Not doing what the technocrats wanted to do . I will have to confess i wasnt prepared to answer that question when i walked into the room. I knew who you were talking about and i have read the articles more than once that you refer to. I guess i would say. Take a swing at it. [laughter] [laughter] how about if i answer slightly different question which is i mean i guess my view is behavior economics is, what it does is it tries to expand the scope of understanding of what is driving behavior and what are the tools you could use to influence behavior . And what you want to take a light handed approach or a heavyhanded approach that is a matter of personal preference so if we were painting all behavioral economist with the same brush i think you are going to find people along an entire spectrum. That i would be happy to go back and look at that article and send you a response. I would like to have that. Mr. Chairman i have to leave but i want to mention this is an excellent panel. I have apologized apologize that we have run out of time. Thank you senator hatch and as you and i have talked on the past its going to be a focus bipartisan tax reform. Senator stabenow. Thank you very much mr. Chairman to you and are distinguished ranking member. This is a very important issue and i appreciate the focus now and i look forward to working with you. I really felt like saying im a little surprised at what feels like an optimistic view that more people are saving and somehow people are going to have enough and they are doing well. I would throw out a couple of different numbers. Retirement research in 2010 we have 6. 6 trillion deficit in terms of what people were saving. Last year, 2013 National Institute on Retirement Security said 92 of working households did not meet the targets they needed for savings. Somewhere between 6. 814 trillion so im concerned about the differences there. But i want to ask specifically about a group of folks that i think we havent talked about this morning. That is as we look at what happened in the Great Recession and people losing their jobs in their homes and they lost their equity in their homes which was a major way that people saved, middleclass families as well as retirement and we look at what has happened to so many folks. We know that a lot of people took withdrawals from their retirement accounts and they were told they increase as much as 40 . Folks were saving it than they had to take a hardship withdrawal because of what was happening to them. I am very concerned about folks who are now in a deficit position who were doing the right thing and were caught short because of what happened that was way beyond their control in all of this. Mr. Bogle i would ask you first come are their options that you would suggest that would help these workers build secure retirement who got behind the eight ball because of the recession . That is a problem to be solved senator but i do think we have to face up to the fact that according to the ici 33 of our population of households have no Retirement Plan at all. The Federal Reserve who is a very reliable source about a quarter, only a quarter for households are preparing for retirement. I look at that kind of data, those kind of data is more important than how many dollars are here and how many dollars are there. Heres a a case where i think common sense should override complex data which includes just about any answer you want. How to help someone who is in real trouble is not easy. We should face the fact that the lower quintile of american incomes are 20,000 a year before taxes. Unchanged on a real basis with living adjustment since 1979 of those people are not able to save. If we want to help them there is no recourse and increase benefits at the lower end of Social Security. Its complex but the money has to come from somewhere and that would be the best answer i could get to your question. We have to look elsewhere in the private retirement system. I would ask each of you if you could respond. Right now its costing 800 billion over the five years alone as we look at retirement accounts and pension contributions. I certainly support this is a major area where we are focusing our tax policy but we also do no according to the cbo the top 20 of households received nearly twice as much of the tax benefits for Retirement Savings is the bottom 80 combined. We understand why that is but that is that the questions as that is that the questions as we are looking attacks reform you know the households that need the least help in retirement are getting the biggest help in the people who needed the most are getting the least help. So how would you suggest or would you suggest that we do anything to improve the targeting of the tax incentives for retirement and also if anybody else has a thought on how we help the folks who got put in a hole during the recession i would appreciate that. First looking at the highend of that and i will stand in for Ellen Schultz because i read her book. So did i. The people behind income the income scale have so many Retirement Plans. Things that are in my opinion socially outrageous if you can handle an opinion that strong get all kinds of benefits above and beyond what we can do and think about in our retirement system. I would say thats a good place to begin reform and whether those savings are making retirement so easy for wealthy citizens can somehow be transferred to those lower on