Legislation Proposes Private-Sector Solution to Expand Access for Americans to Save for Retirement
WASHINGTON, D.C. – The Insured Retirement Institute (IRI) released the following statement from IRI President and CEO Cathy Weatherford in response to the introduction of the Automatic Retirement Plan Act of 2017 by Representative Richard Neal (D-MA):
“Many Americans today are not saving enough for retirement because they do not have access to a workplace retirement plan. Representative Neal’s Automatic Retirement Plan Act of 2017 offers a common-sense private sector solution for Americans to save more for their retirement by expanding access for workers who choose to participate in a workplace plan, while preserving employer choice, competition, and protections for small businesses. IRI is pleased to offer our strong support for the enactment of this bill and we are committed to working with Ranking Member Neal to move this bill forward in Congress.
Many of the measures contained in the bill, including opening Multiple Employer Plans (MEPs) for use by more small businesses, expanding automatic savings and escalation features, and increasing default contribution and automatic escalation rates for savings, are all proposals IRI has long-supported. We were pleased to see them included in this bill as they were included in our 2017 Retirement Security Blueprint, published earlier this year.
IRI also commends Representative Neal’s continued focus on promoting and enhancing our nation’s retirement security with his introduction today of the Retirement Plan Simplification and Enhancement Act of 2017. This legislation includes many additional innovative ideas which would help Americans to save for retirement by expanding coverage, increasing retirement savings, and preserving income. IRI is also pleased to support the enactment of this legislation.”
IRI submitted a letter for support to Representative Neal which can be accessed here.
Excerpts from that letter:
Americans today face many challenges and obstacles in saving for retirement and many Americans are not saving for retirement because they do not have access to a workplace retirement savings plan. Research conducted by the Pew Charitable Trust found that 40 percent of full-time workers at small and medium businesses do not have access to an employment based 401(k) plan.
The same report found the expense and administrative burdens of maintaining retirement accounts are the top reasons why employers do not provide this benefit to their employees. IRI supports this bill because it offers a private sector solution to expand the availability of workplace retirement plans so more Americans will now have an option through their employers to save for their retirement.
Additionally, most private-sector employees who are currently utilizing automatic enrollment set the default savings rate to 3 percent of pay. Research has shown this percentage to be too low and that many Americans do not increase their savings rate even when their pay is increased. A study conducted by the Employee Benefit Research Institute (EBRI) found that a 6 percent default rate would lead to significantly better retirement outcomes for workers without causing a marked increase in opt-outs.
Another study conducted by Wells Fargo Institutional Trust & Retirement found opt-out rates on plans with a 6 percent default rate are the same as those for accounts with a 3 percent default rate. IRI supports this bill because it increases the default contribution and automatic escalation rates for savings to levels enabling workers to save more for retirement through participation in a workplace plan. As a result, more Americans will have a greater ability to reach their retirement savings goals.
IRI’s 2017 Retirement Security Blueprint can be accessed here.