ASA 2019 Retirement Security Agenda
The American Securities Association (ASA) is committed to helping Americans prepare for retirement and other significant life milestones, such as sending a child to college. ASA member companies engage with regulators and policymakers to encourage common-sense, private sector solutions to strengthen the current retirement system and expand savings opportunities for all Americans.
The ASA supports a range of policies to accomplish these goals, as set forth below:
Encourage Utilization of Financial Planning: To encourage access to financial advice, the ASA supports a bipartisan proposal from Sens. Rob Portman (R-OH) and Ben Cardin (D-MD) to allow employees to pay for financial planning with pre-tax dollars through employer-sponsored “cafeteria” plans.1 On average, individuals who use financial planning services save more and are financially better prepared, with one study suggesting that good financial planning can yield nearly 29 percent additional retirement income.2 Providing employees a tax advantaged benefit to pay for financial planning would expand the use of this critical tool. Additionally, Congress can further encourage worksite education by enhancing existing safe harbor protections for plan sponsors.
Facilitate and Improve Small Business Retirement Plan Options: No need is more challenging than achieving retirement security, especially for small business employees. Small business owners want to help their employees with retirement issues, but small businesses often face an array of costs and burdens that make it very difficult to offer a retirement plan. The ASA supports updating rules that would stimulate savings and encourage small businesses to offer retirement plans to their employees, which is the reason the ASA supports the Retirement Enhancement and Savings Act (RESA). On September 21, 2016, the Senate Finance Committee unanimously approved RESA of 2016. The bill was re-introduced in the Senate on March 8, 2018 and in the House on March 14, 2018. The bill’s provisions would:
1. Remove geographical restrictions and allow small employers to pool their resources and lower costs by offering “open” multiple employer plans (MEPs). This widely popular proposal has been incorporated into several bipartisan House and Senate retirement bills.
2. Increase the maximum retirement plan start-up tax credit from $500 to $5,000 and provide additional benefits to employers offering auto-enrollment.
3. Provide a tax credit incentive for small employers to adopt automatic enrollment arrangements, and would remove a restrictive limit on the amount of contributions that employees can make automatically.
4. Allow contributions to traditional IRAs after age 70 ½.
5. Make it easier for employers to offer annuity options under their defined contribution plans, and help employees preserve annuities purchased in a plan.
These changes would facilitate the creation of new plans for very small employers as well as ease the transition to a 401(k) plan when the business is ready to adopt that type of savings arrangement.
Congress Should Enhance Existing Low-Cost SIMPLE IRAs: SIMPLE IRAs have been successful in encouraging micro-businesses to begin offering retirement savings arrangements. The ASA supports (1) allowing SIMPLE IRA balances to be rolled over into other, non-SIMPLE accounts; (2) allowing mid-year SIMPLE IRA plan terminations; and (3) reducing the current 25% penalty for early SIMPLE IRA distributions to match the 10% penalty applicable to other types of retirement vehicles and (4) allow Roth SIMPLE IRAs. We support Senator Susan Collins (R-ME) in her efforts to make these common-sense changes.
Build on the Success of 529 Plans: 529 plans are an invaluable tool for families and individuals looking to save for school. Nearly every state sponsors some type of 529 plan, with most states encouraging contributions by offering tax deductions and/or credits. However, in many states, such tax incentivizes are only available for contributions made to the same state’s 529 plan. Additionally, some states only allow the account owner, and not third-party contributors, to claim the deduction. To encourage all Americans to start saving as soon as possible, the ASA recommends policymakers enact a modest, above-the-line federal income tax deduction for contributions made to any state’s qualified 529 plan.
This policy would promote contributions from grandparents and other family members, providing additional resources for 529 savers. Additionally, under the current system, some would-be savers who anticipate one or several moves out of state – for employment, health reasons or military service – may be reluctant to start making contributions to their current state’s 529 plan. Knowing that a federal deduction is available would likely encourage these individuals to enroll in a 529 plan and consistently contribute.
Use Technology to Lower Costs: In recent years, Americans have overwhelmingly embraced digital communication over outmoded paper delivery systems. The ASA supports legislation and updated regulation that would shift the default method of delivering plan disclosures to electronic delivery while preserving an option for participants who still prefer paper notices. A 2018 study by the Investment Company Institute and the American Retirement Association estimates that total printing and mailing costs for paper delivery could exceed $385 million annually. Moreover, households have already demonstrated a strong preference for e-delivery systems: according to the IRS, 92% of all tax returns are now e-filed since that option became available. A shift to e-delivery would both enhance the effectiveness of ERISA communications while also driving down administrative costs which would be shared with plan participants. In addition to saving money and protecting the environment, e-delivery provides greater access for the visually impaired as well as retirement savers who are not proficient in English.