the income scale. I can tell you how to do it today. Thank you very much and i will ask everybody briefly dr. Reid . A couple of things here. The first is if you look at the entire retirement system just putting employer plans together with Social Security its still a progressive system. And its really a combination of the two that creates the joint incentive. The second point is that i think this is where we provide caution is that if you begin to scale back and really right now the contribution limits are pretty modest relative to where we were historically win a race i was first i was for setup and individuals to take advantage of them have to be in their peak earning years. If you begin to carve that back or began to tinker with how the tax incentives are created you could have higher income employers and employees may decide its better to give him current compensation and not offer a plan. We could end up reducing overall participation. The example of that is a 1986. He removed the ability of high income workers to participate in the ira in the following year higher income people no longer participating. Its complex when it happened but i think its a precautionary tale. I guess what i would say mr. Chairman is. I would increase incentives or remove the disincentives out of the plans that can be put in by employers so they can expand the access. And you would do that for everyone . Their disincentives built into the system that are difficult for the small employer to start these plans. Senator hatch has a number of ways to remove those disincentives to make it easier for small person to start so americans more americans can be saving. If you are worried about lowincome and Global Taxpayers i think many individuals are not particularly financially literate and you can create all sorts of complicated tax incentives and youre not going to get a lot of attraction because the tax incentives arent solving the problem. A recent households arent saving is because they are facing small tax incentives because they dont know what to do or their employers dont offer a plan. A far more sensible margin for saving public dollars would be to create the incentive for employers to offer savings plans and automatically in world the lowincome workers because that solves the problem of inaction and individuals not knowing what to do. Anything to add . I would reiterate a point for my testimony which is the folks who end up retiring without a lot of savings and wealth are often people who are sporadically attached to the workforce during their working years. These are folks for whom and lawyer based savings plans are going to do much but they are also folks who evolved from the Social Security. Social Charity Serves a lot of people not particularly well because its an earning base programming because it has odd distribution benefits even with lowincome people. I think we do need to rethink who was fallen short and what do we need to do for them . Im going to have to stop you at this point. Senator grassley. Im going to start with mr. Betts. In your testimony state that a current savings tax system is quote more progressive than our progressive income tax. Thats an important important point from my standpoint because critics of current savings incentives frequently argue just the opposite. Im going to give you a chance to elaborate on how the current savings incentives are progressing. Thank you senator grassley. Yes in my testimony it demonstrates that americans who earn less than 100,000 basically represent 28 of the tax collection. The same group of americans received 49 of the benefits to the employersponsored Retirement Plans. That seems quite a bit more progressive. In addition what is not noted are the Many Employers that provide employer contributions in these plans because of the way they are designed. The nondiscrimination rules offers incentives for employers to put more dollars in that are covered in this. For dr. Reid as you know there are currently several proposals that would limit the ability of upper income individuals to deduct retirement contributions, the 20 limitation is an example. He discussed this with senator hatch from the employee standpoint. I would ask you how does your Research Suggests employers offer defined Contribution Plans would respond to proposals such as the president s . Its important to keep in mind senator that a 401 k plan is an Employee Benefit in something that when an employer is looking to attract an employee they know to attract highquality employees they want to offer an incentive like they would any other benefit. If you have a benefit to some attractive for a group of potential employees employers will say im going to use my resources elsewhere. I may simply increase wages or Something Else and not offer a plan. The example that i gave them was by putting a cap or a credit in place what will happen a certain individual employees would have to pay a tax going into the 401 k and they would have to pay the full tax rate coming out. Actually for some of these employees would be better off putting their savings in a taxable account outside of their employers plan. The employer that begins to happen will say thats a benefit that some of my employees want. Im not going to offer that anymore and as as many of the panels appointed out of having that employer employer plan there and in place and being able to in many cases auto enroll people that increases