the initial default contribution from 3% to 6% and then gradually increase the default rate to 10% of pay over time. can anyone share views on that? i might start with you, mr. stevenson because i know you have interest in this, but do you think that will be helpful? >> without question, thank you chairman. and quite frankly, all of the provisions that you just ran through, we wholeheartedly support and auto enrollment in particular. auto enrollment and auto
escalation, i think those are both real important and one of the things that we don't talk enough about is just the pattern that creates. once people get started they get in that habit and they see that balance grow, they're glad they did. and one thing i would point to, we hear this all the time, especially from firefighters and police where there's a strong sister hood, brotherhood, once somebody gets you in the plan and they keep contributing and so glad they did and that's what we do with auto enroll and auto escalate is where you're making that more systemic and getting people in those plans. so, anything that we can do to support that we will and we've seen great success with that on the corporate side where companies, you know, i a -- apply that without it being legislated and anything we can do. >> thank you, again, you're in the trenches with this every day and getting more incentive helicopters. on the catchup contribution and anybody can jump in here, the
current bill would have a catchup. $10,000 first versus age 60. how would that help people get security retirement. maybe you could talk about that a little bit. >> think, senator portman, i'd be happy to answer that question. first, let me say, i really do want to thank you and senator cardin for your incredible work on this bill. supporting every provision of it. it's a very needed piece of legislation and it really hits the mark, hits the target that people need to be incentivized to save more. the catchup contribution, in my opinion, the increasing the rmd to age 75. all of those provisions, if somebody had the opportunity to save more money, it's my experience that they do. it's also my experience that
with the increasing requirement on distribution age you mentioned your father earlier, in your comments, i had that-- excuse me, i had that situation happen frequently in my office as well. and having people allow their money to compound over time by contributing and by educating them to do so and by allowing people a little bit of extra time at the end to take care of themselves, their number one concern is that they become a burden to their families, to their friends, to their community, and these provisions, i think, help with that. so, we applaud your efforts and thank you. >> i'm, again, happy that we've made some progress for small businesses. we talked about that earlier. mr. kreps. you may want to talk about this. but the simple plan that we proposed back in, i think it was enacted in 1996, has been
helpful. small business start-up credit was established in 2001. i think we've done some things to help on simple plans and on start-up credits and helped with small businesses, but still, we have these numbers that are inescapebly, you know, discouraging that many small businesses are not offering plans. mr. kreps, i want you to start, but also, mr. barr, you have a strong view on this. talk to us about what we should do with regard to small businesses and particularly simple plans don't permit employees to make roth contributions now which i always thought was a mistake, all over plans permit is, 401(k)'s, 403b's, so i'd like to give small employers the option including the roth option. is there any reason not to do that? can you comment on that? >> i can't think of not giving
a roth option. when we look at the uncovered work force for those who don't have access to a plan. a lot of them are employees of small businesses and i-- i'm sympathetic to a small business owner who doesn't have the time or energy to go through the complicated process sometimes as establishing and running a 401(k) plan. anything we can do to incentivize them to take the steps, to make the economics work better through credits, to give them more options, is great. that will help expand coverage. >> thank you. any other thoughts on that? and then i want to go to mr mr. luskin for a question. any others? mr. luskin, i want to ask you to take a look at one provision, it's the non-spousal assets being able to be enrolled into a plan. can you talk about that and how that might affect some of the beneficiaries you serve? >> thank you for having the
question, senator. and rolling over the non-spousal, and we look at account con sal-- consolidation. and the more that opens you up to lowering costs and allows them to take part in better returns, because incentives and paying for good investment advisement and so forth is important, but lowering those allows that to have better returns and to build up their balances more and so what we're trying to do is give people the opportunity to consolidate their accounts, which allows them to align their allocations to have financial plans that will provide them with better opportunities to be environment ready. i apologize for them to be reiterating, at the end of the day when you're getting ready to retire, you need to consolidate that balance into an income, the lower income you make, the higher your replacement income needs to be.
so consolidating assets gives you a lot of advantages, when it comes not just to your plans, but lowering the administrative costs to make sure that the balances can grow. that's what we're looking to support is providing that ability. >> okay. let me follow on that for a minute. and one of the ways to give plans flexibility they need to ensure, you can get the most gain out of your investment might be these collective investment trust provisions. can you talk about that? i think in your opening statement, it was written, you talked about how this will save plans significant amount. i think you said a total of a billion dollars. can you talk a little about the collective investments trust provision and how that might be helpful? >> thank you for the opportunity. i had the privilege of being raised by educators and the population, and thank you for that. essentially the crux of the
argument is we want to provide 43b participants with the same advantages that other participants have. and have an open market is important and a lot expanding our advanced metrics where you have access to annuity contracts and mutual funds. what we're looking to is larger plans that have access to the cit's not only does it give them lower fees, but it gives them the opportunity to have flexibility, customize investment options, mitigate potential downside risk. so providing that vehicle and that option, for the specific plan sponsor should be something that you provided. on the other side the coin. it's always important to look at the other side of the coin, i can't think of a single reason why we would not want to provide that option for them. and especially the people who work so hard dedicated to the public and our communities.
