May 17, 2021
Senate HELP Committee holds retirement hearing
On May 13, the Senate Health, Education, Labor, and Pensions Committee held a full committee hearing titled “Retirement Security: Building a Better Future.” As the committee’s chairwoman, Sen. Patty Murray (D-WA), noted in her opening statement, it was the first retirement policy hearing the committee has held in eight years.
Murray and ranking Republican member Sen. Richard Burr (R-NC) both called for bipartisanship in their opening statements. Murray also emphasized the emergency savings problems, the gender pay gap, and cybersecurity threats to retirement savings. Burr contrasted the advantages of IRA and 401(k) accounts – “no politician can steal” account balances – with the “mismanaged” public pension plans, which he said are underfunded by $4.5 trillion, and the massive bailout of multiemployer plans in the American Rescue Plan Act.
In their comments and questions, senators focused on expanding coverage among employees of small businesses, the need for special attention to women and people of color, the connection to paid family leave, the problem of emergency savings and the number of American families who do not have $400. Two senators, Sen. Braun (R-IN) and Sen. Tuberville (R-AL), discussed the importance of taking steps to address funding shortfalls in the Social Security and Medicare programs.
Lori Lucas, of the Employee Benefits Research Institute, told the committee that retirement savings policy could be divided into pre- and post-2006 Pension Protection Act, arguing that the system pre-PPA was “do it yourself”, but PPA incentivized automated plan features that greatly increased participation and savings. Still, Lucas, said, the aggregate retirement savings shortfall is $3.68 trillion, mostly due to lack of access for employees of smaller companies. She said the open Pooled Employer Plans enacted as part of SECURE in 2019 could help with small businesses, but more is needed. She also cited specific problems including leakage as younger workers with small account balances take cash-outs when they change jobs and suggested that auto-portability to a new employer’s plan could help.
Shai Akabas of the Bipartisan Policy Center referred to gaping holes in the retirement savings system, calling running out of money in retirement the top worry of a majority of Americans, and saying the problem was especially acute among low-income workers, workers without college degrees, women, and people of color. He said there were three key policy areas – expanding coverage in small and medium sized businesses, creating an auto-enrollment mechanism for emergency savings, and building on other auto-features in existing plans. Akabas also talked about the importance of shoring up Social Security’s finances sooner rather than later
Deva Kyle, an attorney with Bredhoff and Kaiser who previously worked at the Pension Benefit Guaranty Corporation, Treasury, and as a detailee to the House Ways and Means Committee, cited the importance of addressing problems in the system related to class disparities, gender disparities, and racial disparities. She cited statistics that average retirement savings among white families are $160,000, while for black families the comparable number is $25,000, and for Hispanics it is $29,000. She noted the connection between low-income and low savings.
Dave Gray, the head of Workplace Retirement Products for Fidelity said the current system of retirement savings works well for those who can access and maximize the features of the system. He said Pooled Employer Plans are an excellent step forward, that Fidelity has created a PEP which is deliberately focused on needs of small businesses who do not offer a retirement plan. He said PEPs would “go a long way to reduce the retirement gap.” He also called for further legislation to allow employer matching contributions for emergency savings and student debt repayments. Noting that couples would need $300,000 to pay for health care costs in retirement, he said Health Savings Accounts are a good way to help.
Testimony is available here.