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tv   Senate Finance Committee Hearing on the Retirement System  CSPAN  May 16, 2019 7:50am-10:01am EDT

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>> our online video library marks a milestone, a quarter million hours of content. species stan programs since 1987 are available in our online library and you can view them all for free all for >> a senate hearing with ways to improve the financial security of future retirees. witnesses representing seniors in the financial industry testified at this to our finance committee hearing. [banking gavel]
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>> good morning. today the committee will continue its work on retirement security and the various challenges facing us retirement system. we welcome all guests, particularly our witnesses that had to work so hard to get prepared for this testimony. i look forward to hearing your thoughts and ideas on ways to improve the us retirement system. last month senator wyden and i introduced the finance and savings act which goes by the nickname risa, this is an update package of important reforms to the retirement tax rules developed in advance by the committee over the last two congresses. passage remains a top priority
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for senator wyden and me. centerpiece expansion, it's centerpiece expansion of other common sense changes would make it more feasible for businesses of all sizes to offer retirement plans by harnessing economies of scale and reducing unnecessary burdens on employers. i hope the house will send its version over to us at some point this month. and i will continue to work closely with senator wyden and other committee members to reconcile the differences and get this important bill to the president. now, for the purpose of this meeting, there is still work to be done and still gaps to fill in the retirement system. our focus today will be exploring all of those issues.
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what more can we do to improve coverage in the existing system? how can we encourage more people to save and what approaches should we take to help workers plan, save and critically live in retirement? the workplace retirement system is the primary way workers save for retirement. whether it is through a defined benefit pension plan or an employer-sponsored contribution program and benefit plans or main an important part of overall retirement systems, defining contribution plans, 401(k) plans and similar programs are primary means for private-sector workers to save. it is clear there are gaps in the system and we need to work on improving improvements to the system it is not generally clear
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that there is a retirement savings crisis. the purpose of this hearing to bring attention to that. let's look at the numbers. at the end of 2018, $27 trillion has been certified for retirement funds including over $5 trillion in private-sector contribution plans. workers with access to retirement plans has reached 66% of the private sector with 75% of the workers with access to plans making contributions towards their retirement. since 1984 the number of 401(k) plans has grown from 17,000 plans to just over half 1 million plans covering over 60 million active participants. by any measure the growth of these plans and the dollars saved are a success.
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but getting back to the purpose of this hearing, we need to do more to encourage and facilitate retirement savings. as the economy grows, our retirement system needs to keep pace with greater access for employees and independent workers and efforts to make sure retirees enjoy financially sound retirement. while this committee is a continuation of the committees, this hearing is a continuation of the committee's work in this area, it marks the start of our work on the next round retirement savings reforms. we have several members on the committee who put forth very good ideas for next steps and our panel today will share their views on those and other proposals to strengthen the system. >> thank you very much, mister
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chairman and i want to make it clear that i share your view with respect to the retirement enhancement and savings act. it is the view of chairman grassley and i that this important bill should have become law eons ago and i look forward to working with you and all our colleagues to make it law. i will begin my remarks with a quick word on social security, foundation of retirement in america. according to the most recent trustees reports social security can pay full benefits until 2035. after that, retirees would be hit with a 20% cut. that means a 50-year-old worker paid in social security out of every paycheck faces the prospect of not receiving the full benefits he or she has earned. i want to be blunt about this this morning. as long as i have anything to say about it, that cut is not
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going to happen. not going to happen, fool stop. congress has solved physical challenges bigger and this one is going to have to do it again. let's understand that no program has done more for americans economic well-being and stability than social security. congress must not do anything to undermine that foundation. social security is not a piggy bank for lawmakers to smash when they're looking for money for other priorities. instead, it is critical to protect social security for all workers for generations to come. examining other areas where retirement needs strengthening, chairman grassley is correct the we have good ideas coming in from both sides of the aisle. across the country 100 million americans have no pension and no
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savings and retirement plan. a dignified retirement is out of reach for many working americans. there are a variety of ways this committee can play a leading role in changing that. first the committee works on a bipartisan basis to put together the retirement for the enhancement and savings act. it is about making it easier particularly for small employers to offer retirement plans to the employees. giving them an opportunity to band together and offer retirement plan, simpler and more cost-effective way of helping more americans from sea to shining sea. it out to be easier for older americans to save. this is something i felt strongly about since i was codirector, i think it is absurd to cut somebody off from saving
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just because they crossed an arbitrary age limit. in my judgment, change is part of ira law. the chairman as i worked with a previous chairman to include this. this is a critically important part of the bill. let me give you an example of what i am talking about. there are a lot of older working-class folks who can't yet retire and wants to keep saving. with so many families dealing with the consequences of the opioid epidemic, something i hear a lot of members of this committee talking about, i think of working grandparents affording youngsters who want to keep saving. that is going to be made possible by this retirement bill to get across the finish line. in addition, there are other ideas to discuss. yesterday i introduced retirement parities for student loans act, based on a simple proposition.
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summit paying off student loans should not be denied the opportunity and and into the retirement plan, the employee makes a student loan payments. the bottom line is whether you are paying off loans are building up a nest egg you're making the right financial choice. ..line is you are building up a nest egg and making the right financial choices. you ought to be rewarded for the opportunity for more savings. next i want to close by saying we want to welcome our state treasurer, he is one of the innovative thinkers in this whole area with oregon leading the nation with the new auto enrolled ira program for people that don't have access to retirement plans at work. he has been a pioneer in this program called oregon saves which has been statewide since 2018 with hundreds of thousands of people that will be able to save up for the program under
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the program when it is fully up and running. i think we need to be looking at what he is going to tell us today towards expanding the program nationally. finally we need to act and many members have talked about multiemployer pensions. this has been a concern to many senators on both sides of the aisle. there are 150 pension plans that are facing insolvency in the next decade or two. upwards of 1 million americans who could literally be thrown off of the financial cliff who worked hard and paid into their plan and face a crisis through no fault of their own and congress cannot sit on the sidelines. those americans, the ones walking on an economic tight group are wondering tight rope are wondering if they will fall into poverty. tank you to all of our witnesses and mr. chairman. >> the introduction of our
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witnesses, vice president of product management and retirement income solutions and principal financial group. she has been with principal financial group since 1987 she has had several roles within the retirement division legislative policy issues, product development and encouraging the retirement plans to expand coverage. she earned her business degree from the university of iowa and has completed product development education through wharton school of executive development. in addition to what senator wyden said about mr. tobias, he was elected state treasurer in 2016. in 2006 he was elected to oregon house of representatives and became speaker pro tem and
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held several key committee chairmanships and the senator has already referred to his sponsorship of the oregon retirement savings plan. mr. reed is originally from missoula montana and has earned a bachelors degree and his frg fo ms. joan rofuff serves as chair of the american association of retired persons. after more than ten years as a attorney, she joined william mr mercer inc. which he consulted on employee benefits and compensation. from there she held executive positions at zurich financial services and went on to chair the aarp's audit and financeposr committee. ms. ruff holds a juris doctorate degree, university of kansas, mba rockhurst university, maste of law taxation, new york
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university and bachelors degree in journalism university ofnew kansas.urnali finally, ms. lynn dudley, senior vice president of global retirement and compensation policy for the american benefits console.americ ms. dudley directs the consoles advocacy efforts regarding efforts, regarding retirement and compensation policy defined benefit and defined contribution plans, and executive and nonqualified deferred compensation. she also coordinates the consuls efforts to outreach and international arena, includinge benefit, passport, informational sseries. prior to joining thes console, she was a legal consultant for sungard employee benefit systems in birmingham, alabama.
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after earning her undergraduate degree at vanderbilt university, then recede -- or, i'm sorry,,a this is what it says. received her ll m indexationhe from florida university 1983 and law degree from cumberland school of law samford universitr 1982. thank you all for joining us. part out. we would go from left to right. we will go left to right. >> thank you chairman and ranking members of the committee. i want to thank you for the invitation to speak at today's hearing and also your work and seeking to enact important improvements of the retirement system. i am the vice president of retirement and income solutions at principal financial group. we are based in des moines and in the chairman's home state of iowa.