>> well, good. here is another one that we haven't talked about today is exempting roth assets in a plan from the required minimum distribution rules and i think that that also helps your beneficiaries. and i don't know if you and maybe mr. bar want to comment on that and that's had a provision in this bill that hasn't gotten much attention. >> i agree. would you like to go first? >> in truth, that's a provision that's not as familiar with, so i'll defer to you, mr. luskin, thank you. >> thank you. right now traditional buyer rates are exempt from r &md. and consolidation to the point of people nearing retirement age is maintaining the large balances. right now ira's are not required to have an rmd on the
roth accounts, but plan sponsors and government retirement plans are, so what we're simply looking to do is provide our government participants who work so hard the same benefits that the ira's are providing. so we're just looking to even the field. >> and mr. barr, i know how strong you feel about rmd's, i was giving you a chance to talk generally with rmd's. there is i said at the out set, this is about peace of mind in retirement and mr. kreps talked about the golden years, oh, my gosh, i'm outliving my savings and i don't want to be a burden on my family or others. so, everything in this bill, i think, is directed toward that in one way or another. i see that mr. danes has now joined us. if you'd like to ask questions of the audience,of the witnesses, that would be great. >> thank you, mr. chairman.
i'm really glad you're holding this hearing. it's an important issue of retirement security. you think about how many americans, how many montanans work hard, they save for decades hopeful of achieving a retirement. and i've listened back and forth folks don't have to worry about outliving that savings and how do we promote personal responsibility as relates to saving more money so they can do that on their own and not relying on somebody else, and it's so important, we have found, that people who are in the workplace today are aware of how much they need save to achieve their desired retirement and make sure they don't make any significant errors, mistakes along the way. one easy thing that congress could do and chairman portman, thanks for mentioning this bill that i'm working on with senator warren, and that is
helping future retirees with this, we call it retirement savings lost and found acts. if we dug into this issue, we found, first of all, americans, by no surprise, are switching jobs at a higher rate than ever before. but they're unknowingly leaving behind 401(k) balances. in fact, there was a study from a major investment management company that showed up to 30% have employees left behind some retirement savings when they switch jobs. nearly one in three. through this bipartisan bill i have with senator warren will solve this problem and make sure that people get that money by creating a national lost and found recovery for information and using data that the employers are already rekwquire
to report. and using this, employees can find the employer sponsored retirement accounts in one easy location on-line. it would be a big help for employers, who often spend a lot of time, a lot of hours reuniting employees with their accounts. this would be for montana workers and others and highlight that as a piece of legislation, i think that would be a pretty common sense step for building accounts. i have a question for the panel with that kind of introduction. would you agree creating a savings lost and found registry would be helpful to reunite workers and retirees with their missing retirement accounts? whoever off the panel wants to jump in. >> senator daines, thanks for joining us. we certainly support that, that piece of legislation that
you've discussed and outlined, and the other part, i think, that's also important is everything we can do to strengthen beneficiaries, making sure that the plans have cleared beneficiaries on them and helps with tracking that down. you're right, they've earned it, they've worked hard and that money should follow them wherever they go. >> great, thanks, mr. stevenson. somebody else? >> senator daines, i would also like to echo what mr. stevenson just said. it's an important piece of legislation and one part of that legislation that i particularly like is that it's forward looking and that not only does it form this registry, but then has the ability for the administrator of this program to basically work with the private sector to actively try and find people who have missing accounts and that's an important thing. >> yeah. >> senator daines? >> as somebody who has spent time helping clients do just that, i agree that it does
address a critically important issue for lots of americans and i extend the offer that our firm would be happy to help you in any way that we can. >> appreciate it. we'd have you review the bill and make sure we've got it right and any feedback before we have a hearing on it and we're parent to four children, children have graduated college and started their own careers and have their 401(k) accounts and they have those dad and mom moments helping your kids settings them up and telling them to maximize it with the match and so forth, but also as we all know here, the importance of starting early, how big an effect that has long-term on growth of the savings accounts, one way to make sure you don't lose that early investment which of course turns out to be a big number as you move through life. well, i want to ask another question here regarding personal savings rates. one of the trends that surprised us.
