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Addressing the Looming Retirement Security Crisis

The United States is on the verge of a retirement crisis.  About one half of all U.S. households age 55 and older have no retirement savings, and up to two-thirds of workers may not have saved enough to maintain their standard of living in retirement. 


As Chairman of the Senate Aging Committee, ensuring that more Americans are financially secure in their retirement years is one of my highest priorities.  In order to address this looming crisis, I have introduced two bipartisan bills to improve access to retirement savings opportunities so that fewer people end up retiring in poverty.


One cause of this savings shortfall is that employees of small businesses, which are the majority of businesses, are much less likely to participate in, or even have access to, employer-sponsored retirement plans.  Here in Maine, at least 46 percent of private sector employees work for an employer that does not offer a retirement plan. Yet, we know that people are more likely to save if their employer is able to provide access to a plan.


Making it easier and more affordable for smaller businesses to offer retirement plans would make a significant difference for many Americans.  That is why the first of the two bills I introduced, the Retirement Security Act, would focus on reducing the cost and complexity of retirement plans, especially for our small businesses, and on encouraging individual employees to save more for retirement.


This bill would allow businesses to join multiple employer plans (MEPs) to share the administrative burden of a retirement plan without requiring a connection, or “nexus,” between them, and it would protect members of a MEP from losing their tax benefits if one employer in a MEP fails to meet the minimum criteria.  It would also reduce onerous paperwork burdens and requirements on businesses seeking to offer retirement programs to their employees.  Moreover, it would allow employees to receive an employer match of contributions up to 10 percent of their salary and would provide the smallest businesses – those with fewer than 100 employees – a tax credit to offset their increased contributions.


The new retirement plan options in this bill are just that – options.  No business, large or small, would be required to offer a retirement plan.  Rather than a mandate, this is an opportunity for employers, whom I know share the concern about the financial security of their employees.


The second bill I introduced would build on this comprehensive effort to strengthen retirement security.  The SIMPLE Plan Modernization Act would provide more opportunities for both employers and employees seeking to use the popular SIMPLE plans for retirement savings.  Established in 1996, SIMPLE plans can help small businesses provide employees with retirement plans that are less costly and easier to navigate than a 401(k) plan, which many small employers cannot afford.  My bill would help expand access to SIMPLE plans by increasing the contribution limit for most small companies.


I recently chaired an Aging Committee hearing to examine efforts to encourage retirement savings.  Among our witnesses was Denis St. Peter, a Maine business leader who has achieved remarkable success in increasing his employees’ participation in his company’s retirement plan.


When Mr. St. Peter became President and CEO of CES, Inc.—an engineering consulting firm based in Brewer with offices throughout Maine—nearly a decade ago, only six in 10 of his employees were participating in the company’s 401(k) retirement plan, and the average contribution was a meager 3.9 percent of salary.  After Mr. St. Peter adopted a new approach—which included matching up to four percent of employees’ contributions and educating employees about retirement planning and their options—nine in 10 employees began participating in the company’s retirement plans, and average contributions more than tripled.


CES’ success is proof that small changes can make a dramatic difference in retirement security.  It was a pleasure to share Mr. St. Peter’s accomplishments with my Committee colleagues.  Working together, government, committed business leaders, and informed employees can address this crisis and increase financial security for hard-working Americans during what should be their golden years of retirement.