Source: United States Senator for Ohio Rob Portman
September 25, 2019 | Press Releases
WASHINGTON, DC – Today on the Senate floor, U.S. Senator Rob Portman (R-OH) delivered remarks highlighting his legislative efforts to help more Americans save for retirement. The bipartisan Retirement Security & Savings Act, which Portman introduced with Senator Ben Cardin (D-MD), includes a broad set of reforms – 57 specific provisions – designed to help more Americans save for their retirement, including raising the age for required minimum distributions to age 72 in 2023 and to age 75 by 2030. He also discussed the need to quickly pass his Retirement Security Preservation Act, which would reform pension nondiscrimination laws to prevent more than 450,000 Americans from having their pensions frozen through no fault of their own. That bill is included in the House-passed SECURE Act, for which Portman also voiced his support.
Transcript of his remarks can be found below and a video can be found here.
“Mr. President, I’m on the floor tonight to talk about retirement security, something everybody cares about. Who doesn’t want peace of mind in retirement? When I’m back home, I hear about it all the time partly because a lot of people are worried about the costs they’re going to have in retirement, including long-term care costs. A lot of people are seeing their parents, grandparents living longer, healthier lives yet they don’t have the retirement nest egg to be able to keep up. We need to do something to help on that. Social Security is there. It’s the safety net. It needs to always be there. But that’s what it is, just a base amount. $1,200 a month is not very much which is the average for some folks in my home state of Ohio. So you’ve got to have private retirement savings that adds to that. That can be savings you have in your bank account, but the best way to do it is through a 401(k) account at your work where the employer hopefully puts a match in so it’s a good deal for you because you put your money in and the employer puts money in. You get to have a tax deduction for it.
“An IRA, even if you’re not at work, you can take out an individual IRA. You get a tax deduction. That’s good. And then some companies have defined benefit plans, the old pension plans. Those are great if you have one. Not as many workers do anymore but we want to preserve those that are left. If you’re a federal government employee, you do have the federal employees’ pension plan which works for them. All this together is incredibly important right now for the people I represent and people are worried about it. Some of the statistics are actually pretty scary that a lot of people that work for small businesses don’t have access to a plan altogether. They just don’t have any opportunity to get a retirement savings plan. About 50 percent of workers in these small businesses are in that category, as an example.
“Over time we’ve tried to address some of these issues. Right now, fortunately, the United States Senate has a few bills that it could take up that actually help in that. I’ve been working on this issue for a number of years, actually about 20 years going back to my days in the House with now-Senator Ben Cardin. We passed legislation to expand how much you can put into a retirement account, 401(k), IRA, increasing amounts. But also the catchup contributions some people are familiar with. Also what’s called auto enrollment, so companies automatically enroll you unless you choose not to enroll which helps to get the participation rate way up, about 75 percent up to 95 percent. So we’ve done some things that have helped. And because of that, I know that if you provide more incentives for retirement, it works. Because it worked back in 2001.
“In fact, if you look at what’s happened since then, total retirement savings have increased from about $11 trillion to about $29 trillion since 2001. And by the way, this means there’s more resources available in our economy because there’s more savings. Savings is a good thing for investment. It leads to higher GDP, higher economic growth, greater access to capital for small businesses and so on. So this has worked. By the way, these retirement nest eggs have increased among every income quintile since 2001, when you adjust it for inflation. Every quintile. So it’s not just people at the higher end or even the middle. It’s people who are low income, middle low, middle income, higher income have all benefited from this. But as I said, we’ve got a lot more to do because even with that Social Security which is the safety net, really tough to live on that, people are not saving enough through their private savings and their retirement plans. We need to finish the work that we started.
“We also need to fix some outdated regulations that just don’t make sense in today’s world. I’m chair of what’s called the Subcommittee on Retirement in the Finance Committee so we’re working on these proposals on a bipartisan basis. And we’re making some progress. I want to tell you about some of those bills now. One bill is one that’s before the Senate right now in the sense that it’s already passed the House called the SECURE Act. One is a larger bill that does more than the SECURE Act that has been introduced by Senator Cardin and myself. And then there is a small provision I want to mention tonight that has been introduced separately, also is in the SECURE Act that is an urgent thing to pass because there are a bunch of people that are going to lose their retirement benefits unless we pass it very soon.