participation and i think we would be taking significant steps backwards from the actions that congress has taken over the last 50 years. We would actually potentially reduce plan participation. I want to go back to mr. Betts. Employersponsored Retirement Plans are an important component of any Retirement Plan. While 80 of fulltime workers have access to a Retirement Plan this number is only around 50 for employees working for small employers with fewer than 100 workers. Mr. Betts is someone who worked for businesses and the administration of their Retirement Plans what do you see as the biggest barrier to employers particularly small employers offering Retirement Plans but probably a more important question would be the second one so spend more time on this. What single reform is implemented would do the most increased number of Small Businesses offering Retirement Plans . Thank you. There are several older rules in the nondiscrimination rules put in place early on in these plans. Newer rules have done better at managing the nondiscrimination requirement in these plans. One of the ones that could be removed would be the top every requirement. That has disincentivized many small employers because of the risk for how much employer money they may have to put into a plan to satisfy that rule. Another big step in the right direction would be senator hatches start k to provide an employer plan. Employers can contribute where theres nowhere to the employer contribution until such time that an employer becomes more financially stable and can benefit from a large plan. My last question would be to mr. Biggs and mr. Reid what would push Retirement Savings into iras and should Congres Congress or is it important for individuals to have more options . Senator we are all in favor of simplification. One of the concerns we would have in terms of potential as some of the proposals like senator hatchs better trying to find ways to make it simpler for small employers to offer plans to actually narrow the options and make it more difficult for small employers to offer a plan. That is why we have been in favor of concepts like start k to iraq or the scope of an employer offering a Retirement Plan. Mr. Betts do you have anything to add . I am done. Thank you senator grassley. Senator cardin. Mr. Chairman for solving you for holding this hearing and i agree this is a critically important issue. Its been 15 years since congressman portman and i recognized we had a significant problem in our economy and 15 years ago our economy was growing. Our workforce was growing and income was growing. We let the world be a economic indicator. We also recognize we do not have enough money and Retirement Security for americans particularly lowwage workers and younger workers. So we tried to do something about it and we were able to get a couple of significant Provisions Incorporated into our tax code. I want to sort of build on that. Our first principle was to simplify and to increase the limits particularly the catchup contributions from the point of some of you have raised. When youre young you have a family and you have homes in you have all these issues come education and you dont think about retirement until later in life and the limits prevent you from building up enough to provide for Retirement Security. And its Pretty Simple and thats access to Retirement Plans. If an employer does not offer a plan there is going to be limited access. If you simplify the limits are high enough to make a worthwhile they will provide plans and thats been the result of higher limits and more simplified pla plans. We also recognize that when employers put money on the table more people will participate. The federal thrift plan. Our workers participate in it. Why . Because they dont want to put money on the table so when employer setup of match its more likely the workers will participate. Thats one of the things we try to encourage. The alternative to that is to try to put money on the table for the government because as important as the tax deferral is its not enough for lower wage workers and younger workers to participate at the levels we would like them to. The savings credits works. Millions of americans today are using the savers credit so we have been able to get more participation. Automatic enrollment was important not just for people and rolling mr. Chairman but also the default Investment Option is more sensitive to persons age which means there will be better investments rather than making decisions themselves. Lastly you mention Financial Literacy and investment advice. All of that is part of what we try to do over a decade ago. As a result we made progress. More people have Retirement Plans that wouldnt have Retirement Plans and more retirement options you know we have gone through a recessi recession. In a recession you try to encourage people to spend, not save in as a result we have lost ground. Theres no question about it. We have got to do a lot more. We have been on the defense and last for five years trying to preserve the options we currently have. That has been our strategy. We now have a strategy to move forward and that is why i was pleased about this hearing. How can we build on what has on what his work and how can we do with the issues that many of you have talked about with oldage workers and younger workers not putting enough money away for retirement. Mr. Chairman there are many things we