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Graff Unveils Game-Changing Savings Projections in Senate Hearing

In testimony before the Senate Finance Committee on July 28, Brian Graff, CEO of the American Retirement Association, cited projections that enactment of new legislation could create 51 million new individuals saving for retirement and add an additional $6.2 trillion in retirement savings over a 10-year period. 

Graff also noted that the combination of two retirement savings proposals—the Automatic IRA Act and the Encouraging Americans to Save Act—also would greatly benefit the Black and Latinx communities, creating 5.8 million new Black retirement savers and 8.4 million new Latinx savers who earn less than $100,000 per year.  

Ultimately, of course, the emphasis was on expanding coverage and access to workplace retirement programs, with participation boosted by automatic enrollment provisions (both key provisions of the Automatic IRA Act), and the additional incentive and economic benefit of the expanded Saver’s Match included in the Encouraging Americans to Save Act. 

The July 28 hearing, “Building on Bipartisan Retirement Legislation: How Can Congress Help?,” helped set the stage for action in the coming months on bipartisan retirement security legislation that builds on the 2019 SECURE Act. “I hope today’s hearing is a launching pad for the committee to develop another bipartisan retirement package in the months ahead,” Sen. Ron Wyden (D-OR), Chairman of the Senate Finance Committee, said in his opening statement. 

Other witnesses testifying at the hearing were: 

  • Aliya Robinson, Senior Vice President of Retirement and Compensation Policy at the ERISA Industry Committee;
  • David Certner, Legislative Counsel and Policy Director at AARP; and
  • Oregon State Treasurer Tobias Read, a chief proponent of OregonSaves, which became the first operating state-sponsored retirement program for private-sector workers in 2017.

Overall, there appeared to be a large amount of agreement across the witness table in terms of the various legislative initiatives that each support, ranging from boosting auto-enrollment features in DC plans to allowing employer matching contributions for student debt repayments and allowing a limited amount of funds to be withdrawn from plans for financial emergencies. 

The Case for Expanding Access

During his testimony, Graff emphasized that workplace plans are the foundation for a secure retirement, noting that more than 70% of workers earning $30,000 to $50,000 will save in a plan when given the opportunity at work, but fewer than 7% save on their own through an IRA. “In other words, moderate income workers are 12 times more likely to save for their retirement if they have access to some type of payroll deduction retirement savings program through their work,” he stated.

Yet despite these positive results, he contended that far too many Americans still lack access to a retirement plan at work, and thus lack an equitable opportunity to achieve a comfortable retirement. To that end, he applauded the work of state and local programs to close the retirement plan coverage gap, but suggested that federal policy would better ensure that the coverage gap can be addressed consistently throughout the country. In this regard, he offered support for the Automatic IRA Act, introduced by Sen. Sheldon Whitehouse (D-RI) and Rep. Richard Neal (D-MA), chairman of the House Ways and Means Committee. 

“We believe the approach in both pieces of legislation could significantly close the current retirement plan coverage gap while imposing practically no burden on employers. This approach leverages existing private sector solutions in the marketplace instead of causing a massive disruption by replacing the entire existing retirement plan system with a government run program,” Graff stated.  

New Saver’s Match

Graff also offered support for the Encouraging Americans to Save Act (EASA), which was reintroduced recently by Sen. Wyden. The bill shares a key provision with the Retirement Security and Savings Act (introduced by Sens. Ben Cardin (D-MD) and Rob Portman (R-OH)) to expand and enhance the existing Saver’s Credit. With the increased income thresholds under this legislation, Graff noted, a total of more than 120 million American workers would be eligible for the Saver’s Match. This would include millions of new gig workers, as well as government workers like public school teachers, many of whom are not eligible for matching contributions. 

Moving the Needle

Wyden appeared to be particularly interested in estimates by the Employee Benefit Research Institute (EBRI) provided by Graff showing that enactment of the combination of the Automatic IRA Act and the EASA would create 51 million new individuals saving for retirement and would add an additional $6.2 trillion in retirement savings over a 10-year period. 

Graff noted that nearly all (98%) of these 51 million new savers earn less than $100,000 per year. Moreover, these two retirement savings proposals would greatly benefit the Black and Latinx communities, creating 5.8 million new Black retirement savers and 8.4 million new Latinx savers who earn less than $100,000 per year.  

When asked by Cardin about what policy tools would do the most to help low-wage workers generate retirement savings, Graff reiterated the EBRI data showing that expanding access and auto-enrolling them as much as possible would “move the needle” in terms of getting millions of more people into the system and boost savings at a macro level. 

Responding to a question from Sen. John Barrasso (R-WY) about how to encourage more participation in employer-sponsored retirement plans, Graff suggested that the data is clear. Getting all employers to auto-enroll workers, as well as expanding the small-business start-up credit to cover 100% of the cost of starting a plan and providing additional safe harbors to make plan rules even simpler for small businesses, would go a long way towards increasing participation and closing the coverage gap, he explained. “There’s something to be said for being able to tell a small business that this is effectively free, that it’s not going to cost you—the marketing value of that is very meaningful,” Graff observed. 

Additional Support

In addition to calling for the Senate Finance Committee to approve the Automatic IRA Act and EASA, Graff outlined other legislative items the ARA supports, including: 

  • Wyden’s Retirement Parity for Student Loans Act (S. 1443) to allow plan sponsors to make an employer contribution to the retirement plan account that matches a percentage of an employee’s student loan payments;
  • the Enhancing Emergency and Retirement Savings Act (S. 1870), sponsored Sens. James Lankford (R-OK) and Michael Bennet (D-CO) to allow workers to access money in their retirement plan in case of a personal financial emergency; 
  • small-employer retirement plan tax credit enhancements included in the SECURE Act 2.0 legislation to increase the existing small-employer retirement plan start-up credit; and 
  • the Improving Access to Retirement Savings Act (S. 1703), sponsored by Lankford and Sens. Charles Grassley (R-IA) and Maggie Hassan (D-NH), to allow 403(b) plans to join PEPs and to allow employers that wish to join an existing MEP to receive the small-employer plan startup credit. 

Takeaways and ‘Mega IRAs’

Wyden closed by noting four takeaways from the hearing: 

  • expanding the Saver’s Credit, combined with a national program like OregonSaves, could lead to a “staggering number” of new savers; 
  • auto-enrolling workers in workplace savings plans will help reduce racial disparities in retirement plans savings rates;  
  • multilingual retirement savings education materials can also help reduce racial disparities in saving; and
  • that he plans to target so-called “mega-IRAs” in forthcoming legislation. 

In fact, after the hearing, Wyden and Rep. Neal released new data from the Joint Committee on Taxation that provides an update to a 2014 Government Accountability Office on the prevalence of mega-IRAs. According to their announcement, the new data shows a threefold increase in aggregate IRA account balances of $5 million of more. It notes that as of the 2019 tax year, nearly 25,000 taxpayers had aggregate IRA account balances of $5 million or more, and 497 taxpayers have aggregate IRA account balances of $25 million or more. 

“IRAs were designed to provide retirement security to middle-class families, not allow the super wealthy to avoid paying taxes,” Wyden stated. “As the Finance Committee continues to develop proposals to make the tax code more fair, closing these loopholes will be a top priority.”

A video replay of the hearing, along with the opening statements and the witnesses’ testimony, is online here