Sense of the Senate Is Misleading

American workers have access to and are saving in defined contribution plans

On January 23 the Senate, by a vote of 98–0, added a “Sense of the Senate Concerning Personal Savings” to the minimum wage bill. The Senate language, shown in the sidebar, is based on the false premise that American workers are not saving, disregarding all the evidence to the contrary. It’s another demonstration of the challenge we face convincing federal policymakers of the success of employer-sponsored defined contribution retirement system.

To connect today’s personal savings rate with the Great Depression is ludicrous and denigrates the experience of the people who lived during that time. Imagine oranges a treat so rare that you only had one a year — in your Christmas stocking. That was the case for my mother when she was growing up in the 1930s. The government-calculated personal savings rate is dropping not because workers are not saving, but because those over 65, an increasing percentage of the population, are consuming assets they saved for retirement. Collectively in 1995, we in the United States had saved $5.91 trillion for retirement. At the end of 2005, we had accumulated $14.23 trillion, and the 2006 total will probably approach $16 trillion.

PSCA disputes reports that private workforce retirement plan coverage continues to be approximately 50 percent. We refer to the August 2006 Survey of Benefits in Private Industry, which states that 60 percent of workers have access to retirement plans, and 51 percent participate. Add in government workers where coverage is nearly universal, and the overall percentage is even higher. But the Senate says that “approximately half of all working people of the United States work for an employer that does not offer any kind of retirement plan.” All governments have plans. Nearly all companies with 100 or more employees have plans. There are even hundreds of thousands of companies with fewer than ten employees that have plans. Most Americans work for employers that have plans. A lot of American workers are either part-time, in the first year of employment, under the age of 21, or self-employed. They are not eligible to participate in an employer plan and are not counted as covered.

According to the Sense of the Senate statement, “existing savings policies85 provide limited incentives to save for low- and moderate-income families.” Actually, thanks to employers and the non-discrimination rules, median- and lower-wage workers are 14 times more likely to save for retirement at work than on their own in an IRA.

The provision goes on to state that “Congress should enact policies that promote savings vehicles for retirement that are simple, easily accessible, and provide adequate security for the people of the United States.” Congress already has. With the passage of the Pension Protection Act of 2006 the barriers preventing the defined contribution system from reaching its full potential have been removed. What Congress needs to do is let America’s workers and their employers take full advantage of the opportunity Congress has given them. Anyone who wants America’s workers to have the financial resources to retire with dignity needs to help us convince Congress to let that happen. Judging by this Sense of the Senate statement, we still have work to do.

SEC. 244. SENSE OFTHE SENATE CONCERNING PERSONAL SAVINGS  (a) Findings — The Senate finds that:  (1)   the personal saving rate in the United States is at its lowest point since the Great Depression, with the rate having fallen into negative territory; (2)   the United States ranks at the bottom of the Group of Twenty (G-20) nations in terms of net national savings rate; (3)   approximately half of all the working people of the United States work for an employer that does not offer any kind of retirement plan; (4)   existing savings policies enacted by Congress provide limited incentives to save for low- and moderate-income families; and (5)   the Social Security program was enacted to serve as the safest component of a retirement system that also includes employer-sponsored retirement plans and personal savings. (b) Sense of the Senate — It is the sense of the Senate that: (1)   Congress should enact policies that promote savings vehicles for retirement that are simple, easily accessible and provide adequate financial security for all the people of the United States; (2)   it is important to begin retirement saving as early as possible to take full advantage of the power of compound interest; and (3)   regularly contributing money to a financially-sound investment account is one important method for helping to achieve one’s retirement goals.