could do. Senator portman and i have introduced legislation to deal with the plan clarification. It deals with the practical problems that your plans have with erisa and another thing we can do we have the freeze legislation because you have companies that have defined Contribution Plans and theyre trying to do whats right by preserving those options but th challenging. We should act on that. I would hope these modest changes could be done quickly because they are affecting the retirement options and we shouldnt wait for the comprehensive when we can get some progress made. We should move forward and approve the savers credit. You should improve being automatic enrollment and continue to try to simplify but i would like to ask dr. Reid a question. One of the things that has frustrated me is that when we design these plans we made it too easy in my view for people to take retirement money out for things other than retirement. You also made it easier for them to take lump sums than earned income. One of our objectives is to have retirement Retirement Security to have an income source it takes the pressure off of Social Security which was never intended to be the solesource of income for people who are retired. What can we do to encourage more Lifetime Income options for Retirement Funds that are there rather than having money taken out too early through a lump sum or other purposes . I think the Current System certainly if you look at what people do with in their 401 k or ira please find the vast majority of money is rolled to ira and we find individuals tend to start tapping the money as 7. 5. Its a minority of individuals that dont. I think ideas to help individuals to spread out the savings over their lifetime are valuable. Our concern is driving tax incentives for particular product. For many lowend moderate income households they are to Social Security and they may have that lump sum for emergency purposes or Health Care Needs or Something Like that. You wouldnt want to penalize these individuals were wanting to keep the lump sum to be able to tap but other types of proposals that help people spread that savings over time would be valuable. We just want to make sure that these are good approaches. One of their proposals is to give an exemption for a certain amount of Retirement Funds for minimum distribution for the purposes that you just said. So you can keep a nest egg. One of the concerns is that people take money out that shouldnt and we want to do incentives and not for any one product but incentives for income flows that could help people not outlive their income which happens to break only. Thank you mr. Chairman. Thank you senator cardin and also want to be clear that im very interested in working with you and senator portman. For those who are following this this important legislation does what it sounds like. Thrift plans and Retirement Plans that generally arent subject to erisa so we have a situation where you ought to preempt state law to add auto enrollment features that are so popular. I wanted to know we have it pending. We are going to work with what i think is a sensible suggestion. Thank you mr. Chairman. Senator casey. Mr. Chairman thank you and i want to thank the panel for your work on these issues. I will start with mr. Bogle not only because of his pennsylvania residents and his impact in our state and our country. I want to ask you about the basic dynamic that has played out over a number of decades n now, the shift from defined benefits benefit to defined contribution and implications of that. As you noted the transfer of trillions of dollars in savings and risks to individual investors and from corporations. Give me a sense if you can as we try to design policy around the question of giving those individual investors the tools they need to deal with that basic change. The question of educating investors, what more can we do, what model works in terms of giving them at least the opportunity to become better educated . To begin with what we have to do is make what was designed the 401 k for example turn it into a Retirement Plan. If we can just think that one through we will get close to where we want to be. In terms of greater utility in efficiency for investors theres no question in my mind that their investment returns will be improved if they get the cost of the system. By owning an index but even more than that lets call it owning the stock market senator. Its such an easy thing to conceptualize, picking the right manager and what he or she doesnt do well in picking another manager and we find investors in mutual funds and this is my testimony because of the confusion and the idea you can pick a good manager for a lifetime for infesting simply does not work. Investors lose because they have a cost builtin at 2 a a year work is a Staggering Number in making the wrong fund choices is another 2 a year. 4 is so if we would simplify the system and take the cost out of that investors would have a lot of the mystery removed and be much more willing to sign up for a plan. Is there any experience based upon your work were based upon the work of vanguard as to the period of time in an individuals life where education can be especially significant . In other words is starting earlier . I now we have had legislative attempts to make sure even students at a very young age are exposed. Is there any strategy that vanguard has that has been successful . To give