As we reach the midpoint of the 2019 America Saves Week, an annual event to encourage Americans to save more effectively, we want to recognize the importance of retirement savings.

The retirement system in the United States is helping millions of Americans save for a secure retirement and maintain their standards of living as retirees. Increased life expectancies, the uncertain future of Social Security benefits, higher health care costs, and low interest rates have increased the need for American workers to save more for retirement. Importantly, there are several active efforts within Congress to promote increased retirement savings and coverage.

US Total Retirement Market Assets in Trillions, 2018 Q1

SIFMA is committed to increasing retirement security and has identified three primary pillars to reach this goal: expanding access to plans, increasing participation and decreasing leakage, and enhancing education.

Expanding Access

Many employers offer automatic enrollment, tax-deferred payroll deductions, and matching contributions which encourage employees to build their retirement nest eggs. Matching contributions, in particular, boost the level of savings employees are able to achieve on their own in a meaningful way. However, some businesses, especially smaller ones, do not offer retirement benefits, with many citing the costs of setting up a plan as the main barrier to starting one.

Percentage of Workers with Access to Retirement Savings by Employer Size, 2017

To address this concern, Congress adopted legislation that provides a non-refundable tax credit to employers that adopt a new retirement plan. SIFMA supports this important incentive, along with other tax credits for small businesses starting and contributing to a plan. The cost of starting a plan could be further decreased by allowing small businesses to join an open multiple-employer plan which allow the same retirement plan, often established by a financial institution, to be offered by multiple employers. SIFMA strongly supports initiatives that would expand access to open MEPs.

Increasing Participation

SIFMA believes enhancements can be made to make the American retirement system more effective, along with awareness and education about existing tax incentives, increased use of retirement plan automatic features, facilitating portability, and efforts to keep more money in savings. Proposals advancing these initiatives will further strengthen the system.  

SIFMA supports provisions found in various legislative proposals to increase the contribution limit of SIMPLE IRAs to be consistent with 401(k) plans. The SIMPLE IRA is an easy to implement savings program that delivers retirement security for both the employer and employees of small businesses. Increasing the amount which can be saved on a tax-deferred basis will encourage participants to save more for retirement.

Automatic enrollment has proven to be an effective way to increase participation in a retirement plan, and features like automatic escalation can help employees build their savings even further. SIFMA supports efforts to create voluntary automatic IRAs for employers and increasing the use of automatic features in plans, such as auto-enrollment and auto-escalation.

Certain low- and moderate-income individuals are able to take a tax credit for making eligible contributions to their IRA or employer-sponsored retirement plan – this is called the Saver’s Credit. However, many Americans do not take advantage of this credit because they do not know it is available. SIFMA supports efforts that would improve the ease of access, such as proposals to allow taxpayers to claim the credit on the Form 1040-EZ.

Americans are working longer and retiring later. As more Americans choose to stay in the workforce, it is imperative that their retirement savings are protected, and that they are permitted to continue to save. SIFMA supports policies to allow these individuals to continue making tax-deferred contributions to their savings later in life while they continue to work beyond the current retirement age. In tandem, we believe required minimum distribution (RMD) rules should be updated to address the gains that have been made in life expectancy.  

Preventing Leakage

The U.S. workforce is increasingly mobile, a trend which shows no signs of slowing, and mobility could further increase with greater reliance on technology. Complexity and paperwork hassles cause many participants to cash out their savings – particularly when the account balance is small – upon job change. To help alleviate this type of leakage, SIFMA believes initiatives such as plan-to-plan portability could be enhanced. SIFMA believes that the Department of Labor and the Treasury Department can take steps to streamline the process to transfer retirement funds into a new plan and decrease cashouts.

Proposals to help participants save more and keep that money in savings longer will go a long way to increasing retirement security for Americans. For more, download SIFMA’s white paper: SIFMA Retirement & Savings Platform – Legislative and Regulatory Policy Proposals.

Kenneth E. Bentsen, Jr. is president and CEO of SIFMA, the voice of the nation’s securities industry. He is also chairman of the Global Financial Markets Association (GFMA), of which SIFMA is the U.S. regional member.