Witnesses who testified before a Senate panel called on Congress to address the retirement savings coverage gap, racial disparities and emergency savings, as well as other key security issues in the retirement.

The May 13 hearing before the Senate Committee on Health, Education, Work and Pensions (HELP), “Retirement Security: Building a Better Future,” brought together a single group of witnesses who proposed suggestions ranging from improving the automatic functionality of DC plans and group employer plans (PEP), to setting up emergency sidecar savings programs.

Witnesses included Lori Lucas, President and CEO of EBRI; Shai Akabas, director of economic policy at the Bipartisan Policy Center; Deva Kyle, lawyer at Bredhoff & Kaiser; and Dave Gray, manager of workplace retirement products at Fidelity Investments.

Senator Patty Murray (D-WA), who took over as chairman of the Senate Aid Committee at the start of the 117^e Congress called for addressing the challenges facing groups it believes have been historically neglected – including minority groups, women, low-income people and people with disabilities – by pushing for measures to upgrade. day the retirement system.

“We were facing a retirement crisis before COVID-19 – but like so many other things, this pandemic just dumped gasoline on the fire,” Senator Murray said. “If we are to rebuild our country stronger and more just, we have to face the fact that for far too long the ways in which we help families plan for the future have been stuck in the past.

Sen. Richard Burr (R-NC), the Committee-ranking Republican, urged his colleagues to build on the success of the existing DC system – calling it the “reliable superstar of the retirement world” – by acting on any future legislation and to do so in a bipartisan way. “The question before us is what is working well and what is behind schedule and what needs to be improved. The answer to this question is easy at the surface level. The system works great, ”Burr said. “The system doesn’t work very well when you can’t or can’t participate. What we need to do is help Americans and their employers deliver, manage, and fund individual pension plans. ”

Recommendations

In terms of testimony, there was some overlap with many of the recommendations made by witnesses, but there were also some outliers.

Some general areas of agreement included the additional incentive for small businesses to offer a plan and automatically register workers, such as changes to the current SECURE Act 2.0, as well as promoting savings programs. emergency as part of DC diets.

“Notably, SECURE 2.0 is taking an important step in helping people repaying student debt by allowing employers to make matching contributions to a 401 (k) plan while their employees pay off their student loans,” Gray testified. by Fidelity. “The legislation also includes a significant improvement in the openness of MEPs and would allow 403 (b) plans to participate in MEPs and collective employer plans. We believe that open MEPs and PEPs will go a long way in closing the coverage gap for millions of Americans who do not yet have access to a workplace pension plan. ”

“We know that the biggest gap in access to workplace pension plans is in small businesses that don’t have the means or the resources to offer traditional defined contribution plans. Solutions such as PEPs can serve as attractive alternatives, ”said Lucas of EBRI.

Lucas suggested policies to reduce plan leakage, to make payout or deferred annuities more widely available, and to support financial literacy. “When it comes to stemming leaks, a clear area of ​​focus is layoffs, as well as improving the existing safe harbor and helping employees with emergency savings. She said. “Finally, as more and more private sector workers rely solely on their contribution defined as the only workplace retirement savings plan, there is a need to hone their financial skills around debt and find ways to help them spend more of their retirement savings. in complete confidence. “

One area that may not be so bipartisan – even though it came from the Akabas of the Bipartisan Policy Center – was a suggestion to further relax the fiduciary obligations of small businesses participating in PEPs. “Instead of pretending that small employers can effectively meet these obligations – and making them bear the cost of doing so – policymakers should rethink this equation,” Akabas said. “It would be naive to suggest that a simple solution exists; this is a thorny issue, ”he said, adding that some combination of increased fiduciary responsibility from other private sector entities and additional regulation from the Ministry of Labor“ should be able to relieve small employers. of these inappropriate obligations. ”

Akabas also called for a nationwide minimum coverage standard for all employers of a certain size that prevails over the state’s various mandates, suggesting that this would be a way to expand access to employment. workplace retirement savings that would be “less burdensome” for companies.

Several sections of the hearing also touched on racial and other disparities in retirement savings and what can be done to address these issues. Deva Kyle of Bredhoff & Kaiser testified that policies that improve workers’ wages, require employer contributions (not just matching contributions) and provide workers with funds to cover emergencies would help boost savings- workers’ retirement.

She added that proposals that specifically aim to reduce retirement income disparities will also help. To that end, Kyle has offered his support for the Women’s Retirement Protection Act, which extends spousal consent requirements to DC plans and allows more long-term part-time workers to participate in company pension plans.

A video replay of the hearing and links to the testimony of witnesses are online here.