Harkin Unveils Legislation to Address Retirement Crisis, Rebuild Private Pension System
Harkin, Chair of Senate Pensions Committee, Proposes “Universal, Secure, Adaptable (USA) Retirement Funds Act” to Expand Access to Privately-Run, Portable Retirement Plans
WASHINGTON, D.C. — At a Newsmaker press conference at the National Press Club today, U.S. Senator Tom Harkin, Chairman of the Senate Health, Education, Labor, and Pensions (HELP) Committee, unveiled bold new legislation to tackle the growing retirement crisis and rebuild the private pension system. Harkin’s legislation, the Universal, Secure, and Adaptable (USA) Retirement Funds Act of 2014, comes at a time when the retirement income deficit has reached at least $6.6 trillion, leaving many Americans vastly unprepared for retirement. Seventy-five million working Americans do not have a retirement plan, and half of all Americans have less than $10,000 in savings.
“Our country is facing a growing retirement crisis, and it’s only going to get worse unless we take action,” Harkin said. “The USA Retirement Funds Act offers a common-sense solution to the retirement crisis by giving the 75 million people without a retirement plan at the workplace the opportunity to earn a safe, portable, and secure pension benefit for life. USA Retirement Funds would be 21st century retirement plans, run entirely by the private sector, that drastically reduce costs through professional management and risk sharing. Simply put, giving people without access to a quality employer-provided plan the opportunity to earn a retirement benefit would help ensure every American enjoys their golden years with the dignity and financial independence they deserve.
“The USA Retirement Funds Act is particularly good for small business owners. It would allow them to offer more competitive benefits to their employees while at the same time relieving them of the burden of managing a pension plan themselves.” Harkin added. “It is important to note that the USA Retirement Funds Act would also be good for the economy. It would significantly increase retirement savings, and all of that savings would be invested right back into the economy, fueling new growth and job creation.”
Harkin’s legislation would create a new type of privately-run retirement plan that combines the advantages of traditional pensions—including lifetime income benefits and pooled, professional management—with the portability and ease for employers of a 401(k). The key features of USA Retirement Funds include:
- Universal Coverage: USA Retirement Funds would be available to everyone, including the more than 61 million people without access to a workplace retirement plan and the 14.5 million people who are self-employed.
- Automatic Enrollment: Employees would be automatically enrolled at a rate of 6 percent per year, but could choose to raise, lower, or stop their contributions.
- Secure Lifetime Income: Benefits would be paid monthly for life, and participants would be shielded from market volatility and other risks.
- Lower Costs: Pooled, professional management and risk sharing will reduce the cost of retirement by up to 50 percent.
- Portability: People would be able to take their benefit with them as they change employers.
- Simple and Easy for Businesses: Small businesses can easily participate and would not have to take on risk or undue administrative burden.
Public support is especially strong for retirement system reform, with numerous studies and polls showing that Americans are concerned about retirement security and want access to better options. Research by the National Institute on Retirement Security (NIRS) found that 85 percent of Americans are worried about their retirement prospects, and 84 percent say that all Americans should have access to a pension to be self-sufficient in retirement. The study also found that Millennials – the youngest generation of workers – overwhelmingly agree (95 percent) that reforms are needed to the current retirement system, and 90 percent say lawmakers need to make this a high priority.
Just today, the Center for American Progress Action Fund released a polling brief showing that Americans are deeply worried about their retirement security and believe retirement reform should be a much higher priority in Washington. Polling data summarized by the Pensions Right Center found that 84 percent are concerned that current economic conditions are impacting their ability to achieve a secure retirement, and two-thirds cite saving for retirement as their biggest financial worry. Furthermore, small businesses are also behind reform, with an American Sustainable Business Council poll showing 70 percent of small business owners saying that a lack of retirement security undermines the confidence and willingness to spend among older Americans.
Joining Harkin to unveil the USA Retirement Funds Act were Mary Kay Henry, President of the Service Employees International Union (SEIU), and Denise Bowyer, Vice President at the American Income Life Insurance Company. Henry discussed how the legislation would give middle-class families the opportunity to earn a secure retirement benefit that they can take with them as they change jobs and that they cannot outlive, while Bowyer outlined how the bill would also make it simple for employers to offer a benefit without having to take on risk or administrative burden.
“SEIU firmly believes that all Americans should be able to enjoy a dignified retirement after a lifetime of hard work and playing by the rules,” Henry said. “We think Senator Harkin’s bill will fill a critical need for the half of the working population who have no access to a retirement plan at work."
"Senator Harkin's USA Retirement Funds Act fills in many blanks now left by the IRA or company-sponsored retirement plan options with an approach that is easy and low-cost for the many employers who want to offer a plan but feel that existing programs are too costly,” Bowyer said. “It also importantly begins to address a critical problem facing business leaders today: the prospect of an aging customer base with limited means. Since many American workers are not saving enough for their retirement, Senator Harkin's call for an automatic enrollment and deposit system via payroll deduction is a smart move. Businesses thrive only when there are enough customers with enough income to afford goods and services. This plan should give every business leader more confidence in the future strength of our economy."
In additional to establishing USA Retirement Funds, the Act would make it easier for small employers to offer pooled retirement plans, encourage plan sponsors to incorporate lifetime income solutions into their defined contribution plans, provide increased fiduciary and other protections for plan participants, simplify the administration of defined benefit pension plans, and improve the pension insurance system.
Harkin’s legislation follows a July 2012 report examining the nation’s burgeoning retirement crisis, which found that one of the main causes behind the crisis is that people who work for small businesses lack access to quality, low-cost retirement plans. As HELP Chairman for the last four years, Harkin has also convened ten hearings to study and discuss retirement security and ways to tackle the retirement crisis.
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