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i am pleased to offer insight based on principles for the 75 years in the retirement industry. our experience with small to medium-sized employers and their employees, we currently provide retirement services to more than 45,500 plan sponsors of all sizes as well as five- point 9 million participant employees. at principal we care about understanding the needs of our clients and employees through such activities like councils, focus groups, real-time feedback and data collection. this information informs our innovation efforts as we seek to better connect and engage with our clients. we are tremendously proud of the innovation through underlying and digital enrollment as well as our financial tools that we recently introduced. these have driven improved outcomes for our participants. examples include the average
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contribution rate for newly eligible employees is nearly 8%. that is 29% of newly eligible employees deferring nearly 10%. for existing plans there are participants that transition to principal nearly 1-4 opt to save more than 10%. when you look at participants who visited our website the average contribution is 50% higher than those that choose not to engage online. many aspects of our nation's defined contribution system has been a big achievement but it has been nearly 15 years since the protection act of 2006. we need a system that keeps up with the changes in innovation, technology, workforce and consumer needs. the retirement system should offer a range of solutions that are competitive in the marketplace as well as be sensitive to the challenges of small employers. the retirement enhancement and
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savings act is a tremendous first step and we offer our enthusiasm and full support for both the work the house and senate have done on resa. there are three provisions of resa we believe are critical to achieve meaningful participant outcomes. the first is expanding coverage. we have a two prong approach addressing gaps with employers. they offer meaningful tax credits to small employers who set up a plan and secondly it helps reduce the burden of establishing and administering a plan by expanding opportunities for small employers to join multiple employer plans. resa's lifetime income provisions gives judiciaries greater confidence in adopting guaranteed income solutions. it establishes realistic obligations to follow when selecting an annuity provider and also ensures participants who have purchased guaranteed
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income in their retirement plan that they are not penalized when such products ceased to be offered. it also derives adequate savings levels. only 19% of plans between one and 10 million in assets use automatic features. resa creates the start of tax credit and eliminates the auto isolation gap. those provisions can drive small employers to adopt a plan and implement these plan design features that are beneficial to participants. there is an opportunity for retirement law to catch up with developments in innovation that has occurred in the marketplace. as a committee as the committee looks beyond resa additional policy recommendations we believe would be meaningful to american savers include first removing barriers of the adoption of best practices including automatic plan design for small employers. second , expanding resa's multiple employer fan plans revisions 243b plans.
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third recognizing workers are burdened by student loan debt and finally reevaluating the ministry to requirements in the era of automatic features. i would be happy to discuss any of these further details during questioning. again i want to make all of you for the opportunity to testify about the importance is and success in our private retirement system. principal financial group appreciate the effort and sincerity in which chairman grassley, ranking member and members of the senate finance committee have undertaken. i look forward to your questions. thank you. >> thank you for the opportunity to address the committee on the topic of retirement security. my name is tobias reid and i have the honor of serving as oregon state treasuser. i am focused on promoting the
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financial security of all oregonians. in 2015 as a state representative i sponsored the legislation that created the retirement savings program now known as oregon saves. the treasury is tasked with implementing oregon saves which is the reason i am here testifying today oregon created the first in the nation state- based auto ira program in response to the growing retirement crisis. the national institute for retirement security estimate the gap between what is saved and what is actually needed for retirement is at least $6.8 trillion. at the same time more than a third of the private sector workforce in the united states lacks access to a retirement savings plan at work. in oregon alone there were approximately one million workers without such access. we know from research by the aarp people are 15 times more likely to save for retirement when they have the option to do so at work.
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that is why everyone should be happy to see the efforts of oregon and other states to expand savings options to more people. this smart approach will help more workers at every income level and their families. empowering more people to invest in their own futures is vital to the national well- being of individuals, families and of course the government at every level. already tens of thousands of oregon workers are saving. we've eclipsed millions in savings in less than two years and the program's total assets are increasing exponentially adding more than $2 million every month and that re- continues to accelerate. here is more great news. most of those are first timesavers. oregon saves is a public- private partnership giving workers the opportunity to save for retirement through payroll deduction. their savings are deposited into their own individual accounts. those iras are owned by the worker and not tied to the job insured what they say will always be their money and under
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their control. for businesses that do not offer a option are still required to facilitate the program for their workers. many employers see the benefit and are not waiting. employers of any size can enroll at any time ahead of the deadline our program requires and nearly 2000 have already chosen to do so. it is also open for voluntary enrollment by individuals including the self-employed and those workers whose employers do not facilitate oregon saves. hundreds of people have already self enrolled since we brought that option online late last year. the program it seems is seeing strong participation in line with our projections with one-4 people choosing to stay in the program and say. beyond the numbers i love to hear the stories of the sabres like genevieve that works for a small nonprofit. she told us oregon saves is the easiest retirement program she's ever participated in. it's removed a lot of stress choosing from a long list of decisions that feel overwhelming. saving for retirement should be easy and painless. i am also excited about the
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enthusiasm we are seeing from local business owners. the owner of a local brewery told us oregon saves allows me to offer entire retirement plans my employees which i would have a difficult time providing on my own. as a small business it gives me the tools to recruit and retain good employees. it also gives my employees the ability to work for our company as a career. it is a win for all parties involved. from the beginning i was aware the best of oregon saves relies heavily on our relationship with employers. we constructed the program to limit the obligation of the employers as much as possible and are constantly considering ways to reduce the time employers spend facilitating the program. we been working closely with some of the nation's largest payroll providers to discuss how best to integrate payable processes reducing further the amount of time employers need to spend on the program. employers could handle their payroll functions without the help of a payroll service provider to facilitate oregon
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saves 10-15 minutes each month. the public overwhelmingly supports the program. employers say it is easy to sign up workers and based on a recent survey the level of support has increased in the first year. today an astounding 82% of people support oregon saves. oregon saves is already increasing in the long-term financial stability of thousands of oregonians and we are just getting started. thank you mr. chair and thank you committee members. >> thank you. good morning. on behalf of aarp's members and all americans age 50 and older thank you chairman, ranking member and members of the finance committee. thank you for this opportunity to testify today on the state of retirement security of american workers and their families. since 1983 there has more been
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more than a 70% decrease in defined benefit pensions offered to workers. today half of all employees are in jobs that offer no plan of any kind and most of the rest are in a 401(k) or similar type plan. diminishing pensions and inadequate retirement savings coupled with longer life expectancy and higher healthcare costs in danger the dream of a secure retirement for millions of americans leaving them increasingly dependent on social security alone. while it is true social security keeps millions of older americans out of poverty its average monthly benefit is modest. 1565 and 1240 four a retired woman. while the importance of social security cannot be overstated, given such modest benefits the retirement security of many americans could be strengthened if we improve the retirement savings. our first goal should be to provide a workplace retirement
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plan for the 51 million americans who lack one now. to help address the significant coverage gap aarp has recently focused on state-level work programs. those provide payroll deduction savings options to underserved populations such as workers and much of the contingent workforce. workers are 15 times more likely to save for retirement if they have a convenient way to save at work. these retirement programs like 529 college savings plans are operated through public private partnerships. nationwide roughly 1/3 of all states have pursued laws to address retirement gaps in their states. the programs are succeeding as we have already heard from oregon's treasurer. aarp has also long supported automatic ira rigid legislation which like the state programs relies on payroll deduction to it encourage greater retirement savings. we believe state programs and
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federal legislation working together can most effectively offer americans affordable and appropriate retirement investments. we also believe federal legislation and regulations regarding retirement security should allow states to continue to enact and implement savings programs while expanding opportunities for those who still lack coverage. federal policies should also extend coverage to the 27 million part-time workers two thirds of whom are women and most of whom lack coverage. this is especially important for older workers and caregivers who often work less than full time due to caregiving responsibilities. we also encourage you to improve the --. the most beneficial change would be to make the credit refundable to increase the income threshold and to restructure the credit into a match so more of the tax credit and population can benefit and
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build greater savings. preserving existing protections is as important as expanding coverage and increasing savings. a risk clearly states anyone exercising discretion over employee benefit plans must do so as fiduciary yet efforts to establish more standards are leaning are frequently discussed. aarp urges relevant agencies including the securities and exchange commission and the department of labor to continue protecting investors preparing for retirement. we welcome congressional efforts to hold hearings and and sure financial advisors carry out their fiduciary duties for millions of retirement papers. those who have accumulated assets face the challenge of how to draw down on these resources and not run out of money. aarp supports efforts to prevent lump sum cash outs and to ensure adequate lifetime income returns. aarp also strongly encourages you to maintain default paper
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delivery of retirement plan disclosures, especially given the strong consumer preferences of paper delivery of important financial documents across all age groups. finally we urge you to find a fair solution for the millions of workers and retirees who count on multiemployer pensions for their retirement security. we commend senator portman and brown who along with several other members of congress have focused their and attention on this issue. again on behalf of aarp we thank you chairman grassley and ranking member for inviting us to share our views on how to improve retirement savings for americans and their families and we stand ready to work with you as the committee moves forward. thank you. >> hit the red button. >> chairman grassley, ranking
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member and other members of the committee thank you for holding this hearing today and for your continued leadership on retirement policy. the qualified employer- sponsored retirement system is strong and has many features that make it valuable. without it retirement would be far less secure for many millions of people. that doesn't mean we can't do better. the council supports the passage , excuse me, the passage of the retirement enhancement savings act. resa reflect bipartisan efforts to build a consensus of proposals. these proposals have withstood the test of time. on a broad level tranxiv is important because it sends a message that congress record nice is the enormous value of a robust employer-provided retirement plan system and
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builds on the system. i would like to mention two provisions that highlight the policy importance of resa. the first is a proposal that provides nondiscrimination reform so that employers can continue to improve benefits for older longer service participant in defined benefit pension plans when the plan has been modified for future participants. each year this issue is not addressed hundreds of thousands of additional employees are at risk of losing their benefits. the second proposal would expand open multiple employer plans. resa does this by eliminating two rules that currently impede employers that want to join them. a rule requiring a nexus between employers as well as a rule that penalizes compliant employers for others mistakes. this is a tremendous chance to improve access for many including workers and we should not let that slip by. i would like to recognize the important steps that the ranking member has taken by addressing the barriers of student debt that it has on
