Grassley Outlines Pension, Savings Reforms to Build “Savers Society”
Remarks of Sen. Chuck Grassley
Chairman, Committee on Finance
2006 National Summit on Retirement Savings
Thursday, March 2, 2006
Thank you very much for that kind introduction, Secretary Combs. And thank you for
inviting me here today. The topic’s importance has stood the test of time. One of the oldest
American sayings is: “A penny saved is a penny earned.” Those are wise words. Unfortunately
today, it seems like many of us have forgotten them. Recent data on national savings shows that our
savings rate is at record lows. As a nation, we must reverse this trend. We must re-focus on
becoming a “Savers’ Society.” The good news is that we have a strong economy – by far the
strongest economy in history -- and growing stronger every day.
Unemployment is at historic lows. More Americans are working than ever before. Interest
rates and inflation are low, and I could go on. In addition, tax revenues coming into the Treasury
are at all-time record highs. But just because we’re doing very well doesn’t mean that we can’t do
even better. Our challenge is to convert all of the positive economic trends into positive savings
By building a “Savers’ Society”, we can grow the economy even stronger and faster than we
are today. And just as importantly, we can help ensure that all Americans have the opportunity for
a financially secure future. You might ask what role federal policymakers have in creating a
“Savers’ Society”. As Americans, we value personal freedom and responsibility. We reject
mandates, and prefer voluntary systems and personal choice. Therefore, we do not tell people that
they have to save. But that doesn’t mean that we shouldn’t ENCOURAGE savings.
One key way to do that is by not punishing those who save and invest through punitive tax
rates. Lower rates on capital gains and dividends that we enacted in 2003 have spurred economic
growth, investment, and tax revenue. It is critical that we foster a “Savers’ Society” by extending
capital gains and dividends tax relief. It is also critical that we have rules and incentives in place to
foster the sponsorship of employment-based retirement plans. A key part of that is making sure that
the rules work and that they are permanent and certain. In 2001, we enacted far-reaching retirement
and education savings reforms. We increased 401(k) and IRA limits, made retirement funds more
portable, and enhanced the treatment of 529 college savings plans.
Unfortunately, these bipartisan reforms are scheduled to expire at the end of this decade. We
must make these changes permanent, and we must do this as soon as possible. Otherwise, the power
of these savings reforms will be crippled by the uncertainty of whether the tax benefits will still be
there when people need them most. We also need to provide certainty in our pension rules. Today,
traditional defined benefit plans, cash balance plans, and other hybrid pension plans are stuck in legal
limbo. Both the House and Senate have passed bills to remove the uncertainty clouding these pension
plans. I look forward to working with my fellow conferees to get a bill to the President before the
April recess that will address these issues.
We also must confront the reality that more and more Americans will be relying on 401(k)
plans for retirement income. As the migration from traditional pensions to 401(k)s continues, we
must recognize that traditional pension plans have many advantages over 401(k)s. Importing those
good aspects into 401(k)s is vital if 401(k)s are going to be a retirement plan, and not just a
supplemental savings plan.
Traditional pensions have many attractive features – automatic participation, professional
investment management, and often lifetime payment options. Replicating these features in 401(k)
plans is a positive trend, and the House and Senate pension bills take steps in that direction by
encouraging automatic enrollment. We must do more, however.
Already, there are a new set of issues that Congress should look to confront in the retirement
savings area. With the baby boomers on the cusp of retirement, we need to focus more attention on
how retirement plan assets will be distributed in retirement to ensure that they last a lifetime. Related
to that are issues of longevity and increased life expectancy. We are living longer, and that is a good
thing. But we also must all learn to effectively manage financial security as we hopefully continue
to live longer and longer lives.
Also related to these issues is “phased retirement” – a term referring to the relatively new
phenomenon of individuals who prefer to phase gradually into retirement. It is critical for our
economy as well as for retirement security that we find ways to allow those beyond normal
retirement age to continue working if they wish and to coordinate their retirement assets in a way that
makes sense for them. These are big issues without simple solutions.
That’s why we need to begin to roll up our sleeves now to work together to meet these
challenges. We also need to make sure that retirement plans are there for everyone. If we’re truly
going to create a “Savers’ Society”, then we need to make sure that every American has access to
a real and meaningful retirement plan. It’s not right for companies to eliminate or refuse to provide
retirement plans to their rank-and-file workers while those sitting in the executive suite get special
“executive-only” pension plans that can be worth millions.
If we all have an equal stake in building a “Savers’ Society”, then we can make it a reality.
Increasing savings means increased financial security for Americans and stronger economic growth
ahead. That’s a true “win-win-win”. We have a lot of work ahead of us, and it is experts like you
here in this room who we need to help us meet this national challenge and achieve a national victory.
Keep up the good work, and please keep in touch with me and my staff. Thank you.
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