Harkin unveils pension reform plan to wipe out 'dark cloud' of retirement savings crisis
January 30, 2014 | By Marie Robey Wood | firstname.lastname@example.org
Sen. Tom Harkin, D-Iowa, confronting what he sees as a dire shortfall in Americans’ retirement savings, proposed at a National Press Club Newsmaker Jan. 30 a new type of private pension system that would automatically enroll workers and help save them 6 percent of their pay each year.
Reforming the current retirement system is essential, said Harkin, given the fact that half of Americans have less than $10,000 in savings. The gap between what Americans have saved for retirement and what they need to maintain their current standard of living once they stop working, he said, is a staggering $6.6 trillion.
The retirement crisis, he said, is “a subject I think has not been talked about very much, but [one] which I consider to be one of the darkest clouds hanging over the future economy of America.”
“The dream of a secure retirement is growing fainter and fainter in our country,” he added.
Harkin, chairman of the Senate Health, Education, Labor, and Pensions (HELP) Committee for the last four years, called his proposed legislation, The Universal, Secure, and Adaptable (USA) Retirement Funds Act of 2014, "the third leg in a financial stool” along with 401(k) plans and Social Security.
He stressed that 401(k) plans are savings plans, not retirement plans, and that although Social Security “is good,” it “doesn't cover needed income for retirees.” Harkin also referred to recent studies that show “a shocking level of racial and gender inequality in the current system ... the vast majority of working-age households headed by people of color have little or no retirement savings.”
According to Harkin’s plan, every business would be required to enroll its workers in a USA Retirement Fund. (Exceptions would be employers who already offer a defined benefit pension plan or a 401(k) retirement plan with automatic enrollment.) Employees would be automatically enrolled at a rate of 6 percent per year, but could choose to raise, lower or stop their contributions.
The funds would be available to everyone, including the more than 61 million people without access to a workplace retirement plan and the 14.5 million self-employed. Retirees would receive monthly benefits for life, and participants would be shielded from market volatility.
Harkin was joined by Mary Kay Henry, president of the Service Employees International Union (SEIU), and Denise Bowyer, vice president of American Income Life and National Income Life Insurance Companies. Both passionately endorsed the proposed legislation as greatly needed and noted that it addresses the age demographics of their future customers.
“An aging customer base with limited income will be bad for business,” said Bowyer, adding that the plan also offers little cost to employers and ensures that there is no employer fiduciary responsibility. “Eliminating risks will go a long way,” she said.
Harkin stressed that his legislation is good for small-business owners by allowing them to offer more competitive benefits to their employees while relieving them of the burden of managing a pension plan themselves.
“It is also good for the economy,” he said, “by significantly increasing retirement savings that could be invested right back into the economy -- funding new growth and job creation.”