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many participants. retirement parity for the student loan act helps employers help employees build retirement savings while the employee is paying down debt. essentially this works by allowing matching contributions based on student loan payments. this proposal has been included in the retirement security and savings act as well next generation legislation. we urge congress to complete its work on resa and turn to the next generation legislation this year. why should congress do that? because it will lead to a more secure retirement for millions of americans. senator portman and -- two long time champions of good solid retirement policy input of many on the committee and have been hard at work at this. the retirement enhancement and savings act was introduced yesterday and it includes many proposals that would further improve the system, expand coverage, increase savings rates and solve problems in the
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system. here are just a few of the proposals. the bill would direct agencies and responsibilities ever retirement plans to consolidate notices and make recommendations to congress on ways to simplify, standardize and improve disclosure requirements. the bill also eliminates on unneeded notices to employees not participating in the plan and focuses instead on getting those folks in the plan. these changes will make it easier for participants to better understand the information they are receiving from the plan and to engage with that plan and participate. the bill would allow inadvertent plan violations to be self corrected under the irs compliance resolution system. without submission to the irs this would reduce burdensome and make it easier for employers who catch errors to quickly resolve them which will lead to better results for participants. the bill would eliminate indexation of the variable-rate
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premiums. it is already automatically adjusted to take into account the size of the plans underfunding without eliminating the current double system indexation companies could eventually oh 300% of their underfunding just as premiums. this could lead to dire business consequences. we continue to support congressional efforts to help participants keep track of their retirement benefits and solve the challenges posed by missing and unresponsive participants. we also support continued efforts to allow greater use of tech knowledge he so participants can take full advantage of the plan and achieve better outcomes. the last point i would like to make is the employer-sponsored system provides uniformity that federal law provides with respect to qualified plans. particularly as it applies to employers operating retirement
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benefits in multiple states. we are encouraged by your continued commitment to this. thank you. >> for the benefit of everybody on the committee we are going to keep the meeting going during the we have. portman is voting now and then he will come back to chair and then i will go vote and then come back. we will keep it going and we will take you in the order you have here. with my first question it is to all of you. resa has advanced considerably towards strengthening retirement savings but there are still gaps and more that needs to be done. from each of your perspectives what is the next top priority and that is one single thing i want you to point out that the committee should consider that
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will help strengthen our retirement system and helps ensure americans are saving for a secure retirement. >> thank you chairman grassley. principle is the number one provider for plans with less than and assets. we listen to our small plan providers in terms of what works for them and not. two of the things we consistently here is cost and administrative burdens. as we look beyond resa we are most excited about automatic safe harbors that are workable for small employers. >> mr. chairman thank you for the question. i have been very pleased with the experience we've had in oregon with automatic enrollment and turning it into an ally. i commend that full committee's attention. >> you gave an opening statement you have another one you want to add? >> let me say again the priority is coverage, 27
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million part-time workers do not have access and i think that is incredibly important to our members. >> okay. ms. dudley. >> i would just add to what the others have said. reducing administrative burdens and removing barriers of savings is key to getting people into retirement. >> thank you. the concept indicates this wouldn't significantly improve well know let me start over again. i left out the part about the analysis going on about these plans that indicating it wouldn't significantly improve the number of small business plans offering a retirement plan. as you stated your company has spent a lot of time evaluating the proposals. would you share your views with us on proposals and whether it
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will improve plan access for smaller employers? >> yes and thank you. as i mentioned again principal has a lot of experience working with small to medium-sized employers and we listen to our clients. what our small employers talk about most is again the burdens of setting up multiple employer plans as well as the fact that many small employers wear multiple hats. they are the there is a cabinet company in iowa that has an older employee that provides all of the product development. they create the cabinets, they work with citizens in iowa in terms of what cabinets they want both residentially and in their small businesses. what she does is all of the accounting, all of the ordering, all of the payroll and she is also required to take on the burden of setting
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up a plan. what we are most excited about in the multiple employer plan is the opportunity for these small employers to be able to join an open multiple employer plan. these plans are already established. the wife of that cabinet worker only has to join this plan and their administrative burdens are significantly reduced. >> the majority of resa house version called secure are shared core provisions including provisions to encourage retirement. i am concerned about one provision that the house added to its bill relating to part- time employees. i think it is important to look at ways to bring part-time workers into the system but i've heard concerns from employers about potential burden in compliance costs.
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i understand you are familiar with this proposal, can you share with us the views of your members about the effects it would have on their businesses and whether there are any alternatives we should consider that would expand coverage to part-time employees? when you are done i will go to senator --. >> the part-time proposal is an idea that has been around a long time. you would have to be part-time for consistently over a period of several years. our employer plan sponsored members, they have had some administrative concerns in the past over this and they are very comfortable with the idea that going forward we need to give access to people that are working part-time, especially every consisted period as more people do have part-time jobs for longer periods of time. we are comfortable with the
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approach taken in the secure act with respect to part-time employees. there are other things that you can't do as well. there are things like automatic enrollment making it easier for people to participate as soon as they do reach those threshold hours. you can also create opportunities like things where part-time employees can participate. there are other things you can do but overall i think we support the package and we support getting the work done on resa. we would be comfortable guess. >> thank you mr. chairman. thank you all and i will tell you the best hearings around here are the ones where oregon is trailblazing. everybody can stay tuned for our victory tonight over golden
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state. here is what i want to go over with you treasurer because i think you addressed a lot of the key points. we have 1 million people working age something like 1 million of them haven't had access to retirement plans and basically for a lot of those people in the past it has kind of been bureaucratic water torture trying to figure all of this out. you have to choose between dozens of providers and crunching numbers on overhead fees and commissions. you have to wade through all of these complex investment strategies. you all have basically jumped all of that with oregon saves and as far as i can tell there haven't been any hiccups. the employers are reacting well, workers are reacting well. i gather in an important
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document i guess submitted, you offered up a couple of suggestions for how the federal government could help oregon oregon saves and other state based similar kinds of programs. if you could maybe do a summary of what things are about here that could make the federal government a better partner for states that are trailblazing. >> thank you i appreciate your reminder to watch the game tonight. i am with you so we will be on a plane missing the first half. >> at the caucus we will discuss it later. >> we are very excited to have played the role of a laboratory of democracy and share our lessons. i think we worked really hard to make our program as lightly touched as possible for employers and straightforward for savers as possible. we continue in that approach and i think the largest part
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for us is continuing to partner with the federal government as you consider those options already in discussion here making it possible for the state to have already taken the first steps like oregon, illinois, maryland, connecticut and others to continue to pursue the solution that make the most sense for their constituents and citizens. one specific thing i think would be interesting would be the possibility of reducing the minimum age for iras. you think about a young person who may be starting their career at 16 and not able to participate until they reach 18 . we like the idea of getting them into the habit of saving at the beginning of their career. i think there are a number of things that could be helpful but those would be good starts. >> if you want to add anything to the record i am happy to
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have it. i am particularly attracted to the idea of getting younger people to save more. there is support on both sides of the aisle for these kinds of ideas. obviously they focus on personal responsibility but what i like the most is you begin to build a savings culture at the earliest possible times. let's really try to promote the fact that we want to get more young people saving. >> let me ask you a question if i could. i think we have some retirees in the house and they all feel like they are headed on a financial cliff with this multiemployer pension situation. what are the consequences of congress letting this go by the board once more? it looks to me like this has been the longest running battle since the trojan war.
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senators on both sides of the aisle talk about the consequences of congress letting this continue to drift off into the ether? >> we hear from our members that are participating in multiemployer pension plans who are very concerned because of the funding situation. we do encourage and beg that congress does come up with a workable solution. we already know many of the participants already have had benefit cuts. as you pointed out those who are already retired may not have an easy way to make up those funds neither the time or resources to do it. we encourage you --. >> thank you very much. >> thank you mr. chairman. thank you to all of us for being here. there has been a lot of energy
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work around this over several years and i want to thank our acting chairman for his work. i know he and senator brown understand from ohio what all of this means as well as we do in michigan. i want to step back before asking a question. truly in my lifetime i cannot believe that we are having a discussion about folks that are losing or will lose a pension they paid into all of their life.
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because of what that meant but the folks who lost money in that system, the pension system, it's just not that same sense of having to step up and do something about it. we know at that time the oecd estimates u.s. pensions lost 26% of the money in 2008. where's the where's the hair on fire moment to make sure middle-class families are able to have what they were promised lex 401(k)s alone and ira's alone during that time lost $2.4 trillion. thank heaven social security was not privatized and put into the wall street system at that time. or who knows what would be happening to people? i know none of you have caused this but but i want to take ths moment to say that has to be a different sense of urgency here. when you look at the fact that
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although multiemployer pension plans have been historically successful and i believe continue to be, we know there are serious problems. in 2012 close to 500 plans covering almost 5 million people were under 40% funded. 80% is considered adequately funded. we know what we're being told that many of these are going to run out of money. real people, people building the roads and building buildings and about all kinds of important work across our country that will lose their pension because it we don't act with some sense of urgency. the pension guarantee fund projects approximately 110 plans covering 1.3 million people are going to become insolvent in the next 20 years. that doesn't count all the other ripple effect. i just want to bring it back while we're talking about the future which is important, it's important to look at how we structure these for the future, or groups of folks now watching
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the hearing and hearing about this going, what the heck? i'm not going to get the pension that i paid into my whole life in america. how did that happen? i would like to ask ms. ruff, just talk about for a moment you are members who were in that kind of a situation right now. >> thank you for the opportunity to talk about that. yes, our members, retirement security is one of their top issues. it is retirement security not only for themselves but for their children and their grandchildren. so that does take in future as well as where are they today. and to that we listen to their concerns, will my pension be available? what this is happening to my social security, as well as my 401(k) plans?
