The American Council of Life Insurers is urging Congress to make changes to the retirement system as part of its tax reform agenda that encourage more Americans to begin saving for their post-work years.
In testimony before the House Small Business Committee during hearings on the Challenge of Retirement Savings for Small Employers, the American Council asked the lawmakers to avoid regulations that would harm the existing retirement system, including capping amounts held in retirement plans, reducing the limit on retirement contributions and replacing retirement savings exclusions and deductions with a refundable credit.
Instead, it said Congress should try to to make improvements to the system, by allowing employers to automatically enroll employees into payroll deduction IRAs and by simplifying the process by which small businesses come together to participate in multiple employer plans.
Under a multiple employer plan, many small businesses can join together to achieve economies of scale and advantages with respect to plan administration and advisory services, making plans more affordable. MEPs offer the same key protections and benefits of an employer-sponsored retirement plan, such as fiduciary protections, robust contributions levels and employer contributions, without the cost and administrative burden that often deters an employer from offering a plan to its workers.
Employers who participate in a MEP also may be more willing to make a transition to a standalone employer-sponsored retirement plan, the council said.
The council also supports a proposal that would require new illustrations in retirement statements that would help individuals think of their savings as not only a lump-sum balance but as a source of guaranteed lifetime income.
“With this additional income information on a benefit statement, coupled with the Social Security income statement, workers can see how much monthly income they could potentially receive in retirement. Workers can better decide whether to increase their savings, adjust their 401(k) investments, or reconsider their retirement date, if necessary, to assure the quality of life they expect in retirement,” the organization said in a letter.