On Senate Floor, Portman Urges Senate to Pass House-Passed SECURE Act to Help More Americans Save for Retirement
WASHINGTON, DC – Today on the Senate floor, U.S. Senator Rob Portman (R-OH) urged his Senate colleagues to pass the bipartisan SECURE Act to help more Americans achieve a secure retirement. The SECURE Act passed the House of Representatives in May with an overwhelmingly bipartisan vote of 417-3. That’s why Portman is urging his Senate colleagues to pass this legislation as soon as possible. Several components of Portman’s bipartisan Retirement Security & Savings Act, which he introduced with Senator Ben Cardin (D-MD), are included in the SECURE Act. The SECURE Act includes a set of reforms designed to help more Americans save for their retirement, including a number of incentives designed to encourage small businesses to offer retirement plans to their workers as well as an increase in the age for required minimum distributions from 70 and a half to 72. The SECURE Act also includes Portman’s Retirement Security Preservation Act, which would reform pension nondiscrimination laws to prevent more than 400,000 Americans from having their pensions frozen through no fault of their own.
Transcript of his remarks can be found below and a video can be found here.
“I’m here on the Senate floor today to talk about the opportunity we have here in Congress to make substantial reforms to address an issue that keeps a lot of Americans up at night, and that’s whether they’re going to have enough money in their retirement. I chair the Finance subcommittee that handles retirement and pension issues, and I’ve worked to pass bipartisan legislation with then-Congressman Ben Cardin, now Senator Ben Cardin over the years. That legislation has helped let people save more in their IRAs, in their 401(k)s, other retirement plans, but we still have a long way to go.
“In fact, according to a recent study by Northwestern Mutual, two-thirds of Americans believe they’ll outlive their retirement savings. And you know what? People are right to be worried. Right now way too many workers don’t have access to a private retirement plan at all, and too many Americans who do have a plan are not saving enough. Less than half of the employees at businesses with less than 50 workers even have access to a plan. And only 34 percent of them participate. That’s where the major problem is. These are workers at mom and pop shops, small manufacturers, countless other employers who make up the backbone of our economy. We can and should do more to make sure these small business employees are set up for retirement, where they can find peace of mind in their retirement. What’s more, only 22 percent of part-time workers today have access to a plan. Only 22 percent.
“More Americans can have access to a retirement plan just by making some simple changes in law. A lot of Americans who do have a plan again haven’t saved enough, so they’re at risk of having their savings be inadequate for their increasing lifespans, as people are living longer, this is a bigger problem. Social Security is absolutely essential. It’s great that that safety net is there. It’s necessary to cushion the retirement incomes of Americans, but the average payout of Social Security is $1,400 a month. Try living on that. It is tough. A lot of people have a hard time with that, so they need this extra retirement savings. This lack of adequate retirement savings is made worse by the fact that we have more and more Baby Boomers who are retiring. So we have a bigger group in this category. And people are living longer, which is a good thing. But it creates an additional challenge with regard to retirement savings.
“For all these reasons, we need to overhaul the laws governing the private retirement system to help more people get access to workplace savings plans, encourage savings to help our economy overall and make sure people don’t outlive their savings in their retirement. The good news is that we have that package right before us right now here in the U.S. Senate. It would go a long way toward making these changes. It’s called the SECURE Act and it’s already passed the House of Representatives five and a half months ago by an overwhelming bipartisan vote of 417-3. That’s right, 417-3. That never happens around here. So this is totally bipartisan. It’s one of these issues where we would have an opportunity to pass it and then send it directly to the president for his signature, and he has said he would sign it. We’re so divided on so many issues here in Washington today, but this is one where we have a rare chance for a truly bipartisan solution to a problem that’s affecting people in every single state represented in this body.
“Today, what is called a live UC was tried. It was an attempt to get a vote on the SECURE Act, this legislation I’m talking about, with five amendments on each side. I support that, and I supported my colleagues today who came forward to offer that. The amendments that they outlined as our five Republican amendments all make sense to me, and then to the Democrats we said ‘you should offer five amendments also. You all pick them.’ Unfortunately it was objected to by the other side, and that didn’t surprise me because for the past five and a half months some of us have been trying to get this legislation done, and there have been concerns on both sides of the aisle. But we’re at a point now where we know, having raised this live UC, that we continue to have this stalemate. And after five and a half months, I think it’s time for us to move forward on these reforms.
“I like the amendments, again, that were proposed today. As an example, I agree that allowing 529 plans to be used for homeschooling expenses make sense and it’s a reform that Congress should take up. But this underlying bill that almost every Republican in the House supported, even without this provision, is one we also ought to take up. So as difficult as it is for us to give up on amendments on both sides, if that can’t be done because it gets blocked, then let’s go ahead and move the underlying legislation, the SECURE Act. It’s a worthwhile piece of legislation. It helps in a category where we need the help badly and that’s small businesses.
