Testimony and Video from Ways and Means Committee Hearing on Understanding Social Security’s Solvency Challenge

Hearing on Understanding Social Security’s Solvency Challenge

Witness List

Stephen C. Goss
Chief Actuary, Social Security Administration
Testimony

Keith Hall, Ph.D.
Director, Congressional Budget Office
Testimony

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Smith: Less to Social Security Expansion Than Meets the Eye

Writing for Fedsmith.com, Brenton Smith writes that

Expanding Social Security has become a dividing line in many Congressional races where supporters want to create a visible separation with the GOP which largely offers nothing but benefit cuts far in the distant future.

Unfortunately for Americans who are excited about Social Security expansion, there’s less in it for many of them that it seems. Read the whole article here.

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Upcoming event: Ways and Means Hearing on “Understanding Social Security’s Solvency Challenge”

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Johnson Announces Hearing on “Understanding Social Security’s Solvency Challenge”   September 14, 2016 EMILY SCHILLINGER LAUREN ARONSON (202) 226-4774   WASHINGTON, D.C. – House Ways and Means Social Security Subcommittee Chairman Sam Johnson (R-TX) announced today that the Subcommittee will hold a hearing entitled “Understanding Social Security’s Solvency Challenge” on Wednesday, September 21, at 10:00 AM in room B-318 of the Rayburn House Office Building. This hearing will focus on the differences between the estimates of Social Security’s finances produced by the Congressional Budget Office and those produced by the Social Security Trustees, as well as what these differences mean for efforts to address Social Security’s solvency. At the hearing, Members will hear from Dr. Keith Hall, the Director of the Congressional Budget Office, and Steve Goss, the Social Security Administration’s Chief Actuary. The witnesses will discuss how their organizations arrive at their projections of Social Security’s solvency and what accounts for the differences between their projections. Upon announcing the hearing, Chairman Johnson said: “Everyone knows Social Security is in trouble, but how much trouble depends on who you ask. Even the numbers experts at the Congressional Budget Office and Social Security’s Trustees disagree on the size of Social Security’s shortfall. These are well-respected organizations, but they can’t both be right. I look forward to getting answers on why the CBO and the Trustees see Social Security’s future so differently. This hearing is an important step towards making sure our children and grandchildren can count on Social Security, just like today’s seniors do.” BACKGROUND Both the Social Security Board of Trustees (Trustees) and the Congressional Budget Office (CBO) evaluate the condition of Social Security’s long-term finances annually. They base their projections on a variety of demographic and economic assumptions, including life expectancy, productivity, and interest rates. In recent years, the Trustees’ and CBO’s estimates of Social Security’s financial status have begun to diverge. In 2016, the Trustees estimated a 75-year shortfall of 2.66 percent of taxable payroll, while CBO’s estimate was 4.7 percent. Similarly, the Trustees estimate that the combined Trust Funds will be exhausted in 2034, while CBO estimates that this will occur in 2029. ###

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New paper: “What’s Happening with Retirement Saving and Retirement Incomes? Better Data Tell a Better Story”

New paper: “What’s Happening with Retirement Saving and Retirement Incomes? Better Data Tell a Better Story,” by Andrew G. Biggs, American Enterprise Institute.

• Americans are doing a much better job of saving for retirement than is commonly supposed. Despite claims of declining retirement-plan coverage, more Americans have retirement plans today than in the so-called golden age of traditional defined benefit pensions, and new 401(k) rules make today’s workers much more likely to receive benefits once they retire.
• Contributions to retirement plans are at record levels compared to the past. Contrary to claims that employers have abandoned retirement saving, employer contributions to retirement plans are also at a historical peak.
• The policy debate over retirement security ignores much of the best data and research available. While better information does not erase the challenges we face in improving our diverse retirement-saving system, it can help inform the debate.

Click here to read the whole paper.

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New paper: “Can We Increase Retirement Saving?”

The Center for Retirement Research at Boston College has released a new Issue in Brief:

“Can We Increase Retirement Saving?”

by Steven A. Sass

The brief’s key findings are:

• Today’s workers must save on their own for a secure retirement, so researchers have examined existing options for encouraging them.
• Tax incentives: recent research suggests that increasing the generosity of tax incentives for 401(k)s and IRAs would not significantly increase saving.
• 401(k) design: auto-enrollment has boosted participation, but, to date, low default contribution rates and little auto-escalation have dampened the rise in saving.
• Auto-IRAs: recently adopted by some states, they would require employers without a plan to enroll their workers in an IRA, with the ability to opt out.

This brief is available here. Read more!

Upcoming event: Retirement security in the new economy: Access and guarantees, Sept. 23

Retirement security in the new economy: Access and guarantees Friday, September 23, 2016, 10:00 a.m. — 12:00 p.m. The Brookings Institution, Falk Auditorium, 1775 Massachusetts Avenue, N.W Washington, DC  20036

One of every six workers has a non-traditional employer-employee relationship. These workers range from independent contractors and consultants to freelancers, temps, and those in the gig economy. Few, if any, have any form of workplace retirement benefit. Meanwhile, upwards of 30 states are considering a state-sponsored retirement savings plan for small business employees, and six are already implementing such a plan. Congress has been taking notice as well. Some policymakers are reluctant to expose individuals to market risk and want to provide guarantees that would protect their retirement savings in the event of a market crash. On September 23, the Retirement Security Project will host an event to discuss these and related policy issues and will release two new papers on the topic. The first paper proposes a number of ways to improve retirement saving options for contingent workers, such as exploiting innovations in technology and developing retirement accounts that follow the worker from job to job. The second paper explores differing types of rate-of-return guarantees, and who bears the costs of financing those assurances. After each paper presentation, discussants will comment, and all panelists will take questions from the audience. Registration will open at 9:30am with light refreshments. Join the conversation on Twitter at #Retirement.

