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Bipartisan Senate Bills Seek to Boost Retirement Savings

Two Republican and two Democratic senators have introduced a package of bills that would make “needed reforms” to improve retirement and economic security for individuals and families.

Citing reports that nearly half of American families do not have any retirement savings and more than a third of full-time employees don’t have access to a workplace retirement plan, Sens. Cory Booker (D-NJ), Tom Cotton (R-AR), Heidi Heitkamp (D-ND) and Todd Young (R-IN) introduced legislation in the Senate July 17 that, among other things, seeks to expand access to workplace plans and enable individuals to build emergency savings.

The senators also cited a Federal Reserve report showing that 40% of American adults would be unable to come up with $400 for an emergency expense without borrowing money or selling a possession. And for those who do have access to a workplace plan, many end up “raiding their accounts” to pay for unexpected emergencies, they stated in a news release.

Included with the news release was a summary of the four bills issued by BPC Action as part of the Bipartisan Policy Center. In June 2016, BPC released a comprehensive report with recommendations from its Commission on Retirement Security and Personal Savings.

According to the summary, the Small Business Employees Retirement Enhancement Act (S. 3219) would:

  • eliminate the regulatory barriers that prevent small business owners from joining professionally managed pooled employer plans; and
  • transfer some of the fiduciary responsibility from the employer to the pooled plan provider.

The Retirement Flexibility Act (S. 3221) would:

  • incentivize plan sponsors to use automatic enrollment and automatic escalation of contributions to levels that are considered appropriate for the average saver, while maintaining an opt-out option; and
  • provide flexibility on the required safe harbor employer contributions in order to continue to be exempted from the nondiscrimination testing requirements.

The Strengthening Financial Security through Short-Term Savings Act (S. 3218) seeks to limit early withdrawals from retirement accounts and facilitate short-term savings by allowing employers to automatically enroll their workers in emergency savings accounts in addition to retirement accounts.

The Refund to Rainy Day Savings Act (S. 3220) would allow individuals to pre-commit to saving their tax refunds for later in the year.

S. 3219 and S. 3221 encompass components of the bipartisan Retirement Enhancement and Savings Act (RESA), which was first introduced in the last session of Congress by Senate Finance Committee Chairman Orrin Hatch (R-UT) and subsequently reintroduced in the Senate and introduced in the House in March. It has been speculated over the last few months that Congress will act on RESA later this year as part of a legacy-building push for Hatch, who is retiring at the end of this term.

In late June, House Ways & Means Committee Chairman Kevin Brady (R-TX) noted that he plans to move what he called “Tax Reform 2.0” later this summer. Brady explained that he views the legislative effort as a package of two, three or four approaches, one of which would be to make the Tax Cuts and Jobs Act, which is set to expire in 2027, permanent. He has also stated that one of the approaches could encompass retirement savings provisions that were not addressed in the TCJA — although he has indicated that he has no plans to revisit Rothification as part of the new tax reform discussions.

While it is less certain, another component of Tax Reform 2.0 could be an effort to expand health savings accounts.