Retirement Issues Likely a Hot Topic in New Congress
Regardless of which party is in control of Capitol Hill after the November elections, retirement issues are sure to rise to near the top of the congressional agenda.
Robert Reynolds, president and CEO of Putnam Investments, said that “2011 will shape up to be a year when retirement security comes more into focus than it ever has. Retirement is on the forefront of everyone's mind.”
It’s not surprising. With baby boomers hitting retirement age—or postponing retirement because of the weak economy—and a decline in the number of people who participate in pension plans at work, retirement policy is becoming a hot topic in Washington.
In an Oct. 7 hearing of the Senate Health, Education, Labor and Pensions Committee, Chairman Tom Harkin, D-Iowa, indicated that he was zeroing in on retirement issues.
“I am going to make retirement security a priority,” Harkin said. “Over the coming year, I plan to hold a series of hearings examining the crisis in retirement security from a number of different angles, and I look forward to working with my colleagues on comprehensive reforms to help workers save for retirement and ensure that they have a source of retirement income that they cannot outlive.”
Although Republicans may take over the House in November, it’s unlikely that they will capture the Senate, leaving Harkin in place as chairman of the panel that oversees pensions.
The gloomy retirement picture will no doubt aid Harkin’s efforts. On Oct. 13, the Employee Benefit Research Institute released a study showing that 54.4 percent of full-time, full-year wage and salary workers participated in a retirement plan in 2009.
In 1999, that figure was closer to 60 percent. And the rate of employer sponsorship of plans dropped to 61.8 percent in 2009 from 69.4 percent in 1999.
Those kinds of statistics may well propel a congressional effort to enhance workplace savings. In September, Sen. Jeff Bingaman, D-New Mexico, and Rep. Richard Neal, D-Massachusetts, introduced a bill that would require companies to take a 3 percent deduction out of the paycheck of workers who aren’t covered by a company retirement plan.
The money would be placed in individual retirement accounts for the employees. Workers would be automatically enrolled unless they opt out.
The return of Congress for a lame-duck session in mid-November provides an opportunity for the auto-IRA measure to be tacked onto another bill, such as one renewing George W. Bush administration tax cuts. Observers say that it is more likely, however, that the auto-IRA proposal will have to be reintroduced in the new Congress when it convenes in January.
When it is revived, the measure should draw support across the political spectrum, according to John Kalamarides, senior vice president of retirement strategy and solutions at Prudential Retirement.
“Both parties are interested in increasing coverage to more workers,” Kalamarides said. “The debate will be, ‘How do you do that without creating a burden for small employers?'”
Reynolds said growing concern over Social Security solvency adds to the momentum for the auto-IRA bill.
“It would address the private side of preparing for retirement,” Reynolds said. “There is bipartisan support out there for this type of legislation, especially when you talk about covering half of working Americans not covered by defined-contribution plans today.”
Harkin is hopeful that the traditional bipartisan nature of retirement policymaking will endure despite an increasingly tense political atmosphere on Capitol Hill. He is worried, though, that Republicans and some Democrats will promote defined-contribution plans over defined benefit plans.
“I am fearful that more and more, we’re going to try to put the burden on individuals and less and less on the group as a whole,” Harkin said. “I see retirement [as] a bigger pool where everyone shares the risk.”
No matter how Congress approaches the problem, concerns about retirement security are growing more urgent during a time of sluggish economic growth, according to Kalamarides. As baby boomers put off retirement because of loss of income or assets — or both, they’ll be occupying jobs that could go to younger people.
“Solving the financial and emotional gaps in retirement is critical to solving the unemployment and consumer confidence issues,” Kalamarides said.