This is a serious problem and one largely under the radar screen. Recent studies by the gao common pleas of the Federal Reserve and by the private company ill estimate there is a sizable amount of leakage from Retirement Savings, most significantly to cash distributions to change jobs. Moreover, Fidelity Investments in the Boston Research group provided 55 of a preretirement distribution from their defined contribution savings plan later regret having done so. The reality is plans to sell avery fund retirement. They serve as a Savings Vehicle appeared because of this the recommended contribution rate to these accounts should reflect not only what is needed to successfully from retirement but what will unlikely to reach on before retirement is slow. This suggests policy should encourage rates about as neat as the leeches on retirement or policy should limit the extent to which individuals can take her retirement distributions from these accounts. A shortcoming of the system is most employer savings plans do not offer employees and easy way into Retirement Income to remilitarization option. If retirees want annuitize income stream about Social Security, they let to contend with the private market on their own trying to evaluate a product they have little experience in a substantial wealth. The rates are low and several Viable Services to employees that comes to the Investment Option and a savings plan. They evaluate the alternatives and select options to their players names are able to offer employees lower cost Investment Option and employees have access to individually to economies of scale. Retirement income options would be current and former employees that have little incentive to do so. Our defined contribution system is not perfect, but theres other things to make it substantively better. In conclusion we can increase coverage by creating a lowcost mechanism for small employers can benefit from the east of payroll deduction to fund a Retirement Savings account. We can encourage employers and ways for higher employer contribution rates. Third, we can limit plant them for three can encourage the adoption of annuity options. Thank you. Thank you, dr. Madrian. Ask around the fiveminute questions. I want you to know we are looking at the leakage problem and something ive become more aware of and hopefully this committee will be looking at the shortly. Let me ask you share this Retirement Plan, a key open issue is that the contribution rate should be. Those who have been working on developing this plan have thought about it not for Social Security between employer to give you contribution was some low threshold employer match and allowing an employer to raise that match if they want to us in employment incentives so it might provide one and a half . So you could answer it as an employment incentives. Have you thought about if we move ahead in this area, what should the contribution rate be. Thats an excellent question i encourage the committee to think not in terms of a single default contribution rate, but a differentiated alternative. And senator alexander was talking about the small restaurant chain, my guess is employees are younger and for a ban in our contribution rate might make sense. Whereas a look at someone whos a bit older and this is their fulltime job, the default contribution rate might be substantially higher. We know from investor psychology that individuals think in terms of raw numbers, multiple sub type, 5 of pay, 10 of pay. Desired benchmarks that individuals can get their hands around and might be worth taking about something mahler. 5 for younger workers to something higher, maybe 10 for lower workers. Were trying to make this as simple as possible. And a big fan of simplicity. All just ask everyone else here. We sometimes hear the argument that automatic enrollment doesnt be savings because people make up for income by reducing other forms of saving. Have any of you looked at whether automatic enrollment president of the savings . Ive been trying to do a study to answer this question for years and its hard to get data to do that well. The little evidence we had suggested the extent there is cried out, it probably isnt that they. I have a former graduate student whos done research on the mens behavior by members of the military and a savings plan and he finds Financial Education program substantially increased savings in the tsp have had no or sunpak, for example, on the amount of credit for military members have outstanding. So resigning of crowd out there. The society by my colleague at harvard looking at denmark are much better data and they are so concerned about privacy. When they look at automatic savings programs, they found little cutout and other parts of the Balance Sheet either. So i think its a legitimate concern, though most of the evidence suggests certainly its not oneforone offset. Any other thoughts on the crowd out at all ms. Mccarthy . I would offer we dont have it. The complexity it would affect the asset the pain is difficult. Its important on the automatic enrollment is a Significant Impact in getting participants into the plan. Our enrollment rate, Participation Rate is 67 previous automatic enrollment 80 . Its a very powerful distinction in and of itself is so dramatic that its hard for me to think is creating a big distraction with vehicles. Before my time runs out, a lot of people dont have 40 hour week jobs. Caregivers. What do we do to make sure people with nontraditional Employment Arrangements had easy access to Retirement Plan . Whinnied options and opportunities at work. Parttime workers are just not eligible for benefits and its been true. I dont know thats ever going to change. I dont think requiring employers to do that all the ways you can fudge those rules. I just think we need ways to save and we dont have that. Perhaps the workforce. Again, thats something were looking at in developing this issue to make a simple comment make it easy so son a burden for parttime employees or employees that