6 Questions for Sen. Hatch on Retirement and the Election

Workers need to save more. How much more they need to save is a question that the data must tell us. So first, we need data to tell us the facts that should inform our policy considerations.  We need to know how much income Americans are projected to need in retirement, how much are they projected to have and, to the extent there is a shortfall, what policies Congress should enact to help Americans close the gap.

4. In the SAFE Retirement Act, you propose public pensions use annual annuity purchases to guarantee income in retirement. With respect to the private sector, Treasury and Labor have issued guidance favorable to incorporating annuities in target-date funds in defined contribution plans. Could annuitization of retirement benefits shift too much risk to insurance companies? Are you in favor of making this mandatory and why?

My proposal does not have a mandate for employers or workers.  Rather, my bill promotes the use of fixed income annuities from state-regulated life insurance companies because lifetime income is very important for retirement security. Look, people are living longer, and that's a good thing. But longer lifespans make lifetime income more expensive for employers to commit to.  But the life insurance industry is the one industry designed from the ground up to manage longevity risk. So we should see what the life insurance industry can do to help us solve the lifetime income challenge.

Annuity contracts purchased through a SAFE Retirement Plan will be competitively bid on a group contract basis so that the workers receive the highest possible pension in retirement. Government finance officers will be involved in the bidding process to ensure best practices, and life insurance companies will be supervised by their respective state insurance departments. The life insurance industry is reliably solvent because state insurance regulations are strict, with stringent reserve requirements and conservative investment standards. In fact, state-licensed life insurance carriers survived the 2008 stock market meltdown in far better condition than any other part of the financial sector. 

5. Multiemployer defined benefit plans are in pretty rough shape. An alliance of labor and business interests is calling on Congress to give multiemployer plan trustees the power to cut current benefits, to current retirees, by 10%. That would seem to be a generous concession from participants. Is there the political will in Congress to pass such an aggressive measure?

Chairman (Ron) Wyden (D-Ore.) and I both have committed to working together on multiemployer pension reform. The Finance Committee earlier this year laid the groundwork to address this issue in 2015. It's not possible at this point to predict what the reform will entail, or whether or when the reform will occur. 

6. In the private sector, advocates of multiple employer plans say they can deliver defined contribution plan access to small businesses. The DOL has resisted industry calls to make "open" multiple employer plans – which allow non-correlated businesses to pool participants – more accessible. What's your thinking on this?

The SAFE Retirement Act includes a proposal to allow multiple unrelated employers to band together to obtain better 401(k) investment results and simpler, less expensive plan administration. This is an area of bipartisan interest in the Senate, and it makes a lot of sense.

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