“They have an easier time setting up retirement plans under the SECURE Act because the bill increases the tax credit for small businesses. In general you get $500 now for starting a retirement plan. That would be raised to $5,000, a tenfold increase. In small businesses, again where the major gap in retirement plans are found say that would be a significant incentive for them to set up a retirement plan. Second it provides an annual tax credit to small businesses that introduce automatic enrollment features into their plan so small business employees would actually have to opt out of saving for retirement as opposed to opting in. These auto enrollment features are fantastic. The average participation of a 401(k) in a mid-sized business is about 75 percent of the employees. If it’s auto enrollment where you are automatically enrolled unless you opt out, it’s about 95 percent. This makes a lot of sense to me and that’s an innovative change in this legislation. Third, it streamlines a lot of the existing regulations associated with administrating a plan so that small business owners that already have a lot on their plates can have an easier time focusing on retirement for their employees rather than the bureaucracy and red tape.
“Perhaps most importantly to me, the bill allows small businesses to participate in what’s called Open MEPS, open multiple employer defined contribution plans. These are plans that allow business, some of the small businesses we talked about earlier, even if they’re not in the same industry, to come together to work together to set up joint plans for their employees. That becomes much more effective for small businesses because they can share the administrative costs, share some of the liability expenses. It has a lot of benefits for these small employers and will result in more people I represent getting a retirement plan. In all, the Joint Committee on Taxation estimates that this reform alone would lead to 700,000 new retirement accounts for small business workers who need access. In my experience, that security really works.
“I grew up in a small family business. My dad started his own business when he had five employees. My mom was the bookkeeper and he said, ‘We’re going to set up a retirement plan.’ It was called a profit sharing plan at the time. It was before a 401(k). They had no profit the first few years so it was a little awkward. When they finally started making some money, everybody had a stake, everybody got a little bit in their retirement nest egg. When 401(k)s came in, they immediately started a 401(k) plan as well. I meet people today who I have known my entire life who turned a wrench their whole careers as a lift truck technician, a lift truck mechanic, who have a retirement savings plan now because of that. A nice nest egg, $500,000, $600,000 that they were able to accumulate. I know this works. I know that small businesses have the opportunity to do more for their workers if we help them more here in Washington.
“I’m committed to trying to get this done. Another important part of the SECURE Act has to do with older Americans. It says that we should raise the age limit that forces older American workers to start depleting and paying taxes on their retirement savings. Currently at 70 and a half, 70 years old and a half, you have to start taking money out of your retirement plan. You have to whether you’re working or not. And many people are still working. My dad was still working at 70 and a half. It drove him crazy he had to start taking the money out. Why? He was still working, he wanted to keep building it up. We say let’s expand that in this legislation to age 72. As important the bill lifts the current prohibition on IRA contributions by people over 70 and a half, meaning people can make the choice if they want to keep investing in their retirements for as long as they see fit. Remember, somebody who makes it to 70 and a half is likely to live into his or her 90’s. There’s still a lot of time in retirement where you need to have that funding.
“That kind of flexibility is how we allow people to manage their own retirement savings that makes sense. The SECURE Act is good for small businesses, good for older Americans but the reforms don’t end there. It has a number of other good provisions. In fact, one that is particularly urgent. It reforms the pension nondiscrimination laws that I authored alongside my friend Senator Ben Cardin. Our legislation is very simple. It says we’ve got a glitch right now in current law. We introduced it as separate legislation earlier this year, but it’s now been made part of the SECURE Act. It’s a critical piece of legislation to pass, because if it doesn’t pass and pass soon like by the end of this year, 400,000-plus Americans are going to have their benefits frozen in their defined benefit plans. 400,000 people through no fault of their own. In recent years as many companies have transitioned from the traditional defined benefit plans – think of that as a pension plan - to a defined contribution plan like a 401(k), some of them have elected to grandfather existing employees by closing down their traditional DB plans but allowing those who were there to continue to have the benefits.
“Unfortunately what’s happened is that as they build up seniority, one of the rules in our current testing under 401(k) and profit sharing plans and defined benefit plans has come into effect. And inadvertently it has resulted in these plans not being able to continue to accrue benefits. So it wasn’t meant to work that way, but it has for a lot of these people who are in these plans. So as a result, again, 400,000 older workers are at risk of losing their benefits through no fault of their own. Tens of thousands of other workers have already been affected by these flawed rules. We’ve got to fix this. We tried to pass this legislation unanimously earlier this fall. It has no objection on the Republican side or the Democrat side, by the way, this provision, and yet we were not able to get it done because some would like to make it remain as part of the SECURE Act to be sure the SECURE Act gets passed. Well, the way to do this is let’s pass the whole thing. As I said, the SECURE Act makes sense. This particular provision is urgent. Let’s not wait. Let’s do it now so we can help those 400,000 Americans, again, representing states all over the United States that are represented here in this chamber.
“So let’s pass SECURE Act. It’s a bill that does a lot to put us on the right path. Does it do everything? No. Senator Cardin and I have introduced a more comprehensive bill called the Retirement Security and Savings Act. We go further in a lot of these regards we talked about today. But that’s a bill that will require more hearings and a markup and more consideration. In the meantime let’s do what we can. Let’s provide more certainty, more flexibility and more retirement savings. I’m hopeful we can pass this broader legislation soon with Senator Cardin, but in the meantime let’s take advantage of the chance right here in front of us. Let’s be sure we boost the retirement security of the American people through the SECURE Act. I hope my colleagues will all join me in this and we can pass this legislation as the House did on a strong bipartisan basis and get it to the president for his signature.”