you my own person the way we introduce young people to investing is to have the stock picking contest, sending exactly the wrong message to them. We should start with the compound interest table and show them how a percentage point difference in returns mounts up over a lifetime to an end astonishing amount. When you get to a higher level of age i dont think theres a single, well very few to be fa fair, Business School or finance school who wouldnt tell you what im telling you. If it is an inefficient system and its serving mutual fund investors. I have in my prepared testimony a statement thats stronger than that by David Swanson the manager of and the person of impeccable integrity. You could easily say i have a vested interest but anyone can start one. I would like to have more competition in the index area but it comes down to simplification and owning the market and managers if you are investing for a lifetime. I will be able to submit questions for the record for mr. Bogle and others and less than a minute i have dr. Madrian i want to ask you about the appointed reference to automatic enrollment, the benefits of that. If you have to look at this purely from the point of view of the tax code either where we are today or where we hope to be any recommendations for improvements we can make to the code to make it more effective in light of ours should say make changes to the tax code to make savings incentive . I have a oneword answer. Simple. Simplified. But mechanically whats the best way to do that . In other words when you look at where we are today the code as it stands today what change would you hope we would make . That is an excellent question. I think the tax code overall is very complicated. I think for middle and higher income taxpayers the alternative minimum tax and how that interacts with the rest of the tax code makes it a complete mystery. You have no idea what the incentives are that you are facing or the penalties. On the lower end of the income scale you have interactions between the tax code and all of our social welfare programs. I think very few individuals accurately understand the tax incentives that they are facing. I think the savers credit, the motivation behind that is to give lowincome families and incentive to save his wellintentioned but a few comments someone with a ph. D. In economics for m. I. T. Cant figure out in 10 minutes its too complicated. I think the fact that we have so many different ways to save makes it complicated so am i better off saving and its not just a retirement system. If im an employee and my employer offers an Employee Stock purchase plan, a 401 k plan and a Health Savings account and i have a limited budget for how much i can save its very complicated to figure out where should i put that money plus we have 529 plans. We have lots of different ways to save so some simplification and some consistency across these different plans would be helpful. Why a 403b plan has to have different plans than a 401 k versus an ira, a lot of that doesnt make sense to me. I think there a lot of things to do to make things simpler and more straightforward for employers offering plans and for individuals trying to decide how do i save for health care for education retirement and for mortgage . Thank you very much. Senator portman i dont know if you were here that you are on a roll this morning with your church clarification plan so as to promote iowan womb is so just keep going. Excellent. Well thank you. Did you say you agreed with it and it will be an active . We are bringing forward as quickly as possible. I think its a constructive idea and we are looking forward to working with you. I appreciate your just in the your just in the area and having the hearing today and i was here earlier to hear some of the great testimony. What a terrific panel and thanks for what you are doing. Ben cardin was here earlier and as you know we did Work Together in a house on these issues and we have this plan recently but also soon we will introduce a bill on the whole issue of the nondiscrimination testin testins something we have talked about to treasury in open testimony and i think this will be a good clarification plan. Im excited about what we have been able to do over the years. It has made a big difference and im looking at statistics here. I know some are critical of these programs and heres the reality friend with her tough Economic Times we have had during the financial crisis. We have gone from 45 trillion in assets and 401 k s and irass to 10 trillion last year. So thats not bad given again what happened during 2008, 2009 in 2010. We have to figure out how to get Small Businesses to provide these plans and that is the key, encouraging every Small Business owner so every employee has the opportunity and keeping it simple. We have a simple plan that came out of the house for Small Business actually called simple but there is more work to be done in terms of taking out some the complications and the costs and liabilities. The savers credit i think its worked well. I would like to hear your views on how we can make that better. I wonder on that issue. When i talked to companies and i know you talked about this earlier but we go from 75 to 95 and thats obviously a great opportunity. There is more opportunity there i believe obviously to expand that to more companies and recently senator warner and i introduced a bill which is simply in the