07 February 2019 Ways & Means holds hearing on retirement security During a Ways and Means Committee hearing on "Improving Retirement Security for America's Workers" on February 6, 2019, members continued to express bipartisan support for retirement security proposals, some of which are considered holdovers from the last Congress, but began drawing partisan battle lines over a new proposal on Social Security. The hearing began with Chairman Richard Neal (D-MA) and Ranking Member Kevin Brady (R-TX) both calling for bipartisanship on retirement issues, and Neal saying that developing solutions on the issue will also require the retirement industry coming together with participant and retiree groups. Chairman Neal highlighted the Retirement Enhancement Savings Act (RESA) by Reps. Ron Kind (D-WI) and Mike Kelly (R-PA), which was reintroduced on the same day and would make it easier for small businesses to sponsor retirement plans by strengthening open multiple employer plans (MEPs). While the panel of witnesses generally expressed strong support for various provisions of RESA, including the Open MEPs proposal, Andrew Biggs of the American Enterprise Institute ruffled some feathers by challenging the premise that the country faces a retirement crisis. Neal pointedly expressed his view that there is a retirement crisis, citing his own Automatic Retirement Plan that generally would require all but the smallest employers to maintain a 401(k) plan for their employees. The RESA MEPs provision and other proposals were twice passed by the House in the last Congress, as the Family Savings Act (H.R. 6757) and the Retirement, Savings, and Other Tax Relief Act (H.R. 88), but a year-end agreement with the Senate never materialized because of the dynamics that led to the partial government shutdown beginning December 22. Earlier this week, Rep. John Larson (D-CT) along with 202 Democratic cosponsors introduced the Social Security 2100 Act to increase benefits and cost of living adjustments, gradually increase the payroll tax rate to 14.8% from 12.4%, and impose the tax on earnings over $400,000 a year, creating a "donut hole" effect that would exempt annual earnings between $132,900 and $400,000. The bill would also increase the income threshold at which Social Security benefits would be subject to income tax. Rep. Brady highlighted the retirement provisions that were approved by the House on a bipartisan basis last year. However, he warned against a partisan approach on Social Security and said any legislation "must be more than a bait-and-switch scheme that seizes more from every worker's paycheck, overpromises benefits to seniors, and merely refills the Social Security Trust Fund for Congress to raid in the future." Several Republicans raised objections to the payroll tax increases in the Larson legislation, and discussed the need for benefit reductions for middle and upper income Americans and mentioned increasing the retirement age as part of any Social Security solution.
Oakley said changes in the retirement system over the past 40 years make it difficult for workers to prepare for retirement, placing much of the responsibility and risk on the employee rather than the employer. She said policies need to go beyond incremental changes and make bold improvements addressing automatic retirement savings and transformation of the SAVER's Credit to create a match and make it refundable. Altman warned against means testing for Social Security; argued that the system is intended to represent insurance, not savings; and lamented that the program's benefits are extremely modest. McDaniel focused on her personal experience with the multiemployer pension crisis, which Neal also highlighted in his testimony, saying that after working for decades, many are facing the prospect of their planned retirements being taken away from them. Crandall expressed support for enactment, as soon as possible, of RESA, specifically provisions for open multiple employer plans, expanded small employer tax incentives, the annuity selection safe harbor, and provisions designed to simplify and streamline plan administration. He said there is more to be done, including Neal's Retirement Plan Simplification and Enhancement Act and Automatic Retirement Plan. Huffstutter touted the benefits of the Oregon Saves automatic IRA program. Diamonte discussed her company's experience in closing its defined benefit plan to new participants and realizing the benefits of a defined contribution plan and turning those benefits into a lifetime income stream. She said most companies do not have the legal and other resources of UTC in offering Lifetime Income and thus "employers need a clear, reliable safe harbor protecting them from opportunistic class action litigation and other legal risks before adopting their own lifetime income solutions." Biggs refuted the notion that there is a retirement crisis and said proposals to expand Social Security should be considered with caution: middle and high-income workers would likely reduce their personal saving in response to higher expected Social Security benefits and tax increases could increase borrowing and debt by low-income workers and reduce work and encourage tax evasion by high-wage employees. Chairman Neal kicked off the questioning by addressing the multiemployer crisis, noting the Butch-Lewis Act that would provide a loan program for multiemployer programs, and saying he assumes that before the end of the year there will be some legislative activity on that topic. A select committee on the issue operating in the last Congress did not reach a deal. Crandall, who Neal noted represents one of the largest employers in his district, said RESA would provide opportunities and lower administrative costs, as well as resolve problems regarding fiduciary obligations, saying he thinks every company should be able to take advantage of safe harbor rules. He also noted the benefits of auto enrollment. Neal noted that former Republican leaders of the Committee tried to advance an auto IRA bill and asked about the benefits, which Huffstutter said include sparing workers from having to learn a great deal about retirement saving. Rep. Adrian Smith (R-NE) expressed concerns about low- and middle-income tax increases that could arise from the Democratic Social Security bill. Biggs expressed concern about the bill's proposed increase in the payroll tax, which he said is the largest tax most people pay. There is a question of how low-income households would respond, and whether some would try to maintain their lifestyle by borrowing more. Rep. Judy Chu (D-CA) inquired about the SAVER's Credit. Oakley said the Credit has income limits and restrictions on benefits as a result of the budget process under which it was enacted. She said a federal match related to an EITC payment could result in a significant amount of money, and that greater information and less paperwork are necessary to simplify the process. Rep. Kelly observed that "we all seem to agree" on what is necessary to help improve retirement security and noted that he and Neal are on the same page with regard to many of the proposals.
Document ID: 2019-0323 | |||||
