Hatch Unveils Bill to Overhaul Pension Benefit System, Secure Retirement Savings
In Speech on Senate Floor Utah Senator Says, “America cannot continue sleepwalking into the financial disaster that awaits us if we do not get the public pension debt crisis under control.”
WASHINGTON – To address the public pension debt crisis and better secure retirement savings for millions of Americans, Finance Committee Ranking Member Orrin Hatch (R-Utah) today unveiled the Secure Annuities for Employee (SAFE) Retirement Act of 2013, legislation to strengthen and reform much of the nation’s public and private pension benefit system.
“America cannot continue sleepwalking into the financial disaster that awaits us if we do not get the public pension debt crisis under control,” said Hatch during a speech on the Senate floor today. “The problem is getting more serious every day and cannot be remedied merely by fine-tuning the existing pension structures available to public employers. A new public pension design is needed: one that provides cost certainty for state and local taxpayers, retirement income security for state and local employees, and does not include an explicit or implicit federal government guarantee.”
Dangerously high unfunded pension liabilities of state and local governments have threatened the fiscal solvency of states and municipalities as well as the nation’s long-term fiscal health, including the U.S. credit rating. Today public pension debt remains as high as $4.4 trillion and outstanding state and local municipal bond debt adds another $3.7 trillion. Last year, Hatch issued a report - which served as the foundation for the legislation - outlining the financial risks of the public pension debt crisis and its negative impact on the American economy.
Even more, with a national savings rate of only 2.5 percent, longer life expectancies and far fewer workers covered by defined-benefit pension plans, Americans across the country are struggling to adequately prepare for their retirement. The Finance Committee has received evidence in hearings that access to a retirement plan at work is the best way to ensure that individuals save for retirement.
“A pension is insurance against outliving the money you have available to pay your monthly bills,” Hatch continued. “It cannot be denied that people are living longer. And as wonderful as that is, it also means we need find new ways to stretch our monthly pension dollars over longer lifetimes. The SAFE Retirement Plan can meet the test.”
The SAFE Retirement Act of 2013 streamlines current pension programs by providing states, employers, and American workers with stronger tools for providing pensions and better secure retirement savings. Specifically, the Hatch plan takes a three-prong approach to pension reform:
- Public Pension Reform: This legislation creates a new pension plan, called the SAFE Retirement Plan, with stable, predictable costs that state and local governments may use to deliver secure pension benefits. This new tool eliminates pension plan underfunding prospectively while delivering lifetime retirement income to employees. SAFE Retirement Plans are state regulated, market based, fixed annuity solutions to the retirement income crisis in the states, with a consumer safety net, only minimal involvement by the federal government and no federal taxes.
- Private Pension Reform: The SAFE Retirement Act includes a host of common-sense and long-overdue reforms that will especially help small- and mid-sized employers establish and maintain retirement savings plans for their employees. The SAFE Retirement Act also creates an innovative new plan called the Starter 401(k), a retirement savings plan that allows employees to save up to $8,000 per year, more than in an IRA, but does not involve the administrative burden or expense of a traditional 401(k) plan. The Starter 401(k) is perfect for a small or start-up business that is not in a position to contribute to a plan but wants to help its employees save.
- Access to Professional Investment Advice: The SAFE Retirement Act also takes action to stop the Department of Labor from unilaterally over-regulating 401(k) plans and IRAs. The legislation restores jurisdiction over the fiduciary rules in the Tax Code to the Treasury Department. In addition, Treasury will consult with the Securities and Exchange Commission in prescribing rules relating to the professional standard of care owed by brokers and investment advisors to IRA investors. This legislation is consistent with the bipartisan and bicameral effort to convince the Labor Secretary to preserve access to professional investment advice for middle class investors.
The Senate Finance Committee has jurisdiction over tax-qualified pension issues. The SAFE Retirement Act of 2013 has garnered the support of a variety of organizations including: the U.S. Chamber of Commerce, Americans for Tax Reform (ATR), MetLife, the Small Business Council of America (SBCA), American Council of Life Insurers (ACLI), National Association for Fixed Annuities (NAFA), and the National Organization of Life & Health Insurance Guaranty Associations (NOLHGA), among others.
To view a summary of the legislation click HERE.
To view a copy of Hatch’s remarks on the Senate floor click HERE.