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

Douglas Graham/CQ Roll Call File Photo
Harkin calls retirement security “one of the most under-reported crises facing us as a nation.”

Two years later, the Center for American Progress called for a new form of retirement account in which contributions from workers would be pooled and professionally managed by a nonprofit entity. Pooling resources would minimize the market risk now borne by individuals in 401(k) plans or by employers in traditional defined benefit plans. The Center for American Progress proposal would also likely result in much lower fees than savers are currently paying.

“Most people realize if you don’t do anything you’re going to have a situation that neither conservatives nor liberals like,” said Madland. “You’ll have a lot of people in poverty or close to it and you’re going to have more people relying on government programs.”

Harkin has also proposed something similar to the Center for American Progress plan. In legislation (S 1979) introduced last month, the retiring senator outlined a plan to automatically deduct and invest 6 percent from paychecks of workers who do not have access to workplace retirement vehicles. The accounts, known as USA Retirement Funds, would be mandatory for employers with more than 10 employees. In Harkin’s idea, assets would be pooled and managed professionally and would provide an annuity upon retirement, guaranteeing retirees a monthly check for the rest of their lives.

On the Republican side, Hatch has introduced legislation (S 1270) that would make it easier for smaller employers to voluntarily set up accounts for workers. Known as “starter 401(k)s,” the accounts would not be subject to the same administrative burdens that employers who offer traditional 401(k) plans must shoulder.

The legislation is intended to entice small businesses and start-ups to offer the starter 401(k) plans by making offering tax credits and by allowing them to forgo having to match their employees’ contributions.

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