Retirement Security: A Path Forward

WASHINGTON, DC— Nationally, one in four retired Americans has no source of income beyond Social Security; in Maine, that number is one in three. In addition, a Gallup survey published in 2012 found that more than half of all Americans are worried that they will not be able to maintain their standard of living in retirement. Ensuring that more Americans are better prepared financially for their retirement is a top priority for Senator Susan Collins, Chairman of the Senate Special Committee on Aging.

This week, Senator Collins will introduce bipartisan legislation that would encourage more small employers to offer retirement plans, provide incentives for employees to save more for retirement, and ensure that low and middle-income working families are able to claim benefits for retirement savings already authorized by law. The bill is cosponsored by Senator Bill Nelson (D-FL).

Senator Collins said, “Making it easier for smaller businesses to provide access to retirement plans for their workers would make a significant difference in the financial security of many Americans. That is why Senator Nelson and I have again joined together to introduce legislation that focuses on reducing the cost and complexity of retirement plans, especially for small businesses, and on encouraging individuals to save more for retirement.”

More specifically, the “Collins-Nelson Retirement Security Act of 2015” would:

• Encourage small businesses to offer retirement plans. 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. Second, under current law, one business’s 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 save more. 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 increased match.

• 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.

The “Collins-Nelson Retirement Security Act of 2015” is supported by about a dozen groups including the Maine Chamber of Commerce.