“Let me back up and give you some of the troubling facts about why we need to do something here. First of all, less than half of employees, again that’s small businesses with less than 50 workers, less than half of those workers have access to a plan. So the problem is really in our smaller businesses. We know that. Larger businesses all tend to have a 401(k). Many have a defined contribution plan. Others have a defined benefit plan like a pension. But they tend to have retirement options for workers but many small businesses do not. Even when workers have access to a plan, still only 34 percent participate. So among small businesses, fewer plans than there should be but also fewer people participating. Only 22 percent of part-time workers are in plans. Increasingly in our economy, people have part-time jobs, may have a few part-time jobs but they don’t have a retirement plan in any of them. By the way, when you look at this in terms of the folks who are not participating, low-income Americans also are not participating as you would want. 22 percent only of low-income families are participating in retirement plans. Many of them don’t have the disposable income to be able to contribute. We’ll talk about that in a second, how to address that problem.
“And then the final problem I want to mention is not to do with the small businesses or part-time workers or low-income workers. It has to do with what we talked about at the beginning which is people actually outliving their retirement. Let’s face it, we’re living longer and healthier lives as Americans. That’s a good thing. But a lot of people didn’t or couldn’t plan for that. So they may have thought, I’ve got a nice little nest egg here, a 401(k). I’m going to retire at age 65. When they’re in their late 80’s or 90’s, they realize there wasn’t enough set aside. Here’s an opportunity for us to address that as well.
“Earlier this year we introduced this legislation, Senator Cardin and myself, it’s called the Retirement Security and Savings Act. It addresses all these problems that I mentioned. It has more than 50 reforms actually to help Americans achieve this goal of a safe, secure retirement, peace of mind after your working years, letting people retire with dignity. It has a few important provisions I want to mention tonight. I won’t go into all 50 but mention some of them.
“First, to increase this low 22 percent coverage among low-income workers, it expands what’s called the Savers Credit. This has worked well but it is not refundable now meaning that for a lot of people who are low income, they can’t take advantage of it. They don’t have the income tax liability particularly with the new tax bill, frankly, where a lot of people have lower taxes so they don’t have the ability to take the deduction but they can use a credit. We change the Savers Credit to expand it so it’s more usable and we make it refundable but not refundable to individuals but to a retirement account. You don’t want to provide more funding out there that is not going to be used for this correct purpose of retirement. It has to go into your retirement account. In addition it increases the credit amount available to a lot of low-income savers. This is really going to help on getting people who again are working but they’re not saving, to be able to save for retirement.
“The bill also addresses the problem of only 22 percent of part-time workers being in a plan. It requires employers to allow part-time workers who have completed two years of service to participate in a 401(k) plan. This is a big deal to the AARP as an example. One reason they’re strongly supporting this bill, by the way as well as a whole group of businesses and nonprofits and others, people love this bill because it’s going to help people save for retirement. What’s not to like there? But particularly with regard to part-time workers saying if you’ve completed two years of service, you need to have access to a 401(k). That’s going to help.
“It allows employers to make matching contributions to the 401(k) accounts of employees who are paying off student loans who otherwise wouldn’t receive a full match. Why? Because they have to choose between paying down the student loan debt they’ve got and saving for retirement. I really like this idea. It’s an innovative one. It was first proposed by Senator Ron Wyden on the Finance Committee, the ranking Democrat. But I think this will really help with, again, people who are coming into the work force. They’ve got the student loans so they’ve got to pay off that debt. They can’t afford to put money against 401(k)s. This enables them to put that money into the match and help them to be able to get started on retirement. In Ohio, by the way, on average the student debt now for someone coming out of one of our four-year colleges, universities is $27,000. That’s tough for a lot of people to get started in life.
