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As 'Retirement Gap' Concerns Reach Across Partisan Divide, Senators Propose Savings Solutions

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Harkin calls retirement security “one of the most under-reported crises facing us as a nation.”

Some in the private sector are also on board with creating new kinds of retirement vehicles, which would bring more business to the financial services industry without necessarily placing more risk on employers.

Ron O’Hanley, former president of Fidelity Asset Management, and Laurence Fink, CEO of the asset management firm BlackRock, have endorsed forms of automatic retirement accounts.

Sen. Tom Harkin, D-Iowa, chairman of the Senate Health, Education, Labor and Pensions Committee, frequently calls retirement security “one of the most under-reported crises facing us as a nation.”

Although there may be consensus on the broad strokes, the details are much more complicated. Partly for that reason, retirement security proposals have gone nowhere in Congress, which has been more focused on current concerns than on threats that may be several years into the future.

For example, any proposal that would increase the administrative burden on employers is likely to run into opposition from small-business owners. According to the National Federal of Independent Businesses, only about 27 percent of small businesses currently offer retirement plans such as a 401(k).

Mandating that they offer some sort of automatic deduction, even if they are not on the hook for a contribution themselves, would create an untenable regulatory burden, said Eric Reller, a spokesman for the NFIB.

“There are so many regulations going into effect every day that it would just be another thing to add to that,” he said.

At the same time, any proposal that mandates employers offer plans such as 401(k)s is unlikely to find much support among Capitol Hill Republicans, according to a Senate aide. But Republicans might support an idea that automatically deducts money from workers’ paychecks to set up some form of retirement account, provided employers were absolved of fiduciary responsibility and employees had the chance to opt out.

“If you’re automatically enrolled and you can opt out, it’s not a mandate,” the aide said. “But you are taking advantage of human nature and behavioral science.”

But states, including California, that have sought to create their own state-run mandatory automatic retirement savings programs have angered industry groups that say they would duplicate existing programs in the private sector and still leave employers vulnerable to lawsuits.

Liberal groups also have not all embraced Obama’s automatic IRA proposal, saying they prefer a system in which assets are pooled to minimize fees and risks. Under the current IRA or 401(k) system, people risk outliving their savings and lose a significant amount of their assets to fees, said David Madland, a retirement policy expert at the Center for American Progress.

“At the theoretical level you can get people to say, ‘Yes, it would be a great idea,’ and then — the old saying that my grandmother used to use — the devil is in the details,” said Dallas Salisbury, president and CEO of EBRI. “You end up with different pieces of it having different levels of consensus. Obviously, if there was a total consensus, it would already have been done.”

In 2011, the Heritage Foundation issued an extensive report called “Saving the American Dream” that outlined a series of policy solutions it said would boost economic security. It called for a nationwide automatic retirement account that would eventually set aside 6 percent of workers’ paychecks unless they opted out.

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