Senate Committee Examines Savings Innovations
The Senate Special Committee on Aging held a hearing
on June 15 to examine ways to leverage prizes and technology to influence savings behavior.
The hearing featured testimony from Transamerica Center for Retirement Studies President Catherine Collinson that focused on a new research report detailing how employers view retirement benefits.
Collinson used the findings from the report to recommend policy reforms that Congress should make to increase retirement security. At the top of the list was to allow unrelated private employers to join a multiple-employer DC plan (MEP) and to provide for additional tax incentives for small employers to help offset any retirement plan startup costs.
Collinson urged Congress to change the current rules to encourage employers to allow part-time workers to participate in employer-sponsored plans. These rules changes, which were also contained in President Obama’s latest budget proposal, would treat long-term part-time workers (defined as employees who have worked at least 500 hours per year for at least three years) as having met the plan’s service eligibility requirements. The proposal would allow employers to exclude long-term part-time workers from nondiscrimination testing requirements, including any top-heavy vesting or top-heavy benefit requirements, and would allow employers to exclude long-term part-time workers from an employer match.
Collinson also called for expanding and promoting the Saver’s Credit to make it more effective. This would be achieved, she argued, by raising the income eligibility threshold of the Saver’s Credit so that it applies to more tax filers and by making the Saver’s Credit refundable.
Sen. Susan Collins (R-Maine), the Chairman of the Aging Committee, used her opening statement
to highlight her legislation, the Retirement Security Act (S. 266), the main component of which would open up MEPs to any small business that has between 5 and 500 employees. The legislation also includes a provision that directs the Treasury Secretary to allow individuals to claim the Saver’s Credit on the Form 1040EZ. Sen. Claire McCaskill (D-Mo.), the Ranking Member of the Aging Committee, is a cosponsor of the Retirement Security Act.
Testimony from the other witnesses — Timothy Flacke
, executive director of the Doorways to Dream Fund; Aron Szaprio
, associate director of policy research at Morningstar (and owner of HelloWallet); and Brian Plum
, president and CEO of Blue Ridge Bank — focused on products that employ gamification
and prize-linked incentives to encourage individuals to save.
Blue Ridge Bank was the first bank in the nation to launch a prize-linked savings account program after both the federal government — through the American Savings Promotion Act enacted into law in December 2014 — and the Commonwealth of Virginia authorized these accounts. The “contestants” who save in these accounts can win both monthly cash prizes and a larger annual grand prize. The more an individual deposits into these accounts, the greater the chance of winning a prize. This incentive only applies to general savings accounts because the 401(k) rules expressly prohibit an employer from giving prizes to individuals that participate in retirement plans.
Andrew Remo is the American Retirement Association’s Director of Congressional Affairs.