Bill to Help Americans Better Prepare for Retirement
Introduced by Leaders of Senate Aging Committee
Senators Bill Nelson and Susan Collins present
Retirement Security Act of 2014
Sen. Bill Nelson & Sen. Susan
Jan. 29, 2014 – The two ranking members of the
Senate Special Committee on Aging – Sen. Bill Nelson(D-FL), chairman, and Sen. Susan Collins (R-ME), ranking
Republican – joined forces to introduce legislation today that would
encourage small employers to offer retirement plans, encourage employees
to save more for retirement, and ensure that low- and middle-income
taxpayers are able to claim tax benefits for retirement savings already
authorized in law. The goals of the bill seem to answer the plea by
President Barack Obama in the State of the Union last night, where he
said, Let’s do more to help Americans save for
“As Americans live longer, they are growing
increasingly concerned that they may not have sufficient savings to
maintain their standard of living in retirement,” they explained in a
news release. “The fact is, more and more retirees are reliant on their
own savings and investments to help them enjoy what should be their
“golden years,” yet these savings are falling short.”
“I have heard countless stories of retirees whose
savings did not go as far as they anticipated,” said Senator Collins.
“Nationally, one in four retired Americans has no source of income
beyond Social Security. In Maine, the number is one in three. Four in
ten rely on that vital program for 90-percent of their retirement
income. Yet, Social Security provides an average benefit of just $1,294
per month – less than $16,000 per year. It’s hard to imagine stretching
those dollars far enough to pay the bills and, certainly, a “comfortable
retirement” is out of the question.”
“Too many people are retiring with
too little,” said Senator Nelson. “This common-sense and bipartisan
legislation will increase access to retirement plans and make it easier
for folks to put more money aside.”
Their Retirement Security Act of 2014 would
make it easier for smaller businesses to provide access to retirement
plans for their workers which would help make a significant difference
in the financial security of many Americans. The legislation focuses on
reducing the cost and complexity of retirement plans, especially for
small businesses, and on encouraging individuals to save more for
The Retirement Security Act of 2014 would:
Encourage small businesses to offer retirement
Cost is a significant reason that more small
businesses do not offer retirement plans. The bill would lower costs by
allowing small businesses to join multiple employer plans (MEPs) to
share the administrative burden of a retirement plan.
It achieves this by waiving the requirement that
there be some connection, or “nexus” among unrelated businesses in order
to join a MEP. Only businesses with fewer than 500 employees are
eligible for this waiver.
Second, under current law, one businesses’ failure
to meet the minimum criteria necessary to maintain a tax-preferred
retirement plan can endanger benefits for all MEP participants. The
bill would direct the Treasury Department to issue regulations to
address this issue.
The bill reduces costs for all businesses by
directing the Treasury Department to simplify, clarify, and consolidate
notice requirements for retirement plans.
Allow employees to
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 on up
to six percent. The 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. The bill helps the
smallest businesses – those with less than 100 employees – offset the
cost of this additional match by providing a new tax credit equal to the
Ensure that low- and middle-income taxpayers can
utilize existing incentives to save.
The tax code currently provides a non-refundable
credit of up to $1,000 for eligible individuals ($2,000 for joint
filers), who contribute to IRAs or employer-sponsored retirement plans.
This credit is only available to low- and middle-income individuals.
Yet the credit cannot be claimed on a Form 1040EZ. This bill would
direct Treasury to make the credit available on Form 1040 EZ.
Last year, Senators Nelson and Collins held a
hearing to examine retirement security. Witnesses described their fear
that they will outlive their savings.
According to the non-partisan Center for Retirement
Research at Boston College, there is an estimated $6.6 trillion gap
between the savings American households need to maintain their standard
of living and what they actually have.
The legislation, introduced by Senators Nelson and
Collins, is aimed at making it easier for small businesses to provide
access to retirement plans for their workers and would make a
significant difference in the financial security of many Americans.
Statement by President Barack Obama, State of the
"Let’s do more to help Americans
save for retirement. Today, most workers don’t have a pension. A Social
Security check often isn’t enough on its own. And while the stock
market has doubled over the last five years, that doesn’t help folks who
don’t have 401ks. That’s why, tomorrow, I will direct the Treasury to
create a new way for working Americans to start their own retirement
savings: MyRA. It’s a new savings bond that encourages folks to build a
nest egg. MyRA guarantees a decent return with no risk of losing what
you put in.
"And if this Congress wants to help,
work with me to fix an upside-down tax code that gives big tax breaks to
help the wealthy save, but does little to nothing for middle-class
Americans. Offer every American access to an automatic IRA on the job,
so they can save at work just like everyone in this chamber can. And
since the most important investment many families make is their home,
send me legislation that protects taxpayers from footing the bill for a
housing crisis ever again, and keeps the dream of homeownership alive
for future generations of Americans."
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