It would be tough to find more bipartisan consensus in Washington around one issue than improving retirement security for American workers.
At a hearing Tuesday, Senate Finance Committee members on both sides of the aisle spoke about the importance of getting more people to save for retirement and to save more. There was also harmony among the four experts who testified before the committee on what needs to be done to make that a reality.
The witnesses — Joni Tibbetts, vice president of product management, retirement and income solutions at Principal Financial Group; Tobias Read, Oregon treasurer; Joan Ruff, board chairwoman at AARP; and Lynn Dudley, senior vice president for global retirement and compensation policy at the American Benefits Council — voiced support for the major retirement security bills proposed during this Congress.
Chairman Chuck Grassley, R-Iowa, and Sen. Ron Wyden, D-Ore., the committee's ranking member, introduced a new version of the Retirement Enhancement Savings Act earlier this year. It is similar to the Setting Every Community up for Retirement Enhancement Act of 2019, referred to as the SECURE Act, which is expected to pass the House this month. The bills include provisions that make it easier for smaller employers to join open multiple-employer plans, ease non-discrimination rules for frozen defined benefit plans and add a safe harbor for selecting lifetime income providers in defined contribution plans.
"Passage of RESA remains a top priority for Sen. Wyden and me," Mr. Grassley said Tuesday. "I hope that the House will send its version of RESA over to us at some point this month, and I'll continue to work closely with Sen. Wyden and other committee members to reconcile the differences and get this important bill to the president."
In her testimony, Ms. Dudley said it's crucial to pass RESA soon because another 430,000 employees could lose their benefits by the end of the year if no action is taken.
Under current law, outdated IRS regulations force some employers with closed pension plans to freeze them to avoid running afoul of non-discrimination testing rules that become harder each year to pass, as participants in closed plans get older and more highly compensated. As a result of failing the test, a plan is frozen and plan participants stop accruing benefits. RESA eases those non-discrimination testing rules and rules for make-whole contributions to defined contribution plans, with certain conditions.
"These are older, longer service workers, and these are the years that matter most for their benefits in the type of plan they have," Ms. Dudley said. "The end of your career is most important."
Mr. Read spoke about the success of OregonSaves, which was launched in 2017 and enables workers whose employers don't have a retirement plan to invest in a Roth IRA. The program sets an automatic deferral of 5% of pay per year, plus an annual 1% auto escalation until the retirement contribution reaches 10% of pay. Employees can opt out, and may contribute more up to the limits set by Roth IRA rules, which vary based on age and other factors.
To bolster the program, Mr. Read said it would be beneficial to expand state's ability to enroll workers as soon as they join the labor force at age 16 instead of waiting until they're 18. "We'd sure like the idea of getting them in the habit of saving from the beginning of their career."
Mr. Read also spoke about the benefits of auto enrollment, as Oregon has turned the power of "inertia into an ally."
Senate Finance Committee members Rob Portman, R-Ohio, and Ben Cardin, D-Md. introduced a bill prior to the hearing that would establish a new automatic enrollment safe harbor for employers to meet non-discrimination requirements and allow employers to make matching contributions to retirement accounts of employees paying off qualified student-loan debt, among other provisions.
That proposal also earned praise from lawmakers, witnesses and the retirement industry alike Tuesday.
"Few places in current policy deliberations enjoy the same level of bipartisan support and agreement as retirement," Edmund F. Murphy III, Empower Retirement president and CEO, wrote in a blog post. "This is no accident. Policy makers and the retirement industry have worked together for a long time to develop understanding and seek common goals. This collaboration inspires hope."