thrift savings plan moving the option from being government bonds to a lifecycle plan. I dont know what you think about that but the Lifecycle Fund to me makes a lot more sense for federal employees. So i ask you all what you think of that for a savings plan and maybe dr. Reid you could start. Certainly in the private sector the rules that congress put in the Lifecycle Funds have been extremely popular. I think they do help get younger investors into an saving more heavily in the stock market and even while there was talk about younger investors pulling out of the stock market the Lifecycle Funds certainly keep individuals who are in 401 k s contributing. I think another point here that we would like to make is ways of expansion going to your broader question is the net concept begins with smaller employers to help them more easily offer a plan would be very beneficial change and adding to our system as well. Thank you. I completely agree with changing the default fund. A huge volume of evidence shows the default fund is extremely persistent under automatic enrollment so the default fund will be flowing into the bond fund and to hearken back to senator caseys question earlier how do individuals learn and become more financially literate . The best is to say they learn through experience over one individuals to understand how the stock market works and diversification works having them invest in a Lifecycle Fund which contains assets makes a lot of sense. There are so many things i would love to talk to the expert panel about them one of them is distribution. Should we eliminate minimum distribution rules for plans under certain amount say 100,000 bucks . A lot of people at 70 and a half or so working as you know and unfortunately i just left the ceo of a major Steel Company and they are trying to keep younger workers there because they have a serious skills gap so what you think about that . I think in a way which we can encourage people to spread out their balances over a longer period of time we find that most people wait and dont withdraw until they hit that 70 and a half and given the fact life expectancies have increased in the minimum distribution age has not changed it merits looking at whether or not it needs to be adjusted and as long as these are product neutral again. I think again we want to make sure we encourage that minimum distribution age is available to everyone. I think your conclusion is correct that there are to be some incentive for a thousand dollars that can be taken out. I would also say on the thrift savings plan i do think the thrift savings plan needs an option where investors can say i want my money safe before retirement lets say. I dont know what the market is going to do. No one knows that so what we really want is protection late in the period before he retires. He should have faith safe. Does this theory with the Lifecycle Funds. I need to look at them more carefully over the last two years. Let me ask you a general question and thanks mr. Chairman for the indulgence. There is a discussion if you know about savings in general and our low rate of savings in the country and how it affects the economy and senator cardin and i believe that and i think the chairman does as well. There is talk about the universal Savings Vehicle. The bush demonstrations come up with discussion about new ideas on the universal Savings Vehicle available to everyone. The analogy is what they are doing in canada if you follow that at all. Its a rock type vehicle there. What do you think of that as it relates to Retirement Savings in the deterrence is if you have to pull out for anything you have less assets for retirement but thats okay because you are increasing savings and Financial Literacy but maybe if you could comment. Quickly witnesses that we can get senator cantwell in. I dont know the particulars that we are talking about but i dont know what makes sense to have a savings plan where you would put money in and take it out for anything unless you have much stronger incentives to encourage accumulation that plan. If you are going to let people take out for anything you have to be putting more money and in the first place to cover everything they are doing. You need every lover out there. If it was a counterpart we know from behavioral economics of people engaged in mental accounting and organizing their financial accounts. One problem with the Retirement Savings system right now as we do allow people to take money out so its not clear whether the 401 k s or Retirement Plan plan or a universal savings plan. Im sorry senator cantwell. I wanted to see if you want thoughts on that and we will do followup questions as well. Thank you senator portman. Senator cantwell. Thank you mr. Chairman thank you for this important hearing. According to new America Foundation 92 of americans are not using their Retirement Savings. As we look at our budget for Social Security and medicare programs like s. N. A. P. This will have an impact on them so to me i want to look at ways to encourage more savings and certainly offer more of a lifetime stream of savings. Mr. Betts i was wondering if you could comment on programs like a lifetime guarantee annuity product as a way to end sent americans to further save and a way to help them make more efficiency out of their dollars . This is something that could be further incentive by congress. Our business is helping employers design and implement