“To get at this problem we talked about a few small businesses having plans, Portman-Cardin increases the tax credit that small businesses receive for starting a retirement plan. It’s $500 now. We take it up to $5,000, a tenfold increase that would really help small businesses we’re told. This is why they support the bill. It also provides an innovative tax credit idea. Small businesses will get a tax credit who automatically enroll their employees into plans at least every three years. What does this mean? We talked about auto enrollment earlier. If you have auto enrollment in your company, your participation rate goes up to 95 percent from about 75 percent. Why? Because people come into the workforce. They might not sign up for the 401(k) but if they’re automatically signed up, they’re not going to say no they start to get a little bit of that payroll tax and a little of their paycheck going toward retirement and by the way, they find out this works, you know, start a nest egg. They like it and stick with it. Same thing here. If at least every three years you have to automatically enroll your employees, what happens? You get people into these plans and they stay in these plans.
“We think this is going to be a big deal in small businesses and we think it’s worth giving them a tax credit for, kind of an innovative idea. And for small businesses, our bill also reduces some of the burdensome and duplicative regulations that are associated with administering the plan. For a lot of small businesses, they don’t have a lawyer or general counsel. They don’t have, you know, a professional who can help on this. But the HR person would sure like to have the ease of administration of these plans. So we do that which is important to get more of these small businesses offering these plans.
“The problem we have talked about with Americans living longer and healthier lives and being in danger therefore of outliving their retirement, we also address. And for those who follow this closely because you’re getting close to retirement, pay attention here because this could be helpful. To help folks who have accumulated retirement savings preserve those nest eggs, to help preserve your hard earned nest egg, the bill actually changes what’s called the minimum distribution rules. If you’re in your late 60’s or maybe turning 70, you may be shocked to have just found out that, guess what, that 401(k) you’ve got or the IRA you’ve got, you have to start distributing money out of it under what’s called the minimum required distribution rules.
“My dad was a little surprised by that, because he was still working at age 70 and a half, when you have to start doing that. A lot of people back home are still working at age 70 and a half. And they want to keep their retirement nest egg there and they want to keep building it up. They hope to live a long life and they want to make sure they have something in there. But instead, no when you’re 70 and a half, you got to start taking it out and paying taxes on it. We changed that from 70 and a half to 75. We do it over a few years because it is an expensive provision frankly in this bill. We pay for it through other means. But the idea is, you want to let people keep that money in their nest egg. And by the way, if your nest egg is $100,000 or less, there’s no minimum required distribution anymore under our bill. So for people that, again, are 70 and a half and are wondering, ‘Why do I have to start taking this money out? I have $65,000 that I have saved up all these years and I’m still working or I don’t need to take it out for retirement.’ Let them keep it in that plan. If you’re under $100,000 in your account, keep it in going forward for forever. If you have more than $100,000 in there then for that additional amount you don’t have to start taking it out until you are 75 in our bill. So this is really going to help people to ensure that they can set aside money for retirement and they know it will be there when they need it.
“Our new Portman-Cardin retirement legislation has the potential to fundamentally reshape for the better how a large number of American folks approach their retirement planning. That’s a good thing, and I look forward to getting it passed through the Finance Committee and sent to this Senate floor for a vote. As I said earlier, even before we can get this broader package done, we have a smaller bill that’s sitting here in the Senate. It’s already passed the House and it is called the SECURE Act. It actually passed the House almost unanimously, 417-3. That rarely happens. And that shows you the kind of bipartisan support it has. It’s not as comprehensive as the bill I just talked about, but it does have some good provisions. It has that increase in the small employer tax provision we talked about. It also raises the minimum required distribution from age 70 1/2 to age 72, which is good.
“It doesn’t go to 75 and it doesn’t have the $100,000 improvement that we have but it does help. It also helps long-term and part-time workers contribute to 401(k)s which is good. So we go further in our bill, but this SECURE Act is a good step in the right direction. I support it. I support bringing it up and passing it. It already passed the House. I do think that we ought to allow a couple amendments on each side because this SECURE Act that passed the House has not been voted on on this floor before. It came out of the our committee back in 2016, I believe, so it’s been a while. There hasn’t been debate on it or deliberation. Why not allow a few amendments on it on each side? Democrats probably have a few amendments they’d like to offer. Republicans probably have a few they’d like to offer. But the point is, let’s get that bill up and get it passed.