 

Welcoming remarks

William G. Gale, Senior Fellow and Director, Retirement Security Project, The Brookings Institution

Panel one: Retirement plans for contingent workers

Presenter: David C. John, Senior Strategic Policy Advisor, AARP Public Policy Institute and Deputy Director, Retirement Security Project
Discussant: Ida Rademacher, Executive Director of the Financial Security Program, Aspen Institute
Discussant: Seth Harris, Distinguished Scholar, School of Industrial and Labor Relations, Cornell University
Moderator: Deborah Whitman, Executive Vice President and Chief Public Policy Officer, AARP

Panel two: Guaranteed returns in retirement savings accounts

Presenter: William G. Gale, Senior Fellow and Director, Retirement Security Project, The Brookings Institution
Discussant: Andrew Biggs, Resident Scholar, American Enterprise Institute
Discussant: Olivia Mitchell, International Foundation of Employee Benefit Plans Professor, The Wharton School at the University of Pennsylvania
Moderator: Joshua Gotbaum, Guest Scholar, Economic Studies, The Brookings Institution

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Upcoming event: “Making It Easier to Save”

INVITATION MAKING IT EASIER TO SAVE
Publicly Sponsored Private Retirement Savings Programs
DOL Rules: Options, Opportunities and Challenges
Monday, September 12, 2016
10:00 AM - Noon
Washington Court Hotel
525 New Jersey Ave., NW
Washington, D.C. 20001

Eight states – California, Connecticut, Illinois, Maryland, Massachusetts, New Jersey, Oregon, and Washington – have passed legislation to establish retirement savings arrangements for private sectors workers who currently lack access to plans through their employers.

On August 25, 2016, the White House and the U.S. Department of Labor (DOL) announced a final rule to allow states to create their own programs and issued a new proposed rule that would allow some larger cities to also establish such programs.
Please join us for a discussion of the opportunities, challenges and outlook for the future for publicly sponsored private retirement savings programs. Please register here or use the red button below.

Agenda

10:00 AM - 11:00 AM         Expanding Access: A Discussion of the Path Forward
                                        The Honorable Phyllis Borzi, Assistant Secretary, Employee
                                        Benefits Security Administration, U.S. Department of Labor
                                        Moderated by: Michael Kreps, Principal, Groom Law Group
11:00 AM - Noon Perspectives on Options, Opportunities and
                                        Challenges      
                                        Kathleen Kennedy Townsend, Former Lt. Governor of Maryland
                                        and Member of the Maryland Commission on Retirement
                                        Security and Savings
                                        John Adler, Director, Mayor’s Office of Pensions and
                                        Investments, New York City
                                        Julian Federle, Chief Policy and Programs Officer, Office of
                                        the State Treasurer, Illinois
                                        Steve Hill, Director of Retirement Security Campaigns, Service
                                        Employees International Union
                                        Richard Mourdock, Former Treasurer, State of Indiana
                                        Moderated by: Angela Antonelli, Executive Director,
                                        Georgetown University Center for Retirement Initiatives

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New paper: "Reducing Retirement Savings Leakage"

"Reducing Retirement Savings Leakage"
EBRI Notes, Vol. 37, No. 9 (August 2016)

STEPHEN BLAKELY, Employee Benefit Research Institute (EBRI)
Email: BLAKELY@EBRI.ORG

This paper summarizes discussion on new ways to reduce retirement plan “leakage,” presented at the Employee Benefit Research Institute’s 78th policy forum in Washington, DC, on May 12, 2016.

A recurring issue with defined contribution (DC) savings plans such as the 401(k) is the risk of “leakage” -- pre-retirement reductions in plan savings by workers, either through loans, hardship withdrawals, or payouts at job change. There have been widely varying estimates of how big of a problem leakage actually is, and what the potential reactions may be by both retirement plan sponsors and participants if new pre-retirement access restrictions were imposed. For instance, for many workers the option of being able to take a loan from their 401(k) account is seen as a major incentive for them to participate. A 2014 analysis by EBRI found that approximately two-thirds of the impact of diminished retirement savings due to leakage was associated with the cashouts that sometimes occur at job change. Others have pointed out that 401(k) loans, which sometimes are criticized as a significant source of retirement savings leakage, actually account for the smallest amount of pre-retirement savings loss.

To highlight new work on leakage, the Employee Benefit Research Institute (EBRI) devoted part of its 78th policy forum to the topic of “Retirement Challenges and Reforms,” focusing in particular on “Reducing Leakage and Incubating Savings.” The May 12 event in Washington, DC, brought together about a hundred benefits-related experts to discuss a variety of retirement and health topics. The leakage-focused session involved the presentation of a simulation model by the Retirement Clearinghouse (RCH) concerning outcomes of “Auto Portability,” or automated and presumptive plan-to-IRA and plan-to-plan transfers of retirement savings as workers change jobs. Based on research and actual experience with employers, RCH has developed a fairly simple engagement model with both incoming and departing employees -- aimed in particular at those with small 401(k) balances ($5,000 or less, which collectively amount to about $8.8 billion a year) -- that would apply both a pro-rollover/transfer presumption and a near-automatic process that, together, is projected to reduce retirement plan leakage by 50 percent. It was noted that “Auto Portability” has an opt-out mechanism so that individuals can opt out if they need the money.

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