we were doing some investigation what's happening with savings rates during the pandemic. we've seen a big jump in the personal savings rate. in fact, the personal savings rate, the date that that we've collected went from 7.6% in january to north of 33% in april. now, as of october, we've seen this personal rate do create 13.6%, but it's definitely moving up, which we think is actually a healthy thing for long-term retirement. here is my question for the whole panel. when things get back to normal and i was at the president's vaccine summit yesterday at the white house, i'm encouraged by the direction we're headed here and we may have some very good news here, kind of a christmas present for the nation with these vaccines, but when things are back to normal on the other side of pandemic. what would you say is the ideal personal savings rate and how can we make sure that folks at
all income levels are saving enough? >> thank you, senator daines for the question. i think it's a very good question. and the factors and the dc plan for the primary. savings rate with 3% we're used to hearing, based off some past research, and that came out with the 401(k)'s coming out and the higher percentage you need is dependent if it's a primary, a lot of that is the reading, the points are double digit contributions and i think from your initial question and your motivation, there's a lot of downstream benefit-- helping participants get to those rates and that helps them satisfy their replacement income because there is so much dependent on the individual needs. so thank you. >> yeah, thanks, mr. luskin.
someone else? >> i would just reiterate, i think that the point that mr. luskin made. we think that number dependent on what else you have. do you have-- what is your social security. do you have access to pension. but if dc, defined contribution is your only savings vehicle, that number does need to be double digits and greater, 10, 15% to have a real chance at having a secure retirement. there's a lot of data out there, happy to provide that to you all and some of that information after this call. >> i appreciate that. thanks, mr. stevenson. you bet. >> did i miss anybody else who wants to provide a thought on that question? if not, mr. chairman, i'll toss it back to you. >> back and forth. with some of
the witnesses about the fact that one of our challenges in our system right now is that people are moving jobs more frequently and sometimes losing savings, which may be relatively small, but it adds up when you've got several plans, which is not unusual for the generation of your kids and my kids particularly, as they move from job to job. i will say on the personal savings rate, just to throw this in. we talked earlier about the k-shaped recovery, my sense from talking to some of the experts on this is the reason the personal savings rate got so high was that some people were saving more who could afford to and particularly, you know, with the stock market doing as well as it was and continues to, that, you know, higher income individuals were able to save more and a lot of middle income workers as well, but unfortunately it wasn't as you indicated in your comment, senator daines, at all income levels. you want to see that kind of savings and our focus here today has been a lot about the part-time worker, the worker in
the small business. the low income worker which is where the huge opportunity is because they're not saving. senator daines worked for the procter & gamble company in his distinguished career and they had a great savings plan and you know, in effect, their profit sharing plan and 401(k) plan together means that people are given great opportunities. my dad worked there when he was a young man for a couple of years and he loved the idea that procter & gamble, and when he started his own small business with five people, he started a profit sharing plan like procter & gamble. and unfortunately lost money the first three years and people didn't get much in the profit sharing plan, but he started a 401(k) as soon as we could and there are guys who turned a wrench, he told forklift trucks, guys my age, i've known virtually my whole life, are retiring with a nest egg. and i ran into one and he's
using it to help his grandchild go to college. now they've got 3, 4, 500,000 dollars coming to them hopefully spread over time, through the qx and periodic payment methods, but it really works and that's exciting and i know senator daines understands it well from his experience and big business and small businesses. so we look forward to working with you on your proposal. in a sense, i think you've had a hearing on it today and hope we can get it into legislation soon. with that, i want to thank the witnesses. you guys were helpful today and you're the experts and we want to continue to stay in touch with you. we need your views as we put this together. >> mr. chairman? >> yes. >> oh, senator carper, thank
go goodness you spoke up. let me do this if you please i've got to run to vote and i'll turn it over to you or senator daines. you have the gavel in that case. i've got to run and go vote and i'm come back and i may miss the vote if i don't go now. for any members who have written questions for the record submit nos by close of business on wednesday, december 16th and for our witnesses, again, if you have additional written comments please provide them. everything that was in writing is part of the record, but feel free to add to that. with that i'm going to turn the gavel over to senator carper who will formally adjourn this hearing. >> thank you, my chairman. thank you, chairman. welcome one and all. the senator knows i spent formative years in my life in ohio and my dad was a claims adjuster and ended up in the
home office in columbus, training for claims adjustments all over the nation for nationwide. and mr. stevenson, i think you're with nationwide, is that correct? >> yes, sir, that's correct. that's good. there's a great movie out this last year i think nominated for academy award and the name of it was just mercy and it focuses on the life of an african-american attorney who grew up in the rural south and actually grew up in southern delaware and has spent most of his life trying to make sure that justice was provided for people of color, as they went navigated through the criminal justice system. you are a dead ringer for him. you're literally a dead ringer for him. i turned on the mic and i thought what is brian stevenson doing on. >> and we share a last name, which is interesting. >> great guy. >> great movie and great book.
