Chairman Hatch, Ranking Member Wyden, and members of the committee, thank you for the opportunity to submit written comments about the challenges facing retirement savers today and how to increase access and participation for all workers. I am Pamela Villarreal, a senior fellow at the National Center for Policy Analysis. We are a nonprofit, nonpartisan public policy research organization dedicated to developing and promoting private alternatives to government regulation and control, solving problems by relying on the strength of the competitive, entrepreneurial private sector.
The Obama Administration has made it a goal to increase access to retirement savings accounts for workers whose employers do not provide 401(k) accounts. Consider:
- According to the Department of Labor March 2015 benefits survey, 69 percent of civilian workers had access to a defined benefit or defined contribution retirement plan. Of those workers 77 percent participated. In March 2012, 68 percent of civilian workers had access to a defined benefit or defined contribution plan, with a participation rate of 79 percent.
- When broken between full-time and part-time workers in the March 2015 survey, however, 80 percent of full-time workers had access to a defined benefit or defined contribution plan, compared to 38 percent of part-time workers. Moreover, only half of part-time workers who had access to plans actually participated.
- But these statistics include only plans offered through employers. According to the Investment Company Institute, in 2013 67 percent of U.S. households had retirement accounts through their employer of through individual IRAs.
While one could argue that the participation rate could be much higher, it does not necessarily mean that access is the problem. Between 401(k) plans, SEP plans, traditional and Roth IRA plans and the new MyRA accounts, anybody who earns at least the amount in wages that they plan on contributing to a retirement account can start and contribute to some type of retirement savings vehicle. But merely increasing access to retirement accounts does not mean that households will contribute to them. The real question is, with the availability of so many types of accounts, why are workers not saving as much as they should, particularly those with lower incomes?