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to that, we do have a lot of educational and financial advice, but again at this point some of that needed to take place earlier on. >> let me just say, i'm assuming you got members that are not going to the standard of living in retirement that they expected. is that a fair statement? >> that is a fair statement. that is a fair statement and it is great concern of theirs, it is a great concern of ours which is why we do want to work with congress to really help that gap. >> i assume your members follow the rules otherwise can worked hard and paid into the pension and had every delete that in our country that page would be there for them. is that a fair statement? >> that's a fair statement, and they were encouraged to do so by employers and government. >> mr. chairman, i think we need a great sense of urgency about this. thank you. >> agreed. senator enzi. >> thank you, mr. chairman. i want to thank all the members of the panel for their
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information, both what they said and what's in their testimony. mr. tobias, i appreciate oregon has a fund that actually has resources in it that are going at two or 3 million a year come get here that quickly. >> was you did. >> i hope other states will pick up on that. i'm trying to figure out how to get the federal government to pick up on that. for private companies, we do expect them to invest money that will result in enough funds to pay their retirement they promised. as senator wyden mentioned there are 150 multiemployer plans that are in trouble within a decade. we do have requirements for private-sector businesses to invest money to pay that retirement, but some of the signs have been badly -- but the federal government is in worse
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shape. we don't have any investment fund for military retirees. we don't have an investment fund for federal retirees. we don't have an investment fund for postal workers. supposed to be but isn't there. we don't have any real investment fund for social security, at least it has some income from those currently working to as a result expected social security when they are old enough. i don't know how were going to be able to do any bailouts, considering the scope that we have to cover. ms. tibbetts, recently gave a floor speech on the help of the soul street program given the latest trustee's report that says combined fines are expected to be deeply in 2035. that means just 16 years time, 46 year olds become the first eligible for retirement benefits
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and at that time they are anticipating we may be able to pay 80% of the scheduled benefits. does your organization have a rule of thumb, anecdotally, about how much the client should expect to fund their retirement for the own retirement resources versus social security? >> yes. thank you, senator enzi for that question. this is something again the principal continues to look at. one of the things we have is a lot of innovative tools to be able to provide the planned protest appends, so as their planning and saving for retirement vacancy how much income will be replaced by social security as well as their savings into the retirement plan, spouses income and other sources. so we find that participants when educated through these tools are better able to make decisions to be able to prepare for retirement. we have planners that are called
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my virtual coach, you define when participants could back into a checkup to see how much other income would be replaced by social security and also look at the retirement plan, have better wellness scores. what i mean by wellness score is how successful are they in terms of being able to replace that pre-retirement income. and being able to provide these tools is really the factor from an educational perspective to help the participants as they plan, understand what social security is going to be able to provide, what other savings vehicles and what is replaced to the retirement plan. >> thank you. ms. dudley, reducing retirement plan leakage and making sure americans have retirement security or long-standing priorities of my pick the latest bipartisan resa legislation include the provision placing some boundaries around the use of planned loans initiated by means of credit cards.
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where the gao published report may 1, 2019, concluding the retirement plan leakage remains a problem. does the american benefits council at any recommendations for addressing retirement leakage or does it have observations with respect to planned loans initiated i credit cards and the success of recipients pingback those credit cards? >> happy to answer that. the american benefits council continues to be concerned about leakage. it's a real problem. it most often happens with respect to planned loans when the person leaves their job and they haven't paid their loan off, and that's why we are very supportive of the work that you did in your leadership to give people more time to pay off their loans, even after they leave their job. we continue to look for ways to address leakage and we support resa and the limitation on the use of the credit cards in terms
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of planned loans. another thing i would like to point out that companies are doing along the lines of what has been talked about relating to financial well-being, companies are looking for ways to better educate their employees about the impact of loans, including pop up statements when they are applying for a loan so that they can understand actually what that will mean in terms of having less money in their account earning interest and learning benefits for the future. so there are things were looking at just even outside policy changes that would help employees. we continue though to be concerned and look for ways to give people more time to rectify planned loans, to put limits so that people don't use credit cards for unnecessary purchases or purchases that are very small. small. it could be very easy to use it to just buy things at the store
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versus something that you really need it for. >> thank you. thank you, mr. chairman. >> thank you, senator. thanks for your work on these issues over the years. i'm excited about the same as all you know i am convinced we can do so much better on our retirement policies in this country. the title of the hearing is challenges in the retirement system. so i know today we are focused more on the defined conservation plans and specifically on private savings. but i will say we've got some of the challenges that a big. the biggest of all of course social security in 2035 only being able to pay 80% of the benefit here that can't happen. defined benefit plans, we got huge issue with full-time for plans and the answer to the question posed earlier by senator wyden unfortunately is not five and half years, maybe even sooner. that's pension benefit guaranty corporation that for those listening, that the federal program that guarantees these
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defined benefit plans, not just multiemployer plans but all the defined benefit plans. that's a big deal and so we got to fix that. the leading plans that are in the most trouble right now are the my workers plan in the future splint which is the state splinter those going under would cause the pbg is to go under, no question based on analysis wheezing. we got a subcommittee on this issue on retirement security. we plan to get back to holding hands on that. remove at the end of year we had select committee looking at it but we didn't quite get there. we got to ensure that does not happen. and again it would be terrible for the beneficiaries, 90% cut if they did go under, but it's s also terrible for the economy, for small business and others. we're going to work on all that. we have 44,000 in central states in ohio alone and it's an issue that senator brown myself and others are focused on. today the focus more on the defined contribution site and we have this opportunity with resa.
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it's an important first step. we have to move forward with resa and hope we can do that. one thing that is an resa that's also urgent come in fact, the most purchasing fall i suppose we could talk about today is his pension nondiscrimination provision that senator cardin and i introduced that is now part of resa. bottom line is about 430,000 individuals, individuals that have defined benefit plan, are at risk of losing the future benefits by the end of this year. not many people are focused on it but wait, it's important and it's mostly older workers and resa does address the issue. maybe you want to talk about a 42nd, this past out of the finance committee as a recall back at the end of 2016. >> right. >> and since that time, since 2016, some of these workers have the retirement at risk already. why don't you talk about that and what should be done about it. >> thank you so much for that opportunity. this provision or this issue
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comes about because the plan makes a change for future participants. and so the people that remain in the plan, over time, become older and longer service. so then they violate nondiscrimination rules. and what the proposal would do would be to provide for relief so that companies can continue to provide benefits to those people speedy rather than freeze the plan. >> rather than freeze the plan and stop providing benefits. so that's how people could lose benefits and have lost benefits. in 2014 we actually did a survey to estimate what the impact would be, and at the time it was hundreds of thousands of employees potentially millions of employees are in the millions, and over time that has borne fruit. people tossed the benefits because of these rules. they are not allowed to accrue any for the benefits for these
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older, longer service workers. if we don't do it by the end of this year, it's the potential as you sent another 430,000 employees could lose their benefits. and beyond that, every here that we don't fix this, every year it's hundreds of thousands more people that could lose their benefits. and because people are getting older and they longer service, more companies are impacted so it's urgent. >> another reason for us to move forward with resa. in the meantime we've introduce other legislation we talked about today at appreciate the comments from all the witnesses about it but this is this broader retirement package. we're all for resa, want to get it done. we need to go beyond resa as a chairman talked about. and build on the foundation. we have four mac principal objectives in this plan. it's addressing i think the major concerns went now have on a private retirement side. one is to allow people to save to look to set aside more. with the cash of conservation
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for those. that comes because the latest data we have is 40%, about half of baby boomers, my generation, have no retirement nest egg at all. so no private savings at all. we've got to give people a chance to save more as one example. we also have small businesses to offer these 401(k)s. we talked about that earlier. we talked about important getting resa pastor this goes beyond resa to provide more tax credits to business. when you look at the data, about 68% of people who have access to a blink and small businesses, it's about 40%. among part-time workers, as ms. ruff will tell you, it's even worse. we've got to get more of the small businesses engaged. we have a number of provisions to do that. we also have something to expand can retirement savings for low-income individuals. if you look at the data who is saving a new us not, low income individuals make sense, they don't have the disposable income at or not saving as much as a
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have to should. we have an expansion of what's called the savers credit to you. finally to provide more certain flexible for people in retirement, of thought of you look at the minimum required distribution. that was put in place at a time when our longevity cables were a lot different. people are living longer. i just talk to someone who is 70.5 and so working and he did know we had this provision. he doesn't want to start taking this money out of retirement turkey still working. my dad was in a situation. a lot of people are. if you have under $100,000 in your retirement plan, 401(k), say, you don't have to minimally distribute anything. you get more than that we'll change the age from 70.5 to 75. we encourage longer-term lifetime savings rather than just taking a lump sum which is responsive to specific problem now we have in a retirement system as people are living longer. i want to thank everybody for working with us on that. every but at the table has been
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involved in some way. there's one that a no, senator wyden is very interested which is the student loan issue. that's part of our bill, too. that's important. we talked about earlier. ms. tibbetts and others, mr. read and others are supportive of that. it's important. on the part-time workers, ms. ruff, can you talk briefly about that, why that's so important? and talk about why aarp system supports that provision. >> thank you very much. part-time workers, there are about 27 million part-time workers, and many of them, a majority of them are women, and women generally are the lower wage earners as well. the result is when you do not have a chance to actually save for retirement, they do not have the retirement resources when the time comes to retire. and at this point 58%, that is
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the amount of retirement income that most women have compared with men. they also have longer lives, lifespans. a lot of that comes because of lower wages and caregiving. aarp is very concerned about caregiving, the financial and the emotional costs of caregiving. and that is one of the reasons that we look at it from the financial and retirement security standpoint. >> well, thank you. the number i have is that only 22% of part-time workers participate in a plant now. >> right. >> so enormous opportunity here, and just to broaden the 401(k)s to include long long-term part-time workers would make a big difference. i have so many other questions. we have 50 different provisions in the bill and many of you been
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involved in those. we thank you for that i want to work with you on getting resa done, but also expanding what were talking about here. it's the backstop for so many people. social security actually is essential, it's a safety net, got to have it. but it's tough to live on social security alone are a lot of people impossible. you need to have private retirement savings as well and although we made some progress, back in 200 in 2001 by duane ser grassley was chairman of this committee when the first bill passed and he is the one who shepherded it through the finance committee. he's got lots of experience in working on retirement policy itself over the years. centered in c, do you have a follow-up question? then we will go to senator whitehouse. >> yes. after tobias, can you tell us all a bit more about how you encourage people to sign up for this and what kind of numbers you talk about with him as needing for the retirement?
