North American Development Bank Improvement Act of 2017

Mr. President, ensuring that more Americans are better prepared financially for their retirement is one of my top priorities.

That is why I rise to reintroduce with my colleague, Senator Nelson, the Retirement Security Act of 2017. Our bill would encourage more small employers to offer retirement plans, provide incentives for employees to save more for retirement, and make it easier for low- and middle-income taxpayers to claim tax benefits for retirement savings already authorized in law.

According to the non-partisan Center for Retirement Research, there is an estimated $7.7 trillion gap between the savings American households need to maintain their standard of living in retirement and what they actually have. A recent Gallup poll found that only 54 percent of working Americans believe that they will have enough money to live comfortably in retirement. We must continue to work to ensure that more Americans will have the resources they need to enjoy their ``golden years.''

The Social Security Administration's most recent report noted that 61 percent of all beneficiaries rely on Social Security for more than half of their income. Many seniors in my State rely almost entirely on Social Security to cover their monthly expenses, despite the fact that the average annual benefit is only about $16,000 per year. It is hard to imagine stretching those dollars far enough to pay the bills-- certainly a ``comfortable retirement'' is out of the question.

Sadly, they fare no better when it comes to savings: a survey by the Federal Reserve found that nearly half of individuals do not have enough savings to cover an emergency expense of $400. That is not even enough to buy new tires for a car. For this reason, among others, Americans need to increase their personal savings so that we can better weather financial emergencies without raiding our retirement accounts.

There are many reasons why Americans have struggled to save for retirement, including the shift away from employer-based ``defined benefit'' plans, or pensions; the severity of the recent financial crisis; rising health care costs; the need for expensive long-term care; and most of all, the fact that Americans are living far longer than they did in the past. Many Americans reaching retirement age also have more debt than retirees of previous generations.

Another contributing factor is that employees of small businesses are much less likely to participate in employer-based retirement plans. According to a study by the PEW Charitable Trusts, more than 30 million U.S. workers lack access to a work-based plan to save for retirement.

Making it easier for smaller businesses to offer retirement plans for their workers would make a significant difference in the financial security of many Americans. That is why the bill we are introducing today focuses on reducing the cost and complexity of retirement plans, especially for small businesses, and on encouraging individuals to save more for retirement. Let me describe the provisions of the bill:

First, our bill would make it easier for businesses to enter into multiple employer plans, known as MEPs, to offer retirement programs to their employees. MEPs permit small companies to share the administrative burden of a retirement plan, which helps lower costs. Current law discourages the use of MEPs because it requires a connection, or ``nexus,'' between unrelated businesses in order to join a MEP, such as membership in the same trade association. Our bill would waive the nexus requirement for businesses.

Second, our bill makes joining a MEP a more attractive option for small businesses. Under current law, if one employer in a MEP fails to meet the minimum criteria necessary for retirement plans to obtain tax benefits, all employers and their employees could lose these tax benefits--which are substantial. For employees, benefits include delaying the taxation of income contributed to a plan until funds are

withdrawn. For employers, plan disqualification could result in limited deductions and a higher tax burden. Our bill would address this uncertainty, and protect members of a MEP from the failure of one bad apple to meet its obligations.

Third, our bill would reduce the cost of maintaining a retirement plan. Current law requires that participants in a retirement plan receive a variety of notices. Our bill would direct Treasury to simplify, clarify, and consolidate these required notices to lessen costs.

Fourth, the Retirement Security Act would encourage those still in the workforce to save more for retirement. Retirement plans are often designed to comply with existing safe harbors to prevent the IRS from challenging the tax benefits that flow to employees and employers. The existing safe harbor for so-called ``automatic enrollment'' plans effectively caps employee contributions at ten percent of annual pay, with the employer contributing a ``matching'' amount of up to six percent. Our bill would create an additional safe harbor for these plans that would allow employees to receive an employer match on contributions of up to ten percent of their pay. Employees would be able to contribute more than ten percent, albeit without an employer match for contributions above ten percent.

I recognize that businesses that choose to adopt a plan with this new optional safe harbor may face additional costs due to the increased employer match. That is why our bill would also help the smallest businesses--those with fewer than 100 employees--offset this cost by providing a new tax credit equal to the increased match.

I should note that the new retirement plan options for businesses included in our bill are just that--options. No business, large or small, would be required to offer its employees a retirement plan under the Retirement Security Act.

Finally, our bill would ensure that current measures to encourage savings are functioning as they were intended. One such measure is the so-called ``saver's credit,'' which reduces the tax burden on low- and middle-income individuals who contribute to retirement plans, including IRAs and 401(k) plans. Yet the credit cannot be claimed on a Form 1040EZ, which is frequently used by these individuals. A 2013 Transamerica Center for Retirement Studies survey found that only 23 percent of people with household incomes of less than $50,000 per year, the group most likely to qualify, were aware of the saver's credit. To address this, our bill directs Treasury to make the credit available on Form 1040 EZ.

Mr. President, during my time as chairman of the Senate Aging Committee, I have heard countless stories of retirees whose savings did not go as far as they anticipated. Adequate savings reduce poverty among our seniors. As the HELP Committee noted in a July 2012 report, poverty among our seniors also increases Medicare and Medicaid costs and strains our social safety net. Giving those not yet at retirement age more opportunities to save, and to save more, would help ease this additional burden on entitlement programs that already are projected to be unsustainable.

In light of the positive effects this bill would have in strengthening retirement security for millions of Americans, I urge my colleagues to join Senator Nelson and me in supporting the Retirement Security Act of 2017.

Thank you, Mr. President.

Mr. President, I ask unanimous consent that the text of the bill be printed in the Record.

Mr. President, I ask unanimous consent that the text of the bill be printed in the Record.