“Then there’s this final bill that I was talking about. It is part of the SECURE Act, which is on the floor right now ready to go. It’s also been introduced separately. And this is to address an urgent problem right now that’s affecting over 450,000 Americans. Now, it gets a little complicated here, as retirement plans do sometimes. But these are people who are in these defined benefit plans, the pension plans. And they are in businesses that have shifted from a defined benefit plan to a defined contribution plan like a 401(k). Now these are businesses who have said, ‘We are not going to have additional pensions anymore, we’re going to go to a 401(k) where individuals contribute and individuals control their account.’ Now what happened in some of these businesses is they said, ‘But if you’re already in a defined benefit plan, you can stay in it. We’re going to freeze your plan going forward, so new employees can’t go into it, but you can stay in your plan.’ And I think that’s fair. Let people who are in the plan, who paid in all these years continue to stay in that defined benefit plan as they retire.
“The problem is that inadvertently, the rules with regard to pensions are tripping these people up. Because there’s something called the nondiscrimination income testing. In other words, you can’t have too many of the benefits go into a defined benefit plan to people who are more on the high-income as we spread out. The people that are left in these plans are people who are older, because the new employees have had to go to the defined contribution plan. So it is an older group of employees, and, therefore, more highly compensated because they’ve been given raises over time. So they trigger this nondiscrimination income testing and they lose their benefits. They can’t continue to accrue benefits. That’s just wrong. These are people who have played by the rules, done everything right, through no fault of their own, but through this quirky regulation, which was never meant to address this kind of an issue, they’re facing the very real possibility — 450,000-plus — people that they’re going to lose their benefits through no fault of their own. They should be able to continue to accrue benefits and get this retirement plan that they have worked so hard to be able to enjoy. Nobody really disagrees. Again, it is in the SECURE Act. We’ve introduced it separately.
“Around here you run what’s called a hotline with your fellow senators to see, does anybody object to this, if it is a noncontroversial piece of legislation. So we did that with this. And, guess what? This legislation was approved by everybody on the Republican side. Nobody had a problem with it. Again, it’s just a question of being sure that these flawed rules aren’t inadvertently hurting these 450,000 Americans. And then we ran the hotline on the Democratic side and it was also very popular over there but at least one person objected. Maybe more but at least one. So we’re trying to work on this together to try to get it done and we found out the objection is not based on the legislation at all. No one has any problem with the legislation. It’s based on their interest in not allowing anything that’s in the SECURE Act to be done separately because they want to be sure the SECURE Act gets done. I want to be sure the SECURE Act gets done, too. It is an important bill.
“It is a first step in the right direction as we said. But let’s not take it out on these employees. If we don’t fix it, then by this year end, like in the next couple months here, these people are going to lose their benefits. So my hope is that now that we have tested the waters and found out that it’s not controversial among my colleagues, let’s just bring it up under unanimous consent, get it done, and then let’s move on and do the SECURE Act, too. So my hope is that we’ll be able to do that.
“It’s been introduced again as a stand-alone bill. So it’s not like it’s the other parts of the SECURE Act that are only in the SECURE Act that stand alone. So it shouldn’t violate anybody’s sense of fairness to say, let’s deal with this separately and get it done. I want to thank Chairman Chuck Grassley and Ranking Member Wyden for helping on this because they have been supportive of the SECURE Act. They’ve been supportive of dealing with this quirk in the law that deals are these 450,000 people that are going to lose their benefits and they’ve been supportive of us doing this broader retirement package as well. I hope we can get them done. Let’s do it in order. Number one, let’s get the Retirement Security Preservation Act done. That’s the 450,000 people. Let’s just do that by unanimous consent. Everybody agrees to it let’s move to the SECURE Act. Get that done. Again, that was passed in the House almost unanimously. And then let’s move on to this broader Portman-Cardin legislation we talked about tonight. It really deals with these issues of small business coverage. It deals with the issue of low-income workers needing to save more. It deals with this issue of part time workers needing to save more. It deals with this issue of ensuring people aren’t outliving their retirement savings.
“Again, of the 50 plus revisions that are in there, there’s a lot that really help the people that I represent back in Ohio and folks all around the country. They deserve for us here in Congress to be focused on these kinds of issues. This is exactly what people expect us to do here, help them ensure they have a piece of mind in their retirement and we’re doing all we can to provide the incentives to make that happen.”