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>> the employers in oregon who don't offer a plane to their employees are obligated to facilitate organization. with that means is they say to their employees unless you tell me otherwise, 5% of your wages are going to go into your ira. employee retained the ability to change that to any number including zero, and some do. but for the most part about three out of every four people stay in the program and safe. our average withholding rate has actually settled a little bit about that to about 5.5%. we also have an auto escalation feature that on january 1 the subsequent year, unless a person opts out, increases that rate to 1% each year up to a total of 10% 10%, so we had one of those so far where people moved to 6%, and about 90% of those people
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stayed at 6%. some portion stayed at five, and actually a few people increased beyond six as well. we really trying to make it as easy as possible for people to do what's i in the own interest. it's also worth noting how we have set it up to be very simple. .. he describes his experience with that saying every time he
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looks at his statement and he smiles and feels like it's piling up and he's getting ahead and i think that's something we're all excited about here and i assume amongst members as well giving people the chance to be in control of their own financial future. >> a quick easy question, is there a required match by the employer? >> mr. chair, senator, there can't be because it's an ira. eighths roth ira so no employer match is possible. >> thank you. >> can i add something to your point on that? the american benefits council has a center on state initiatives, the state law project and we have reached out to work with oregon and others on their rules. one to be a resource on what works at the federal level and the qualified planned system and we continue to work with them to address all the issues that might come up so that plans can operate side by side. both those federally qualified
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plans and state operated plans and one point that was raised earlier is the possibility of a 5500 data base so that if you have a qualified plan that's recognized by the states and we support that effort and look forward to continuing to work on a system that allows a thousand flowers to bloom. >> thank you. okay. i said earlier senate white house, and now we have others unfortunately who have come in, senator whitehouse, fortunately for them. >> call to regular order. >> senator roberts. >> beg the indulgence. >> you are next anyway. >> oh, i'm next anyway, all right. i want to thank the chairman and our ranking member and to our panel of witnesses, thank you for coming. retirement security is a
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tremendously important topic. here we have at least one example for there's a great deal of bipartisan support or especially with the recent act passed in 2016 and i voted for it then and support it now. and we ought to find a way to get this done. one proposal i believe will help improve retirement pictures for americans which senator carden and i proposed expansion in employees act. the number of employee ownership plans 6500 with more than 14 million folks who actually participate. our bill would promote s corporation plans with a tax incentive to creating an office at the treasury department to provide technical assistance to the eso--
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>> i understand that you are a u of k jay hawk. >> say that again? >> a university of kansas jay hawk? >> no, and i can support jay hawks. >> i thought you went through ku, the time my daughter went through ku. >> i am a jay hawk. >> i was going to express my condolences for not winning their 14th or 15th conference championship, i can't remember which school that that out west and all of that doesn't make sense since you didn't go to the university. sorry. given the track record that they have -- would that be a way to help americans grow
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retirement savings? >> absolutely. i'm a firm believer that employer stock can be beneficial to employees, not only in helping them engage in the plan and build retirement savings, but also, it gives them a stake in the employer and allows them to grow with the employer. so, i think it's a very useful tool. and with the right parameters around it, i think it works very, very well for employees and congress has a long history of encouraging those programs for employees. >> i thank you for that. i'm going to submit my additional questions for the record. i apologize for the rest of the witnesses in that senator roberts apparently has not voted in the second vote so i think i perhaps ought to terminate my comments. thank you all for coming. i know it's a tremendous demand on your schedule, but we --. >> thank you. thank you very much,
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mr. chairman. before senator roberts leave let me tell you what a pleasure it is to work on esop proposal. it's an important part of the tools available and i want to thank all the witnesses. mr. chairman, just note the harmony among the witnesses. there's not a lot of disagreement on what we need to do. it starts with preserving the tools we currently have available and build upon that and make it easier for companies to establish plans because of the complexities today. it's difficult to expand eligibility, and we talked about that and the part-time and the multi-employer world to provide greater incentives particularly for lower wage workers, so it's worthwhile for them to put money away for their retirement and talk about how that can be done with employer matches and the savers' credit and expanding the savers' credit. and to deal with the realities that we're moving from a
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defined benefit world, we've moved from defined benefit world to defined contribution world so there's greater risk of retirees outliving their retirement income and we have to look at lifetime income flows and how we can strengthen that and look at the required minimum distribution rules in order to make it easier for people to have money as they left longer and longer lives would nothing defined benefit world to cover their lifetime income needsment so i make that observation. but it starts, mr. chairman, passing the legislation that you and senator weiden filed on risa. it should have been done a long time ago. you mentioned in your opening comments about the frozen plans and including them in the pill th bill that senator portman and i worked on. and underscore, thousands of workers may be losing benefits
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or may have lost benefi benefit talk about the urgency of getting it done immediately. we have people who had planned coverage who can no longer be covered because of our discrimination rules. >> i've worked on this for many years. it's a real problem. people are losing their benefits and it's because the rules work in a quirky way and require an employer to have-- just try to protect older longer service workers by leaving them in the plan when they change the plan for the future. they're no longer able to accrue those benefits without running afoul of these rules. so each day, each day that passes an employer sits down and makes a decision about what they're going to do for the future and they're constantly running this nondiscrimination
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test. and when they see that they're going to fail it and then they make plans to shut down that plan, and no longer accrue those benefits. so, over the years it builds, it's humps of thousands of employees, and if we don't fix it by the end of this year, it's another 430,000 employees potentially could lose their benefits. so -- and it's something where we need to -- the urgency is that companies have to plan for the end of the year and they have to tell people what is going to happen and if they're not going to accrue any more benefits. and here is the piece about this that really bothers me. these are older, longer service workers and these are the years that matter most for their benefits in the type of plan they have. your -- the end of your career is most important and they lose those benefits. >> i wanted to give you extra time to explain that because,
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mr. chairman, i just really want to underscore the point. we've got to get the risa bill done. a lot of us have improvements that we like to see in the system. i'm very proud i know that senator portman mentioned bill that the two of us filed. i want to get that done, but to me the first priority is to get it across the finish line as soon as possible because that's been worked out and i hope, mr. chairman, we will have a chance to markup addition aal legislation that you were talking about, many of us had suggestions and senator portman mentioned what's included in the bill. it builds on what we've already done that's worked. automatic enrollment, that's worked. and income sources, and we have to look at that in a defined contribution. and for me it's extremely
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important for lower wage workers to get them to start early enough in retirement savings. i thank the chairman for holding this hearing. >> thank you, mr. chairman. let me add my comment to senator cardins. i would pass resa, one of the things we would take up shortly thereafter is the bill i have with senator brown and senator casey, the american miners act and senator dudley is talking about folks losing benefits. we're about to have thousands and thousands of miners lose benefit if we don't back up the contract and 1974 pension plan. pbg is not here, but in my state 7,000 miners lose those benefits and my hope would be we'll be able to move to that as well ap you'd have great support from senator casey and senator brown on that. i want to move on a variation
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of where we head from here and one of the things i've been working on is changing the nature of the work force. and the percentage of people that work for the same job the way my dad did for 38 years is dramatically declining, literally to the point where now, close to 40% of my work forces and some level of contingency, they're a part-time gig, independent contractors and i think we need to recognize this changing nature of the work force needs to have the notion of retirement benefits as part of their life. start with mr. westin and miss dudley. if others want to add in. i've been working on an idea that would actually set up a universal account that would be granted at birth, that i think would actually be that fallback for the third of the work force even under today's rule that has no retirement at all. obviously, a lot of details how we don't disrupt folks who are
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already in existing accounts, but how would you, starting with miss dudley, does that notion of a fallback account issued at birth, what maintenance costs, how you can enough economic incentive to have a take up rate. and general comments on that. we'll start with miss dudley and others-- >> you're quite right, the work force is changing with the gig economies and people coming in and out and people are not set up for that. and we need to make sure that happens. to my knowledge, aarp does not have a policy on the type of account that you're talking about. however, we do know that retirement security starts early. and so certainly there are levers that we should be looking at and i think that is one that should be looked at.