and manage Retirement Plans. We dont get into a product but we have seen current legislation introduced opportunities into these plans to have annuitybased structures and things to help with these plans. Our biggest focus is expanding the access so more dollars are going in. We would like to see less of the disincentives that prevent small employers from starting these plans so more and more americans can be contributing. And as they grow the employers will put more employer dollars m. Its from our perspective getting access and contributing sufficiently. We know in retirement there is a variety of different situations and people need the flexibility to make their Retirement Systems they need. The right amount of tools for an american is important. Do you like the annuities and you think they are successful . They have a place for the right person who meets that type of structure but thats not something we work on in our business. Mr. Bogle any input about annuities . The problem with annuities today anyone with a fixed Income Portfolio are the rates are terribly low. Ive always felt there is a place for an annuity and a guarantee that eliminates longevity risk and a place for bonds but those returns are so unattractive today i think investors in their visors have to at least vaguely think about whether they are attracting investments. If you think about the universal savings plan we know from history there is inflation and putting into money in savings longterm and is a losers game at 1 a year as the cost of living is adjusted so we have to think differently about shortterm investments and longterm investments. I think annuities have a place but we have to come out the commercial system and go into a more public system where the annuity gets a fair return. And how would you do that . Tia crafts does a pretty good job. It has to be annuity run for the investors and for the salesman and it comes down to that. The costs are horrendous and Life Insurance products if you will forgive my expression but i dont think anybody would disagree with that. If you take the cost out the rates are still going to be low but for a certain type of investor who wants to ensure the longevity risk and has no other assets i think they are an attractive option. What dont you think given the crisis that we are we are facing that its important to have that opportunity . Yes we should have that opportunity. Thank you. Thank you mr. Chairman. Thank you senator cantwell. Let me tell you first of all this is very helpful. Obviously there are a whole host of issues to be examined. Its not a topic for today but i feel strongly about getting people to start saving early in life and that is why we have been talking about child savings accounts and here again there are commonsense approaches you can take. With what you all have been talking about with the median ira account balance in 2012 2012 being about 21,000, and it is pretty clear there is some important work to be done. I think i would like to do, just in terms of wrapping up , have you all almost pretend that the roles are reversed here. You are up on the side of the deus. We will try on a bipartisan a bipartisan basis to stimulate retirement saving. The way it we will start when we get to it is right now the american taxpayer is putting up about 140 billion each year to subsidize retirement accounts. This is the second biggest tax expenditure, the second biggest tax expenditure in the code. You take that and juxtapose it next to what what the general gentle General Accounting Office has told us about the mega iras and 21,000 that 21,000 that people have, the median amount in their account, and it is pretty clear this committee will have tough choices to make. I would like to go down the row and ask each one of you for one suggestion of where, as part of that effort with the hundred and 40 billion that is used to assist these accounts, where would you make a change to get a bigger bang for the taxpayer buck . You get to make one choice because this will be fairly similar to the debate here in the community as part of tax reform. The first thing you would obviously do one. You dont get a first. [laughter] thank you. One thing we would do is eliminate the large deductions or have a tax credit. I would not do that in that situation. Very good. I would try to expand the system to make sure more small employers were easily able to offer plans. All right. A similar answer, to remove the disincentives and create incentives for small employers. And one way you would like to do that. Starter k, multiple programs. Well, you well, you dont get to 5 million by investing up to the limits we currently have an and putting it into well diversified mutual funds. You get their by putting it into employer stock and getting lucky. For every for every winter with employer stock their are lots of losers whose companies go bankrupt. I dont think it makes sense to encourage gambling through the tax code by allowing employer stock as an Investment Option in tax savings plans. You would support a change. Yes. Okay. I would echo with the other witnesses said and simplify plan offerings for small employers to get at the low income workers, improve incentives. Okay. At this. We have sen. Nelson on his way. I think what i would like to do is ask our guests, can you all stay a few more minutes . Okay. What people do is when sen. Nelson returns he we will ask his questions and