>> who is from zanesville on that. >> i am, scott barr from zanesville. >> that's great. i have a stepson who's life's work is helping people make investment for security for retirement security up near north of detroit and very much, very proud of him and what he does. so, it's-- i have all kinds of interest in this hearing. used to be state treasure, and 29 we had the worst credit rating and the pension fund and not a pension fund and not a dime. and we had a deterred compensation program that was a tragedy, it was just such a screwed up mess. and we were able to work with great governors, pete dupont and others to straighten it out and something that we could be proud of. i have a question for mike kreps and actually focuses on helping low income and nontraditional workers save for
retirement. and i've been going back and forth voting for hearings. i as confused, in your opening statement you raised proposals by my colleagues aimed at helping low and moderate income people save for retirement and i reminded in the new testament looking out for the least of these and i think when you quote me on and on and on, it doesn't say anything about when i was a low income person and didn't have much money i think you helped me to save for retirement and i think there's more imperative at play here. the related challenge in this space, most people don't think about retirement savings until later in life at a particular inception point, maybe getting a new job and tax time is one inflection point that might be particularly helpful to
leverage for low income and nontraditional workers. here is an example out of delaware. volunteer income tax assistance operator piloted to a local institution where they can sign up for an ira and mr. kreps. how should congress, maybe the incoming biden administration think about better leveraging inflection points in public private partnerships to encourage retirement savings particularly amongst lower income and nontraditional workers? >> again, it's a great question. and we have-- you're right, we have decades of economic and industry research showing very clearly that we could help people and encourage them to save if we hit them at inflection points when they're thinking long-term about retirement. birthdays, starting a new job, marriages, divorces, deaths in the family, things where they have to think long-term.
and i think we can, congress the biden administration, folks in industry can think a little more creatively how we can partner together to do things. imagine if every time you got a tax refund, you file your taxes and a window popped up and said would you like to put part of that towards retirement savings? or there was a more national push to get people using the saver's credit or more of a national push to get people to save. i think there's a lot of room to work there, particularly through public-private partnerships, to do the education, to do the kind of pushing on folks, to nudge them in the right direction when they're busy and they're not going to think about retirement 24 hours a day like some of us in this hearing. >> good, thank you. any other panelists want to comment on that, please? thanks for your responses. anybody else? >> i would, senator, i would add that while using inflection points is helpful, just what i've seen over time and what
the data continues to suggest is that the auto features are even more impactful. we have to really, excuse me, the auto features are key. and the savers credit expanding that and things more standard to the people don't have to have choice, and i think that will help them and once they see the balance and then they're hooked and that's an important way to go. >> to your point on the auto feature. the-- we have the thrift savings program for employees and a lot of people participate in that, as they should. we find that when folks-- before you had an auto signup feature, fewer than half of people, you know, began, joined the thrift savings plan and when they came and joined the federal work force. once we moved the auto provisions over three quarters. >> and one of the opportunities in that federal thrift plan, even now, is to help those federal workers, now that they're in the plan, how do we
help them get out of just that safe account, that value and get into more of the equities, and that's the next opportunity and that's something in the right time we should have a conversation about. >> thank you. all right. anybody else? no? all right. let me just see if-- i want to find out at least two of you can spell this word, o-h-i-o. [laughter] great to see you guys. thanks so much. thanks for what you do, thanks for joining us today. is anybody else? i think i'm the acting chair, is anybody else -- members or witnesses wish to comment? no? going, going, gone. thank you to all, happy holidays, thank you so much. >> thanks, senator. >> the u.s. senate will be gavelling in shortly. lawmakers will be working on the final version of the 2021 defense programs and policy
bill. tomorrow they're expected to vote on legislation to extend government funding past this friday's midnight deadline. now live to the senate floor here on c-span2. the president pro tempore: the senate will come to order. the chaplain, dr. black, will open the senate in prayer. the chaplain: let us pray. have compassion upon us, mighty god, for we are weak. we strive to do good, but too often miss the mark. without your strength we will surely stumble and fall.