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>> i would just add that the council is very pro savings and we think all different types of savings are a good thing. and we believe, also, that savings needs to start early, and we want to continue to try to work together so that there is a seamlessness between any savings account and your employer provided retirement account, so that people can track what they've accumulated so that they can use it appropriately over their lives so that they can continue to build towards the secure retirement and i would just add, too, the changes that risa has on openness, this is critical for the evolving economy. those can are adapted very easily to help gig workers to help part-time employees. the work that you've done and the leadership that you all
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have shown on that issue is enormously important and fits very well with what the work you're doing. >> well, i would-- and again, commend the chair and ranking member for moving forward on this. but i think the notion of portability, the ability to aggregate together from different income sources, candidly, regardless, even avoiding some of the worker classifications, just making sure every dollar you make some portion is set aside for retirement. treasurer reed do you want to-- >> i'm aware of some of the changing nature of work. i think the notion of portability is the key of it and something that's been positive about oregon saves as people move from employer to employer, they continue to be able to participate and, in fact, we have a number of people who are simultaneously working for multiple employees and contributing now. i think that the notion of automatic enrollment early on is essential and i think the
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work that many on this committee have done about the refundability of the savers credit and a particular emphasis on lower income folks getting them started at an early age-- >> and i think the idea even potentially at birth and making sure you've got the incentives aligned, for others to take care of the administrative burden and how we manage that is terribly important. >> i would say, senator, we may have seen examples of that to follow in a college savings context as well. >> thank you, mr. chairman. >> thank you, senator warner. now senator. >> thank you. treasurer reed, delaware, the constitution, and recovering i tell you i'm a recovering governor and recovering state treasurer and it was pressure to be treasurer of delaware when we had the worst rating in the country and we went to workout to do it and a great
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republican did a wonderful job and i hope i helped a little as treasurer. and we had a pension fund that was not funded at all and within ten years was fully vested. and we had a deferred compensation program for state employees that was a mess and we worked hard to straighten that out and finally, i think it's pretty good. so i sat in your shoes, in your seat and wish you well. we have a new state treasurer in delaware succeeded kent sempler. have you met her. >> i have. >> and a good role model and maybe if she takes the reins, maybe you could be one of those. this question is for miss ruff and mr. reed. first of all, thank you for being here and helping us with this. it's a great challenge, but an opportunity, too, but half of american workers i'm told do not have access to retirement plans through their workplaces, as you've alluded to, it is a few of you mentioned in your
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written testimonies, workers i think are 15 times more likely to save if there's an option to do so at work. >> i'm pleased to see that the state of oregon and aarp, set up state facilitated programs. and it's a program that we have in d.c. and federal government across the country if when people go to work, go into payroll, if they immediately become members of the-- through a savings plan, there is about a 75% likely they'll continue to be members. if they don't sign up automatically there's about 25% so there's a huge, huge difference, a lot to be said about inertia and i think that tells a pretty interesting story. and mr. reed and miss ruff could you expand on congress, we have votes going on and hearings going on, we're in and out of here, i apologize. could you expand upon the top one or two ways to have
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congress make programs. miss ruff, would you go first? >> again, i appreciate the chance to talk about work that has been an important issue to aarp. and we've had from the beginning in this country a combination federal and state system. what we need is for the federal government to recognize work and save and make sure that all of the-- that there is an encouragement of work and save and that the rules do not go contrary to work and save and that congress does not come in and say we want to do away with work and save because right now in oregon it's working very well and we're working with other states who are in the process with their legislatures at implementing or enacting work and save programs. so they can work side by side
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very easily. >> all right. >> and can i-- i just add something to that? >> yes, you may. >> the uniformity of the federal law that-- it really allows employers to have qualified plans and operate in multiple states to do that and to treat people equally so we do really want to continue to work with everyone so that the systems operate and co-exist comfortably next to each other. >> all right, thank you. senator carper, i would agree with both of those statements, we're focused on making it easest as possible-- >> my question is, one of the things that congress could do. >> senator carper, i would allow states to innovate and do what works for their constituents. i mentioned earlier the creation and improvement of the 5500 data base that allows us
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more easily to presumptively exempt an employer because they provide a plan on their own. we have a number of mechanisms i think that would improve that and i mentioned earlier reducing the minimum age for participation in ira. so someone starting their career would get on the right path from the start. >> in addition to automatic enrollment and escalation of contributions do any of you have recommendations to are other behavioral tools that could be effective to encourage people to save more for retirement, anyone who has something to offer on that, please? >> well, i have one which is automatic reenrollment or-- and it's really visiting. it's automatic enrollment, but revisit it every year, two years, three years. even if you visit every few years and come back and sweep people through and allow and apply the automatic enrollment, that can be really helpful particularly in the case of small employers because they tend to lose a little bit of
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track. they're busy doing their business and that really helps them sweep up people into the plan as they go. >> and i would agree with lynn that, as principal member of the american benefits council. i think the importance of the sweep also has consumer protections and has the opt out and you have the benefit of being able to sweep them back into other funds and have the allocation balance and there certainly is the opt out feature. >> thank you, one option we're delighted to hearments thank you all for your time. i want to go back to what senator carper was talking about and the statement you made about reenrollment as well. tell me mechanically how that would work for an employee, for a reenrollment proposal. >> i'll start and everybody can chime in. so, automatic enrollment when
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you come to work, you are filling out your paper work for your job and you automatically are put into the retirement plan and you have some help had. there are default investments, but you can opt out as to the enrollment if you don't want to be in the plan, you can opt out as to the percentage. >> but the assume is you're in. >> you're assumed you're in. you're assumed you're in at a particular rate, you know, typically 3% or hopefully with changes in the law, higher. higher percentage and you'll either choose an investment or default into an investment. usually an age appropriate target date. let's say you opt out, then the system the computer system that you're using the and a moment in time every year, two years,
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three years, and your name comes up and you're automatically enrolled in the plan and you get information that you're planning and you can opt out. >> what do you suggest as the right time? is that annual or every two or three years? >> i think that three years. you know, you can do it sooner than that, but if you do it every-- at least every few years, i think that you have to think that there's an administrative issue to that, too. so being practical about the time makes sense to me. >> and i may add on to what lynn said we do see with planned sponsors about every three years is kind of a best practice there. and i think, three to six
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percent. 11.4-- there's not a difference opt out for high income workers versus low income workers. everyone knows they should do it, but-- >> and escalation helps when you get raises you automatically go to a-- >> it's not your percentage that goes with you, your percentage changes-- >> right and lifting the current cap on that is helpful, too. >> and let me ask you a question, you've said allowing more state innovation. have you an example of that either from your state or another state, something allowed and encouraged or something now allowed currently that should be? >> and thank you for the question. i think, you know, we fit the ira-- we fit our program into the ira program because of the federal restrictions. i think there's a lot to be
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learned from the college plans that they went through. and we heard earlier, questions about whether a employer could match. i could imagine a scenario years from now where you and your colleagues have recognized the power of this and made it possible for employers to participate in some way. those kinds of further reductions i think and participation in barriers and the kind of synchronization across the country could be positive. >> one of the great challenges we face is a portability issue where you have four different retirement funds and the last five employers you had in trying to be able to track all of those, how to combine and how to go through, what's the best solution to solve that. >> mr. chair, senator lankford, i think part of what we're doing is an answer to that that allows people to take their retirement from job to job. this is an ira, it's owned by the employee, by the saver and they get to take it with them. it's under their control.
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no one has control on it and it can go and grow with them throughout their careers. >> there are changes for other proposals for portability? >> one thing i would mention, portability is hugely important and educating people on how to track their benefits-- >> but there are a lot of people who say i'm not going 0 opt in because i'm only going to be here a year or two and it's hard to shift it over and i want to leave it. >> and making it automatic, helping people make it automatic to roll forward and roll to their next employer, that's something that the private sector has been working on that's very useful. developing data base so at that people can easily track and find their benefits is something that we're supportive of and working on as well. >> all right, thank you. >> thank you, mr. chair and i want to thank you and the ranking member for holding this hearing and thank all of our witnesses for being here today.
