Prepared Remarks by U.S. Sen. Chuck Grassley of Iowa
Chairman, U.S. Senate Finance Committee
On the Retirement Enhancement and Savings Act of 2019
Wednesday, April 3, 2019
Mr. President, earlier this week I introduced the bipartisan Retirement Enhancement and Savings Act of 2019 – or the RESA bill as we call it in the Finance Committee. I’m pleased to be joined by my colleague, Finance Committee Ranking Member Wyden, in introducing this important legislation.
The workplace retirement system provides an effective way for employees to save for retirement. But not all workers have access to a retirement plan. And some workers who have access to a plan don’t always participate.
We need to do more to encourage and facilitate retirement savings. That’s why we’re providing new incentives for employers to adopt retirement plans. The bill also helps reduce costs of operating these plans, and creates new provisions to encourage workers to plan and save for retirement.
This bill is a long time in the making. Work on it actually began shortly after the passage of the Pension Protection Act in 2006. Over several Congresses, the Finance Committee has held hearings on the retirement system and reviewed a number of proposals to improve the system.
Many ideas were put forward. We examined each of them carefully, including through the work of the Finance Committee’s Tax Reform Working Group on Savings and Investment in 2015. The resulting proposals were brought together to form RESA, which was unanimously approved by the Finance Committee in 2016.
In the last Congress, many of us worked closely with former Chairman Hatch to advance this package. We came very close to an agreement last December, but fell short due to politics and the process at that time.
Passage of this important bill remains a top priority for me. I’ve continued working closely with Senator Wyden, other Committee members, and colleagues in the House to maintain the momentum from the end of last year so the improvements in this bill can be signed into law without further delay.
The RESA bill would reform our retirement savings laws in several important ways. For example, it would improve on an existing type of plan called a “multiple employer plan” or MEP. The bill would expand these plans so that employers can join together to sponsor a single retirement plan for their workers.
These “open MEPs” would make it far more feasible for businesses of all sizes, especially small businesses, to offer retirement plans by harnessing economies of scale and reducing unnecessary administrative burdens on employers. More importantly, these open MEPs would open the door for millions of Americans to save for retirement.
Speaking of small businesses, the bill includes provisions designed to make it easier and more cost-effective for smaller employers to sponsor a retirement plan. Small businesses, farms and ranches are vital to our economy. We need to encourage a level playing field so that workers at small businesses throughout the country have equal access to retirement plans as workers at Fortune 500 companies.
RESA also would create a new fiduciary “safe harbor” for employers that allow employees to invest in lifetime-income arrangements like annuities. In addition, RESA would expand the portability of retirement plan assets, including annuities. That would allow workers to keep their retirement savings when they change jobs throughout their career. This bill encourages employers to provide the kinds of tools and flexibility that employees need to plan for a financially secure retirement.
RESA also would help employees add to their retirement savings each year through automatic increases in contributions to 401(k) plans. And, to help workers plan better for retirement, the legislation would require employers to provide an estimate of how much the employee’s account would provide during retirement if the employee invested the balance in an annuity.
All of this is intended to help individuals get on the path of saving for a secure retirement during their working years. But it is also with an eye toward making sure their savings will last once they retire.
I should also note that this bill is paid for. The main offsetting provision involves an option under current law for a person to pass along his or her IRA or 401(k) account to a family member or other beneficiary. Under current law, the recipient of that account can keep the inherited funds in the tax-deferred account and save for their own retirement if they take out a required minimum amount each year.
This is often referred to as a “stretch IRA.” The bill maintains this savings option for people who inherit an IRA or retirement account, but places a limit on how large an account can be inherited on a tax-protected basis. This is a common-sense approach to encourage the next generation to save for retirement while ensuring that the changes in this bill are fiscally responsible.
Retirement security is an important topic that is already getting a great deal of attention this year. The House Ways and Means Committee considered a retirement-savings bill yesterday that is built on the provisions included in RESA, and I look forward to working with Chairman Neal to reconcile our bills and get a final package to the President’s desk.
In closing, I want to stress that increasing long-term savings in America is critically important. We know there are ways that we can improve our private retirement system to make it easier for Americans to save. The reforms in this bill represent an important step forward in improving Americans’ retirement security.
I know there are other Members with additional ideas for improving retirement security. I’m committed to considering those proposals and advancing those that will build on RESA and help attain the goal of ensuring that all Americans achieve a secure retirement.
I yield the floor.