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Retirement Plan Simplification and Enhancement Act of 2013

Floor Speech

Location: Washington, DC

Mr. NEAL. Mr. Speaker, today I am pleased to come before the House to reintroduce the Retirement Plan Simplification and Enhancement Act of 2013. Our current retirement plan rules are very complicated. My bill includes a number of common sense reforms that will simplify the rules while still protecting participants.

For example, under current law, small businesses that adopt a new retirement plan are eligible for a tax credit to cover some of their start-up costs. We're increasing the credit to $5,000 to cover all of these expenses. I hope this will encourage more small employers to sponsor retirement plans.

Also, currently employers can exclude some part-time workers from participating in their 401(k) plans. As women are more likely than men to work part-time, these rules can be quite harmful for women in preparing for retirement. So my bill would require employers to allow certain long-term, part-time workers to make elective deferrals to their 401(k) plans.

My bill also reforms the Saver's Credit. The current Saver's Credit provides a tax incentive for families to save for retirement. However, because the Saver's Credit is currently non-refundable, it does not benefit those who need it most--low and moderate income households who have little or no federal income tax liability. Therefore, my bill would make the Saver's Credit refundable and also incentivize taxpayers to pay the credit into their retirement accounts.

The Retirement Plan Simplification and Enhancement Act also would establish a new automatic enrollment safe harbor. It was my legislation that established the existing safe harbor that promotes automatic enrollment in 401(k) plans. The power of inertia is a powerful tool. And automatically enrolling employees in 401(k)s unless they decide to opt out is a simple and effective way to harness this power of inertia. And my legislation has incentivized many employers to implement automatic enrollment in their 401(k) plans.

However, the current safe harbor sets a minimum default level of contributions of 3 percent in the first year. Under the existing rules, employers can set the default at a higher percentage if they want to but many employers just stick with the floor amount of 3 percent. We all know that 3 percent is not enough savings for most American families--in fact, many financial institutions recommend that employees save at least 10 percent of their salary. So my proposal would keep the existing automatic enrollment but it would create a second safe harbor. And this second safe harbor would set the minimum default contribution rate at 6 percent in the first year, 8 percent in the second year and 10 percent in all subsequent years. Now remember, employees can lower the rate if it's too high for them--but this proposal would use the power of inertia to encourage employees to save more.

Finally, my bill would help consolidate and simplify the many employee notices required by retirement plans. The current rules require retirement plans to provide employees with lots of information regarding their plans. Although well intended, it has become information overload with many employees just ignoring the many notices--or even worse, it confuses employees. My bill would direct the Secretaries of Treasury and Labor to review the current retirement plan reporting and disclosure rules and make recommendations to improve these requirements.

Let me conclude by saying that I also intend to keep working on allowing for greater disclosure to participants in an electronic manner. We certainly need to protect employees without computers or individuals who just prefer paper. However, electronic disclosure provides many efficiencies, saves participants money that could otherwise be taken from their retirement accounts, and provides easy access to educational and financial tools. And, therefore, I plan to continue working on this issue.

My legislation provides common-sense reforms that will help Americans prepare for a financially secure retirement. I urge my colleagues to join me in supporting ``The Retirement Plan Simplification and Enhancement Act.''

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