Sen. Tom Harkin, D-Iowa, introduced legislation Thursday that would make universal retirement coverage available to an estimated 75 million Americans who are without access to workplace retirement plans or are self-employed.
The Universal, Secure and Adaptable Retirement Funds proposal combines defined benefit features like professional money management and lifetime income with the portability and administrative ease of defined contribution plans, Mr. Harkins says. An aide to Mr. Harkin estimates that pooling contributions into funds with professional money management and risk-taking could reduce the cost of retirement by as much as 50%. “This is really intended to replace the pension piece” of retirement planning, the aide said. “It also lessens the stress on the social safety net.”
Employers would enroll employees in privately run plans overseen by independent trustees who are subject to Labor Department oversight. Employers that already offer a defined benefit or 401(k) plan with automatic enrollment and lifetime income options would not have to participate.
Employees could contribute up to $10,000 per year tax-free, and employers could contribute up to $5,000 per year. Participants could choose to opt out or change contribution rates. Existing 401(k) or IRA balances could be rolled into the new plans, and benefits are portable between employers.
Mr. Harkin, chairman of the Senate Health, Education, Labor and Pensions Committee, who is retiring after this current term, would like to leave this as his legacy, his aide said. Mr. Harkin is working with a broad coalition of interest groups to advance the idea and work with officials in the Obama administration, which just unveiled a workplace-based Roth IRA program, to find common ground. “We want to get this over the finish line,” the aide said.