Senate Finance itching to move on RESA, other retirement bills

The Retirement Enhancement and Savings Act, a wide-ranging retirement bill that first passed out of the Senate Finance Committee by unanimous vote in 2016, should have been passed into law “eons ago,” according to ranking member Ron Wyden, D-OR.

Finance Committee chairman Chuck Grassley, R-IA, and other lawmakers echoed Wyden’s sentiment during a hearing on retirement and on a day another expansive retirement bill, The Retirement Security & Savings Act, was reintroduced in the Senate.

“We have to get RESA done—the first priority is to get it across the finish line as soon as possible,” said Sen. Ben Cardin, D-MD, who is the co-sponsor of The Retirement Security & Savings Act, along with Sen. Rob Portman, R-OH.

RESA includes relaxed Open Multiple Employer provisions, which allow unaffiliated small businesses to pool workers under one defined contribution plan. It includes new tax credits for small employers who start a 401(k) plan, and tax incentives for small employers to incorporate automatic enrollment into existing plans.

It also has provisions that would make it easier for 401(k) plan sponsors to incorporate annuities into investment menus, and portability provisions that would protect 401(k) savers invested in annuities from surrender chargers when an annuity option is dropped from a menu.

The Retirement Security & Savings Act has 50 provisions. One would raise the current required minimum distribution age for qualified retirement plans from age 70 ½ to age 75. Accounts with less than $100,000 in savings would not have a RMD.

It also increases employers’ contribution limits to 6 percent in safe harbor 401(k) plans, and raises the catch up contribution limit from $6,000 to $10,000 for workers age 60 in safe harbor plans.

The bill expands the tax credit for starting a new 401(k), from $500 to $5,000. And it would allow more part-time workers to participate in company plans.

A retirement bill in the House of Representatives, the Secure Act, which tracks closely with RESA, also includes provisions to allow more part-time workers to participate in retirement plans.

Sen. Grassley said he had heard push back from employers over potential compliance costs to expanding retirement plans to part-time workers. But Lynn Dudley, an attorney for the American Benefits Council, which represents the interest of large employer sponsors of retirement plans, testified that ABC’s members “are comfortable with the approach taken in the Secure Act.”

Sen. Portman said the committee should “go further” after it gets RESA done, and be prepared to mark up a second wave of retirement bills.

Oregon Saves auto-IRA program adding $2.2 million in savings a month

According to the Bureau of Labor Statistics, 32 percent of private-sector workers lack access to a retirement savings plan through employers.

Tobias Wolf, Treasurer of Oregon, testified to the early success of the Oregon Saves program, which requires small businesses that don’t sponsor retirement plans to enroll workers in a state-sponsored Roth IRA platform.

So far, the program has amassed $19 million in savings in roughly 35,000 accounts, with $2.2 million in assets being added every month to the Roth IRAs, according to Wolf’s testimony. The program automatically enrolls workers, but has an opt-out provision. The opt-out rate has been 25 percent.

Oregon’s participants are enrolled at 5 percent of salary. The average withholding is 5.5 percent, Wolf said. An automatic escalation provision raises contributions 1 percent annually. Of those who have been in the program for more than a year, 90 percent of participants have opted to stay at the 6 percent deferral rate.

“We’re just getting started,” said Wolf, who added that the program has overwhelming support in Oregon.

Federal IRA plan has at least one Republican member’s support

While Wolf’s testimony was cited by some on the Committee as support for efforts at the state level to close the workplace retirement plan access gap, at least two lawmakers used his experience to float a federal IRA program trial balloon.

And one was a Republican.

“I hope other states will pick up on that,” said Sen. Mike Enzi, R-WY, in a series of questions with Treasurer Wolf on Oregon’s experience. “I’ve been trying to figure out how to get the federal government to pick up on that too.”

Sen. Sheldon Whitehouse, D-RI, raised the prospect of a federal IRA program more directly, asking Wolf what the burden Oregon’s program has placed on small business owners.

“As little as possible,” testified Wolf, who said employers typically spend 15 to 20 minutes a month overseeing enrollment and payroll responsibilities to the plan.

Whitehouse asked if a potential federal IRA program should carve out efforts at the state level.

“I feel good about where we are going,” said Wolf. “I’d like to keep at it.

Student debt and retirement savings

Portman and Cardin’s bill includes a provision that would allow employers to contribute a match to 401(k) plans in the amount of student loan payments made in lieu of retirement savings.

Wyden and five other Senate Democrats introduced a separate bill, The Retirement Parity for Student Loans Act, this week. It would create a new optional benefit for employers that would allow them to contribute a match on student debt payments equal to an existing match on retirement savings deferrals.

For example, a plan that offers a 100 percent match on the first 5 percent of salary contributions would be required to make the same match for loan repayments equal to 5 percent of pay.

The ABC’s Dudley said many large employers—but not all—recognize student debt as a barrier to participating in retirement plans.

“They want to help them find a way to not leave money on the table,” testified Dudley. “These are the years when the dollar (in savings) count the most.”

Portman, Brown signal intent to re-launch subcommittee on multi-employer aid

Senators Portman and Sherrod Brown, D-OH, both insisted Congress needs to address the approximately 130 collectively bargained multi-employer pension plans that are destined for insolvency, and, along with them, the Pension Benefit Guaranty Corp.

The senators from Ohio — where more than 40,000 pensioners in the Teamsters Central States pension plan will lose up to 90 percent of their benefits when the plan becomes insolvent by 2025 — were instrumental members of a Joint Select Committee on multiemployer pension reform that failed to produce a bipartisan solution to the problem last year.

“No discussion of retirement security is complete without discussion on how to protect collectively bargained pensions,” said Brown.

“We came close last year. We have to get back to that,” said Portman. “I think PBGC goes under in five years, maybe sooner. We have to fix that.”

Brown and Portman both indicated a new subcommittee will take up multiemployer pension funding reforms.