Sen. Susan Collins
U.S. Sen. Susan Collins (R-ME), chairman of the U.S. Senate Special Committee on Aging, this week launched a multi-part strategy to help Americans better prepare for retirement.
“Ensuring that more Americans are secure financially in their retirement years is one of my highest priorities,” Sen. Collins said on Monday. “This is a crisis that is looming on the horizon.”
Sen. Collins on Feb. 4 sponsored two bipartisan bills to improve people’s access to retirement savings plans and Wednesday she will preside over a Senate Special Committee on Aging hearing to question a variety of stakeholders on retirement issues.
“It used to be that we could count on the three pillars that made up the retirement system: social security, a pension from an employer, and also personal savings. All three of those pillars are shaking right now,” the lawmaker said from the floor of the U.S. Senate.
The Feb. 6 hearing, “Financial Security in Retirement: Innovations and Best Practices to Promote Savings,” will focus on the three retirement challenges faced by Americans: accessing retirement plans through their employers; amassing sufficient retirement savings; and making sure there’s enough savings and benefits to last through retirement.
Witnesses scheduled to testify before committee members include Gene Dodaro, U.S. Comptroller General for the U.S. Government Accountability Office; John Scott, retirement savings project director for PEW Charitable Trusts; and Denis St. Peter, president and CEO of CES Inc., a consulting firm headquartered in Sen. Collins’ home state of Maine that on Jan. 25 received recognition as the 2019 Business of the Year by the Bangor (Maine) Region Chamber of Commerce.
“A recent Gallup poll found that only 54 percent of working Americans believe that they will have enough money to live comfortably in their retirement years,” Sen. Collins said. “We must therefore continue to work to ensure that more Americans will have sufficient resources that they need to enjoy what is supposed to be their ‘golden years.’”
Sen. Collins sponsored two bipartisan bills that “attempt to strengthen two out of three of the legs” comprising what she called the three-legged U.S. retirement system stool. “It is vital that we pass this legislation to ensure that Americans can enjoy a financially secure retirement and not end up retiring in poverty,” she said.
The first bill, the Retirement Security Act of 2019, S. 321, which Sen. Collins and U.S. Sen. Maggie Hassan (D-NH) introduced on Monday, would help small businesses offer retirement plans to their employees and encourage individuals to boost savings for retirement, according to the lawmakers.
“Research has shown that there is a significant gap between what people need to maintain their standard of living after retirement and what they actually have, and we must do more to help workers close that gap,” Sen. Hassan said.
In fact, that gap actually amounts to $7.7 trillion, according to the nonpartisan Center for Retirement Research, while a recent Gallup poll found that just 54 percent of working Americans think they’ll have sufficient funds to live comfortably in retirement.
Sen. Collins said both she and Sen. Hassan represent states with a large aging population.
“We know how difficult it is for many older Americans when they are struggling with high healthcare costs, heating their homes, affording their medications, and trying to get by in their retirement years,” she said, adding that S. 321 would ease the process for businesses to enter into multiple employer plans (MEPs) to, in turn, offer retirement programs to their employees.
“MEPs permit small companies to share the administrative costs and burden of a retirement plan and that helps to lower costs overall,” said Sen. Collins. “Current law discourages the use of MEPs, however, because it requires a connection, or a ‘nexus,’ between unrelated businesses in order to join together as a MEP, such as membership in the same trade association.”
S. 321, the lawmaker said, would waive that nexus requirement for businesses and would prevent employers from losing their tax benefits if one member of the MEP fails to meet the minimum requirements necessary to obtain such tax incentives.
Among other provisions, S. 321 also would require that federal compliance be simplified for small businesses opting to provide employees with employer matches on contributions up to 10 percent of pay, for example.
“This is an example of a provision that would encourage employees to save more for their retirement by giving them this tax incentive,” said Sen. Collins.
The second bill Sen. Collins introduced on Monday with U.S. Sen. Mark Warner (D-VA) is the SIMPLE Plan Modernization Act, S. 322, which would support small businesses and their employees that want to use SIMPLE retirement plans as an option to save for retirement.
Congress established the Savings Incentive Match Plan for Employees, or SIMPLE plans, in the Small Business Job Protection Act of 1996 to encourage small businesses to provide retirement plans to their employees.
Businesses having 100 or fewer employees currently may create SIMPLE retirement savings accounts for their employees as long as the employers don’t have another employer-sponsored retirement plan.
“Financial advisors from Presque Isle to Portland have shared their concerns that neither employees nor their employers are in a good position to save for retirement,” Sen. Collins said. “The SIMPLE Plan Modernization Act is a win-win proposition for retirement security, encouraging small business owners and their employees to take steps to save for retirement.”
“The changing nature of work has made it more challenging for many Americans to plan for their retirement,” added Sen. Warner. “This commonsense legislation will make it easier for small businesses to support their workforce in saving for retirement.”
Among several provisions, S. 322 would increase the contribution limit for SIMPLE plans to allow small business employees to save even more each year on a tax-deferred basis.
S. 322 already has garnered an endorsement from AARP.
“Employees of small businesses are far less likely to be offered retirement savings accounts than those in larger companies,” wrote Joyce Rogers, the organization’s senior vice president of government affairs, in a Feb. 4 letter sent to Sens. Collins and Warner.
“While over 60 percent of those who work for employers with 100 or more employees are offered these accounts, this proportion drops to about half of those who work for an employer with between 50 and 100 employees, to about a third of those working for companies with between 10 and 50 employees, and to less than 20 percent for those with 10 employees or fewer,” she wrote.
Both S. 321 and S. 322 have been referred to the U.S. Senate Finance Committee for consideration.