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i'd like to start by echoing something senator weiden said at the againibeginning. hearing, there's those and personal assets. while it's not the focus, but congress addressed the first pillar and strengthen the long-term viability of social security. i wanted to start just by acknowledging we've heard from a number of my colleagues today about this impending retirement bill that's come over from the who us and you've answered the particular questions i've had about it. i want to stay i'm continuing to look forward to it and the retirement security act and many in risa coming over, including the provisions in the retirement security act which would make it easier for small businesses have small business
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plans and multiple employer plans and provide taxes to plans and offer auto enrollment and reduce administrative burdens. so all the things you've talked about and your testimony is helpful as we do this work. i wanted to follow up, if i could, on this topic that senator warner raised and senator lankford was just trying to get at, which is again, we have a lot-- we've had a lot of discussion about portable retirement benefits. i've joined senator collins in kc for a study on this topic because we know as workers move frequent from company to company than in the past, it's easy to see how they will have small retirement balances in several companies if they're not aware of their option. and you've addressed the importance of portability given the gig economy. are there additional fixes we can put in place to make it easier to consolidate the small
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retirement plans that exist? we might look forward to a portable plan like you've got in oregon. what can we do to help employees now who have multiple accounts from different employers? >> we could start with ms. dudley and move down the table. >> right. well, one of the things you can do is make it easier for employees who leave their companies, who roll their money with them, to take them to the next employer, and combine many, many employers, except transfers from other plans. making that easy and seamless from the participants' perspective and making it-- and there are tools that are being developed in the private sector to facilitate that, and now that we have technology, more in the workplace and it's easier to use that technology to help transfer that money because that would be the number one thing to do for people. >> okay. thank you, anybody else want to
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add? miss ruff? >> yes, i do think that senator danes has a bill that talks, a lost and found so people can, in fact, know and find their accounts. underpinning all of this that we haven't spent that much time talking about is education. because if you understand the ramifications for opting out you're going to be less likely to opt out. and to understand the need to stay in long-term. so i would say education an incredibly important. >> thank you. >> i concur with miss ruff on the education aspect. one of the things that we do at principal, as we're working with planned sponsors is talk about the auto features and the importance of cutting those in plans. there's a study that we bring up to plan sponsors and it talks about what are the three factors that have the lbiggest
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influence on a person's retirement income. as we ask the questions, it's savings rates, it's asset allocation and individual investment accounts and most people go right immediately, it's got to be the individual investment when 74% of retirement savings is attributed to those savings rates. so, that's why i think it's critically important to not have participants think i'm only going to be here for a couple of years so i must opt out. so in addition to the plan sponsors we talk about this with education with the participants. >> thank you. i'm just going to mention one other topic and i'll follow up with a question to the record for you, miss ruff because i know there's been a huge gender gap on retirement savings, aarp whose done a report on that. and average 55 and older women have less on average than men
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in the work force because they take time out as care givers. and what we could do to close that retirement gap. >> there are many things we are looking at and focusing on the different levers and caregiving being a huge issue. if we can, in fact, make progress on that area we're going to make progress on the other areas. >> thank you all for your testimony, thank you, mr. chair. >> thank you, miss hassan, senator brown. >> thank you. first and foremost, i want to reiterate the solution for the multi-employer many, and comments you made earlier about it. it's know the focus of the hearing, but this committee has an absolute responsibility to do that. no discussion of retirement security is complete without a recognition of the workers who spent their lives doing the back breaking work iron workers, construction workers, mine workers, truck drivers, bakers, about honoring the dignity of their work.
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they've followed the rules. they're at the risk now, as we know, of seeing their pension plans totally collapse if congress doesn't act. they're not asking for a handout. they're asking for whatever they've already earned through the process of collective bargaining. giving up money today and at the table for a future retirement security, something we should want everybody in this country to do if they have that opportunity. i know that and i've spoken with both senator weiden of working on a bipartisan committee with senator portman and me to make this happen before the end of the year. i want to turn to the gig economy. the future of work should be one good for workers in honoring the dignity of work. good wages, good working conditions, good benefits, child care, all the things that go with that. part of that is having access to retirement account, as we know. i've worked with senator crapo and others to an allow
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independent contractors, most of which gig workers are, open employer plans, that way they'd have some access in portable, but i think a lot of the so-called gig economy workers are classified as independent contractors, when they shouldn't be. and we know that violates the spirit of the law over the years. we know access to employer provided savings is a key indicator of workers, retirement security. my question to the panel and do as close to yes and nos on the question. is a traditional employer more likely than an independent contractor to have the benefit of an employer match to help accelerate the tax deferred savings growth? start at this end, ms. dudley? >> yes, i would say they're more likely to have a match from the employer, though their compensation is different than a traditional worker, so they may be getting that made up in compensation. so, each individual situation
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you have to look at that. >> miss ruff? >> yes, you do receive benefits as an employee that you have to pay for yourself if you're an independent contractor. >> mr. reed. >> senator, oregon is a roth ira so there cannot be employer contribution. >> we agree with ms. dudley and ms. roth, we have workers with matching contributions. as indicated independent contractors are usually paying for that by themselves. >> and as the hearing has transpired in the last couple of hours, much has been tinkering with the tax system, underlying the issue in part is wages. so answer this yes or no. it's sort of a self-evident question. if workers were paid higher wages it's likely they would have more money to put away? >> sure. >> yes. >> yes. >> yes. >> thank you, if workers were
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members of a union is it more likely to have better access to retirement savings? >> well, i think that they have-- most unions have plans and so they do have access, but i think for the member benefitses council, all of our member sponsored plans. so i would think they all have plans. but there are lots of employers who don't have plans. >> and union plans generally mean more money for the union membership and generally more for the employees retirement? >> would you repeat that again? >> would union membership generally mean more money for employee retirement? >> certainly the unions have the bargaining capacity and traditionally unions have had better retirement plans. as it is now more and more companies are taking on what do we need to be competitive in
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today's very tight labor markets. >> mr. reed. >> senator brown, i think your point is right. in fact, in the passage of oregon saves, a big part is a discussion of home care workers, therefore independent contractors so there's a close tie there. >> thank you. >> yeah, and we agree with the comments made by the panel. i think it's important to know that benefits are an important differentiator when employees are looking at which employer to work for. whether it's small, large or union, it is a critical factor. >> thank you, let me do one more question of the-- the sitting chairman's home state treasurer, if i can ask the question, i'm sure he'll give me extra of the result. >> as fond as i am of senator brown, it can be 30. >> i'm put it in writing. >> no, put it in 30 seconds. >> based on your experience, mr. reed, and in your state, do we need a national automatic
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enrollment, and in-- >> do you agree? >> senator brown, i do. i think a national program particularly with auto enrollment could have great potential and i hope that as you consider that you'll make the appropriate provisions for those of us who have already started so we can continue our good work and partnership. >> thank you. >> i thank my friend. >> senator danes. >> thank you, mr. chairman. about ten days ago our youngest child caroline just graduated from montana state university. so we officially have four children on their own health care and own cell phone plan. i'm a proud dad and a proud bobcat. with all of that celebration as parents it's a reminder how quickly time marches on. like any graduation, it makes you think about their future. at the moment to pause about the future of our country, but i'm pretty sure this year's
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college graduates aren't spending a lot of time focused on their retirement plan. they're fresh out of school. ready to take on the world with all much my study sessions in the rear view mirror and the thought of social security, a roth plan, ira, 401(k), perhaps when looking for the job. when asked, polls indicate most of them don't think they'll be seeing their full social security benefits when they retire. and i think all of us on this committee agree that we've got to do a lot better for our children and grand children and remind them that the future is real. older we get the more we realize it and it gets here before we know it. montana has the sixth, the sixth oldest population and we look at it per capita basis, in our country. and it's also critical that we in congress work in a truly bipartisan way to protect social security for our current, as well as future
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generations, in addition to protecting social security we must also promote personal savings, employer sponsored savings plans, as they're also incredibly important to ensuring there's financial security during retirement. and i applaud the good bipartisan work done by this committee to bolster practices so our kids and other montanaens will have sufficient retirement income. and thank you for highlighting my bill with senator warner. and some wonder how a republican from montana and a democrat from massachusetts come together? we do. and i look forward to working with my colleague from massachusetts on this important issue. i mentioned my daughter caroline's recent college graduation from montana, and just entering the work force, what actions do you recommend they take now to assure sufficient retirement income in
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the future? >> one of the things i think is so important for young people coming out of school is to recognize the dollar they save now is so much more valuable than the dollar they save when they're my age. >> you're sounding like me. >> well, i have children and grandchildren. but it's so much more important it's important that they start early. it's not how much they're going to earn on that dollar. they're going to earn a lot as the market goes over time, it's the fact they're putting the money in. it's not how much they put in in the beginning, though the more the better, it's that they're started. what we find is that when young people start, they stay with it, they like it. people who are in employer-based plans like it better than those who do not.
