Every hardworking American deserves the chance to have a comfortable retirement. But for far too many Americans it seems out of reach: a recent study by Northwestern Mutual found that two thirds of Americans believe they’ll outlive their retirement savings.
People are right to be worried, because as a country we are not saving enough for retirement. A 2019 GAO report found that nearly half of all near-retirees over age 55 have no private retirement savings at all.
The biggest gap in coverage is among the self-employed and employees at smaller businesses. Employees at larger companies often have access to a 401(k) plan to help grow their retirement nest eggs, but less than half of the employees at businesses with fewer than 50 employees have access to a plan. It’s difficult for small businesses to set up a plan because of the costs, liabilities, and administrative work. In all, only 34 percent of these small business employees participate in a workplace retirement plan.
Comprehensive retirement reform to address the challenges in the private retirement system should help small businesses provide workplace retirement plans, encourage employees to save, and make sure Americans can sustain their lives in retirement. Congress can and should address these issues to make it easier for smaller businesses, which will result in millions more Americans having peace of mind in retirement. The Secure Act, which passed the House of Representatives in May by an overwhelmingly bipartisan vote of 417-3, accomplishes these reforms, and that’s why I’m urging my colleagues in the Senate to pass it swiftly.
The Secure Act helps more small business employees save for retirement by making it easier for their employers to offer a plan. It increases the tax credit small businesses receive for starting a new retirement plan tenfold, provides an annual tax credit to small businesses that introduce automatic enrollment features into their plan, and streamlines existing regulations associated with administering their plan.
Importantly, the bill also allows small businesses to join forces to save money and offer larger, safer, and more efficient retirement plans for their employees. The Joint Committee on Taxation estimates that allowing these kinds of multiple employer plans alone would create more than 700,000 new retirement accounts for small business employees who need to start saving up.
Another important reform the Secure Act helps older Americans put more aside for retirement by raising the age limit on the law that requires Americans to start depleting and paying taxes on their retirement savings. Currently, that age is set at 70 and a half, but there are many older Americans who want to keep working without having their retirement accounts drained. My dad was one of those people. He ran his small business well into his seventies, but all the while had to watch taxes eat into his retirement savings.
To fix that, the Secure Act allows people to save for retirement tax-free until age 72, giving people more flexibility in when they begin their retirements. In addition, the bill changes the law to allow people over age 70 ½ to keep investing in their retirements for as long as they want so their nest eggs don’t have to stop growing.
Finally, the Secure Act includes an urgent provision I coauthored with Sen. Ben CardinBenjamin (Ben) Louis CardinThe Secure Act makes critical reforms to our retirement system — let’s pass it this year Lawmakers honor JFK on 56th anniversary of his death Senate Democrats ask Pompeo to recuse himself from Ukraine matters MORE (D-Md.) to help more than 400,000 older workers at risk of losing future pension benefits this year through no fault of the employees, but because of code regulations that will render their plans “discriminatory.” Our provision fixes these rules to protect these older workers from losing their benefits.
All these reforms are important first steps in delivering lasting improvements to our retirement system and strengthening retirement security for millions of Americans, but we can and should do more. That’s why I’ve introduced the Retirement Security and Savings Act with Sen. Cardin, which builds on the policies included in the Secure Act to further improve Americans’ opportunities to build retirement savings. This legislation includes major new reforms to allow individuals who have saved too little to set aside more for retirement, provide even more incentives for small businesses to offer retirement plans, expand access to retirement savings for low-income Americans, and provide more certainty and flexibility for Americans as they enter retirement. While I’m hopeful that we can pass this broader legislation soon, Congress shouldn’t pass on the chance to provide an immediate boost to the retirement security of the American people through the Secure Act.
The Secure Act passed the House nearly unanimously, and I know the support in the Senate can be just as strong. That’s why the time is now to pass this legislation and ensure that every American has the opportunity to save for a well-deserved retirement.
Portman is chairman of the Finance Subcommittee on Social Security, Pensions, and Family Policy.
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