Lawmakers and a panel of experts said the U.S. retirement system works well for some but is leaving others behind, and discussed ways to close the savings gap in a hearing Thursday before the Senate Special Committee on Aging.
Sen. Bob Casey, D-Pa., chairman of the committee, said at the hearing titled, “A Financially Secure Future: Building a Stronger Retirement System for All Americans,” that the retirement system allows millions of Americans to fall through the cracks.
“The reality is that millions of American families approach retirement with almost nothing saved,” Mr. Casey said. “Despite working so hard their whole lives, too many seniors are barely able to make ends meet.” He added that in 2020, one-quarter of adults who had not yet retired did not have any retirement savings.
Sen. Tim Scott, R-S.C., the committee’s ranking member, released a report Thursday that examines current trends and gaps in the retirement system. In his opening remarks, Mr. Scott, citing the report, discussed the importance of reducing plan leakage and the benefits of auto-portability programs.
One of the witnesses before the committee, J. Spencer Williams, founder, president and CEO of Retirement Clearinghouse, said it is rarely a good decision for participants to cash out their retirement savings.
“Auto-portability is a simple concept,” Mr. Williams said. “It is a technology that allows a person’s account to automatically follow them from one employer’s plan to the next. The idea is that if we make it easy and automatic, more people will keep their savings in a plan rather than cashing out.”
In 2019, the Department of Labor granted Retirement Clearinghouse the ability to expand its auto-portability program, which is aimed at reducing plan leakage and missing participants.
The committee members asked panelists — which included Nari Rhee, director of the retirement security program at the UC Berkeley Center for Labor Research and Education; Shai Akabas, director of economic policy at the Bipartisan Policy Center; and John Scott, project director of The Pew Charitable Trusts’ retirement savings project — about provisions enacted when the Setting Every Community Up for Retirement Enhancement Act, or SECURE Act, was signed into law in 2019. One provision that got a lot of focus at the hearing from Sen. Susan Collins, R-Maine, and others was one that established pooled employer plans, or PEPs, which went live on Jan. 1 and allow unrelated employers to join a retirement plan.
Pew’s Mr. Scott said PEPs are a good way for small businesses to reduce administrative burdens and fiduciary liability while offering their employees a retirement plan. While PEPs are still in their early days, Pew’s Mr. Scott said he was “pleasantly surprised by the reaction from the financial services industry. There seems to be a lot of interest in offering pooled employer plan products to small businesses and other employers.”