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Senators Aim to Complete RESA, Move on to Broader Reforms

Members of the Senate Finance Committee expressed hope May 14 that Congress would move quickly to approve the long-pending Retirement Enhancement and Savings Act (RESA) before moving to the next round of broader retirement savings reforms. 

“I’m hoping that the House will send its version of RESA over to us at some point this month. And I’ll continue to work closely with Senator Wyden and other Committee members to reconcile the differences and get this important bill to the President,” Sen. Charles Grassley (R-IA), Chairman of the Finance Committee, said in his opening statement before a hearing to address “Challenges in the Retirement System.”  

While questioning whether there even is a retirement crisis, Grassley did suggest that in addition to RESA, there is still more that can be done to fill gaps in the system. “What more can we do now to increase coverage in the existing system, how we can encourage more people to save, and what approaches should we take to help workers plan, save, and – critically – live in retirement?” he asked.  

Committee members Rob Portman (R-OH) and Ben Cardin (D-MD), who just reintroduced their comprehensive “Retirement Security and Savings Act,” which contains components of RESA, agreed that it was important to approve RESA first before moving to broader legislation. “The first priority is to get RESA across the finish line,” Cardin stated, further noting that he hopes to get a chance to mark up additional legislation.  

Witnesses Agree

The committee also heard from a single panel of witnesses who largely agreed that enactment of RESA is an important first step but offered several additional policy recommendations for the committee to consider. Witnesses included Joan Tibbetts, Vice President with The Principal Financial Group; Tobias Read, Oregon State Treasurer; Joan Ruff, Board Chair of AARP; and Lynn Dudley, Senior Vice President with the American Benefits Council.

Echoing Grassley’s comments, Tibbetts underscored the importance of RESA’s provisions to allow more businesses to participate in open MEPs, as well as the tax incentives to help small employers offset the cost of setting up a retirement plan and adopt automatic enrollment.

Similarly, Dudley expressed strong support for open MEPs and for proposals to make it easier for employers to provide matching 401(k) contributions based on an employee’s student loan payments and to improve the retirement plan reporting and disclosure regime.  

Dudley also singled out support for nondiscrimination testing relief allowing older, longer-service participants in DB plans to continue to accrue benefits. “If this issue is not fixed in the near future – year-end is too late – at least 430,000 participants could lose future benefits as of January 1, 2020,” Dudley testified.

OregonSaves

Interestingly, the one area where the hearing could have gotten contentious, but didn’t, was over state efforts to expand private sector retirement savings opportunities. Tobias Read explained how Oregon’s auto-IRA program for private sector workers will help address the estimated 1 million private sector workers in Oregon who don’t have a retirement plan gain access to one. “That’s why everyone should be happy to see the efforts of Oregon and other states to expand savings options to more people,” Read stated. “We constructed the program to limit the requirements on employers as much as possible and are constantly considering ways to decrease the time employers spend facilitating the program,” he explained.  

Read noted that to date, the program is adding approximately 1,800 workers per week and now has more than 78,000 workers enrolled. He further noted that three out of four participants remain enrolled in the program, which has eclipsed $18 million in savings and is increasing by more than $2 million a month.

Read urged the committee to consider changes that would create a more “robust 5500 database” to help determine which employers are exempt from the program and to allow minors to use OregonSaves. He explained how the state currently uses the Form 5500 data to determine which employers are exempt from the program, and while helpful, they found that the data was not as robust as they originally anticipated.

Read also asked that when Congress considers federal legislation that would overlap or create a national-level retirement savings programs, it allows state-based programs to continue where they already exist. 

In the absence of a federal solution to the coverage gap problem, many states have stepped in to provide a solution for those private-sector employees who don’t have access to a retirement plan. This has pitted some states against private sector employers that argue that ERISA preempts state mandates and reporting requirements. To that end, ABC’s Dudley, representing the employer plan sponsor community, agreed with Read to continue discussions to seek a seamless federal solution.