then the finance committee will be adjourned. With your leave we will suspend here for a few minutes and the sen. We will senator will come wrapup. Thank you both for your professionalism and your patients with us on a hectic day. For this scholz must still be stranded somewhere. Tried to help. [inaudible conversations] all right. [inaudible conversations] senator nelson has arrived and has had a a hectic day. Senator nelson, it is our plan that you we will ask the questions that are important to you, you, and at that. You we will adjourn the community. Okay, mr. Chairman. Questions that are important to you because you are a member of the committee as well. We had a hearing about the extraordinary debt that is carried, and would you believe by seniors, of all things student loan that. And to the. At which seniors if they cannot pay low and behold the Social Security is garnished, and that brings them below the Poverty Level because you can garnish down to 750, down to that level. 750 a month for a a Senior Citizen today is lower than the Poverty Level. Sen. Senator nelson, you are doing very important work. I am sorry. I am going to have to go. The fact that so many seniors have racked up these eyepopping debts that are going to color so many of their retirement decisions in the future is especially important, and i look forward to working with you. What i wanted to ask the panel is what impact does that have long workers on workers trying to put money aside for retirement . Anyone . It puts them in an impossible position. Student loan debt is enormous, and i dont see how you can save beyond say beyond that when you are still trying to pay off. That is right. And now we recently had somebody talking about, you know, our thrift savings plan here. And the and the senate has a very successful thrift savings plan if you were in a company a company they would call it a profitsharing plan. The question was proposed, an idea of opening up a thrift savings plan type entity to everyone. Want to give any thoughts . Senator, i mentioned this in my written testimony. I reference your colleague from florida who has advocated this idea. There are obviously practical issues that need to be overcome in the sense that the thrift savings plan is plan for government employees. It is in in that sense an easy plan to administer and handle. I do favor the idea of giving savings options for low income workers who are not offered pensions by their employers. Explicitly or through a structure that looks very much like the tsp, i think that is a good idea. It is it is extremely wellrun, simple, lowcost, offers annuities. It answers a lot of the questions we have about Retirement Security. We can design a good plan. And how would you go about setting up administratively a plan like that for anyone who wanted to buy and . The question is, do you have it run through those individuals employers were they would not run the plan but it would deduct the money and send it, or do you run it Something Like an ira where the individuals themselves have to do it . Having their employers do it puts an Administrative Burden on employers. If you run it in an ira setup where the employee makes the decision, that has no burden on the employer, easy on that end. On the other end, many employees will fail to do it. How do you make it cheap and do you make it cheap and easy . The problem for small employers, electronic, electronic bookkeeping, electronic wage records, that is fairly easy. Your computer will do it for you. Small employers are most likely to be writing out the check by hand each month. How do you make it work . That goes back to one of the points we all made. A key is making it easier for small employers to offer these plans. Sen. , the thrift savings plan essentially with all of the longterm money in it, 100 percent index. They charge about 0. 025. 025 per year, two and a half basis points which you could argue is even better than the vanguard 500 index fund which charges a shocking five basis points. However, the thrift the thrift savings plan has their portfolio accounting for the participants and beneficiaries paid in a different source. Probably about the same. Essentially a thrift savings plan in a different guise is already available to any employer of any size. Senator, to echo both points, if you would open up thrift savings. To potentially millions of employers you would not have the thrift savings plan anymore because the relaxed savings they get from one employer with long tenured employees with very large accounts, those efficiencies would obviously galway. There are options with in the private sector that through mutual funds you can be index, lowcost actively managed funds, and you can call up any one of the Fund Companies and open up an ira for a small employer plan working with one of them to open a payroll deduction plans. So the private market actually does have something that actually is working very well. I am not able to speak turn on your might. Sorry, i, i am not able to speak to the tsp plan. I can say that my colleagues expanding the accessibility savings plans is very important. One of your bills, the suggestion to expand multiple employer plans which would allow more small employers to offer these Retirement Plans, savings plans with some of these types of investments. Yes, maam. I agree with with what the other panelists of said. Thank you. Thank you all for participating in this