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>> thank you, good advice. miss tibbits, you mentioned those with a lack of plans particularly among small employers. as a u.s. senator from montana where we have a lot of small employers, that reality is very concerning to me. could you speak for a moment about how the reforms in the retirement enhancement and savings act would help increase access to retirement plans among smaller employers in rural states like montana? >> yeah, thank you so much for that question. so excited about risa and we hope the committee passes this and comes into fruition for small employers. as we think about access, employees who work for small employers, 58% of them don't have employer-sponsored plans to be able to participate in. so, i think the number one
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thing that resa does is provide opportunities for those small employers to adopt plans. we're excited about the small employer tax credit that helps offset some of those administrative costs and then increasing that tax credit for plans that include auto features and then secondly, the open multiple employer plans. as i talked earlier, when you think about that cabinet worker that lives in grimes, iowa, having the ability, having the ability to already join a plan that's in existence is easier when you're wearing multiple hats from that company and your workers have access to be able to save for retirement. >> i'll wrap up here. having spent 28 years of my career in the private sector in small, medium and larger businesses, growing businesses, particularly when we have the 50-year record low levels of
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unemployment in this country, to be able to attract and importantly, retain the work force as a small employer is important. they don't have a big hr department. when you have an open head count to fill, you have to be consumed with that and it's a nice problem to have, but it's a big problem and i can see this is another remedy to perhaps help in that area. >> we cannot agree more senator daines. >> thanks to my friend from montana. senator whitehouse. >> thank you mr. chairman and thank you to the panel for being herement we obviously see the problem of small and medium sized businesses trying to figure out how to manage a retirement savings plan and the difficult of that difficulty that 90% don't. which means that small business states like rhode island are often left with very little retirement savings. we also have the lesson, i believe, from the 401(k) plans
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to opt in versus opt out as a simple default switch can make a very, very big difference and help people out for the record, i see the heads all nodding just to be clear about that. i wanted to ask miss ross first, you mentioned my ira bill in your bill and i appreciate that. describe what you like in context of doing something, what are the key features you want to see in any bill that the committee would support for aarp to support that measure. >> the federal auto ira. it's very important that people have the ability easily to enter into the ira. that their investments are, have fiduciary standards around them, and very much not unlikely to work and save type of program would be and important that the two can in fact work together.
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>> the portability? >> portability. >> default to opt in rather than opt out? >> yes. >> certainly, certainly the ability to opt out. and certainly education for people to understand what their plan is and what they do with it if they move somewhere else. >> to miss dudley's point about being knowing how valuable today's dollar is. >> exactly. >> and life expectancy and another important area that we're going to be living longer and it's more and more important. >> forever, right? >> well maybe you, but it's more and more important, yeah, it's more and more important that people stay early. >> treasury reed you've had the experience of doing this at the state level and i would like to ask you in your plan, what does a small employer have to do? >> as little as possible. we've made it easier for small
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employers, initially our design had the employer providing notice to employees and that asking them whether they want to opt out, we've changed that and in fact, our record keeper a census now does that, so essentially all that the employer has to do is provide the employee information to census, and then facilitate as they do with any of their other withholdings over time. >> and once they set up the withholding, and they know what their employee wants which they don't have to do, gets disclosed to them, they're done. >> that's right, and mr. -- >> have you got-- >> i'm sorry? >> what's the response abouten from the small business community? >> generally positive. i was thinking of that when senator daines was asking his questions, there are a lot of small employers who very much look this and you know, are focused on running their business. there's one in my mind who runs iconic sandwich shop who says i don't have an hr department, i've got sandwiches to make and they view it as a very positive
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thing. i mentioned in my opening, a brewer who says this allows me to work on my career allows them to retain them. very positive. >> good. if we're looking at federal legislation in this space, what would you like us to do about state programs like yours? carve them out? let them continue? would you do this off your hands and have this turned into a federal program? what's your take on how we should handle oregon savings, if we get around to doing a federal bill? >> mr. chair, senator white house, i appreciate the question, i feel good about where we're going and i think we have provided a service if it's not presumptuous to say in asking and answering the questions. >> you'd like to keep at it. >> i'd like to keep it-- >> would you like other states to step up and say we're doing
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it-- >> and how our version would interact with the federal program. >> great. i thank you for the good example you're setting. i'm sure you said so, i was elsewhere, what happened to your savings rate even in the small amount of time you have. >> a number of ways to answer that, mr. chair, senator whitehouse, we've accumulated over 19 million in savings in 95,000 accounts. 2.2 million growth and we're only halfway through our rollout at this point. and one private sector provider who has this service as opposed to a competitive market? >> that's mostly right. one does the record keeping and another who manages the money. >> got it. >> could i add one thought? >> sure. >> on the whole concept of coverage, and i really appreciate the work that oregon has done at the state level and the work that's been done here on a bipartisan basis, too, to
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strengthen the qualified employer program. as we look at coverage. there are places where a federal system would be more helpful to some people than the state system and i think you would agree. there's not a reason that all of these approaches couldn't exist together. i think that's something that we'd like to continue talking with you about how to make it seamless for people. >> in the same way as people get to opt out, you could have that did-- >> possibly. >> i'm out of time and i yield back to the chairmanments i thank my friend and i think there's only one question i want to get at before we wrap up i'm going to pose this to you, miss dudley and the chairman has some important
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procedural matters that we've got to convey to you before we wrap up. let's talk about the students who come out of school and they are just up to their eyeballs in debt. i mean, thousands and thousands and thousands. >> tens of thousands. >> thank you. >> and they get that first big job and they're incredibly xied. -- excited. maybe the first generation to get out of college and the employer has a really good 401(k) matching program a watching contribution program. and employer is putting up the money and the student figures out where their share comes from. we've had students come to us and stay, this is heartbreaking, you know, we finally got that good job after all the years, but we owe so
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much money, we don't want to miss out on saving. we don't want to miss out on building that nest egg for the future. so what we proposed in our bill is essentially that the amount they have to repay amount they pay on student loan would count towards their contribution for the 401(k) matching. my sense is that this would be enormous value with so many young people be up against this dilemma. i'd be interested in your thoughts in terms of what your member companies are telling you about this situation because that's really how it comes down in terms of my world. i mean, i have town hall meetings oregon county every year and people just tell me that the student loan debt is
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like a boulder on their back and it ripples through their lives in so many ways and in a minimum we ought to figure out a way to let them start saving after they get hired for the first great job. >> right. i think you're absolutely right. employers, students and young graduates are excited about the idea of being able to pa participate and play down their debt. employers recognize this has become a barrier, student loans have become a barrier to people participating in many plans, not every employer sees that problem, but many, many do and they want to find a way to help them not leave money on the stable. one of the things we always try to do when we're educating employees about participating in the plan is explaining to them the value of a matching contribution and the importance of contributing so that you get the match.
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so what's happening to the new england -- new employees that have student debt, they're not participating out on the mat and these are the times when the dollar counts the most. by participating early, you earn the most money for retirement. so if your bill would address this by allowing those employers to go ahead and recognize that people are paying down debt and get that matching contribution in the plan, and get these people enrolled in the plan, so that you may have a student that can't do-- an or a graduate that can't do very much, but maybe paying the loan down and can't fully get the match so they're in the system. they're in the system early because when you get in early, you stay in the system. >> great. >> and just for the record, if we could, for you ms. ruff, you
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all have done some interesting work on the savings credit and because we said we were going to wrap up, if you could just furnish us for the record any suggestions you might have to improve the savings credit. because of time we couldn't get into it. if you could finish that in writing. >> certainly. >> on behalf of the chairman i want to thank all of the witnesses. you all have been very patient and we appreciate your testimony, we appreciate your being here and sharing views on the policy directions and the finance committee on a bipartisan basis wants to consider to improve the retirement system. for all the members and staff, i don't believe we have any members who are coming, any members who have written questions for the record should submit them by close of business on tuesday, may 28th, both the chairman and i share your view about getting the
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resa bill passed immediately. if we'd had our way, it would have been done yesterday so we appreciate your comments on that, and to indulge, i believe, that the chairman won't object to it, but given the evening before we adjourn, i'd like to just say, go blazers. [laughter] >> good city. [inaudible conversations] [inaudible conversations]
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former vice-president joe biden is this saturday 1 p.m. eastern to kick off his democratic nomination candidacy. we've looked at the candidates so far from announcement speeches to campaign events, watch anytime at at r 2020. sunday 6 p.m. eastern on american artifacts, we look at the muslim scholar from west africa, he was shipped to south carolina and sold into slavery and he wrote the only known in arabic. showing his autobiography and several in the library collection. >> it went from hand-to-hand. and this is important enough to
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carry it on. others were written by people who are enslaved, but this is the only known existing manuscript in arabic written by a slave. >> watch american artifacts sunday at 6 p.m. eastern and c-span 3. this week our on-line video library has con at the point in time. all are available in the jop line library, view them free at we are live as the u.s. senate is it about to gavel in to hold votes on nominations for u.s. district court judge in louisiana, undersecretary of state for management, and deputy attorney general, the first two votes are at noon
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eastern. live coverage now of the u.s. senate here on c-span2. the president pro tempore: the senate will come to order. the chaplain, dr. black, will open the senate with prayer. the chaplain: let us pray. redeemer and friend, the fountain of wisdom and strength, we borrow our heartbeats from you. today, guide our senators to new heights of achievement,


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