come in and out of the system all the time. It would not have a fiduciary response ability and operate a plan. Any other advice you have, please let us know. We look forward to seeing the plan. Mr. Chairman, said senator enzi has been working with this, that to the first question. Thank you, mr. Chairman and thank you for working on this. Your testimony is just packed with ideas and thats led to questions, which are in more technical in then ill attempt while doing my questions. I appreciate the emphasis on hondo enrollment versus perhaps admin they and i appreciate the comments about schools needing to do Financial Literacy. I looked a number of schools to see what theyre doing and im very disturbed and they provide them with the money that theyre going to learn to budget, daily about the fact that their Social Security and medicare are taken out and the possibility of saving they might add to that. Im hoping that will change. Dr. Madrian and mr. Mccarthy, have you done any plans to boost the 401 k versus a boss . Would that make a difference in that autoenrollment in contribution . The limited research on regular versus matt savings account suggests people behave similarly in both types of saving plans, which suggest the roth option might lead to higher levels of wealth accumulation because the taxes have been taken out of the front end. Truthfully we need much by research to the question. I would agree with that. Senator enzi, we havent done extensive research. We see powerful resource with the roth ira and the roth plan for incremental savings coupled with audio. I dont have distinctive research at this point. I hope we stay in effect with possibilities. What is the amount of regulation and the possibility for liability. Thats it to think Small Businessman tony to keep them from going into this. I used to do the accounting primarily for fire when k. And do fairness testing. Packets into other top executives are getting paid more in saving more versus the other people. Do you have anything hessians for ways the regulation could be made simpler perhaps for Small Business . Mr. Moslander come you are dating to that. Sure they regulation is the typical name, especially when fiduciary response ability. One of them are created and unintended positive consequences can put it elsewhere. It might be the portability possibilities difficult today to change jobs, but the fiduciary responsibility and some hotties that unless they are in the employer. We go a long way towards simplifying the ability of employers to provide for the plants and also simplifying portability by participating rather than cashing out benefit where they terminate employment easier for benefits to be portable. Anybody else want to comment on the regulation . Packages that come the simplification is key in every aspect of this conversation for a regulatory or, our experience shows the caller plans, their adoption is very often avoided as a result of regulatory requirements. Looking at safe harbors in the fiduciary responsibilities, the disclosures are often onerous address cost for the employer, which will cause them to have the very real opportunity there. Without walking away from the importance of goals to achieve with the regulations. Anybody else . Ive also got a bill that would allow pooling for Small Businesses. Its still individual accounts and thats what allows portability for a different job, which improves enhancement of this. Sender i have a deal with some of the leakage problems so people have an opportunity to put it in with one business. My time is expired and i think the chair. Thank you very much, senator enzi. Senator enzi was chair this committee and shepherded through the pension protection act. He is one of our resident experts on this whole issue. Im delighted to have them as a partner in this effort. As you know, we recognize people in order of appearance here, so this will be senator warren and senator alexander. Senator isakson, senator burr, senator frank income ascender kacey. Thank you very much, mr. Chairman. I want to offer my thanks to the panel very much for the work youre doing in education, for all of you, the commitment made to educate clients and the work youve done in research. She seems to me, and a major testimony. I agree senator enzi is held at ideas, good thoughts and primarily based around how we might do better with employersponsored plans. This polling people and. I went through the notion of changing optout, increasing the default amount to gross and youre very creative plan, dr. Madrian the changing how the employer calculates the incentive to get people to stand. But i also noticed in your testimony to you all, to one extent or another, talk about incentivizing the employers are encouraging employers. And i am mindful of some alexanders point that im the one hand, we can require the employers to participate. Senator alexander said this creates complications for Small Businesses. So the question i have is can you fill in that part of what youre talking about in your testimony . We dont have employees who will participate in the science of a dont have employers offering this plan. So how do we get more employers to offer these plans . What are the options available and how effective will that be . Ms. Mccarthy, which like to start . S. Commit thank you. It comes down to the discussion because the four smaller employers is the cost of administration in the fiduciary responsibility and complexity that goes along with administering plans. If we can streamline some requirements and accountability, we would naturally better adoption dominica into the experience, the space to offer simple plans to reduce the administrative cost as well. Then they completely agree with that. There needs to be a very simple option for employers that needs to have no great military requirements, very minimal regulatory requirements, ltd. Fiduciary responsibility to do something simple and straight outward and to the extent you can piggyback that the Something Else employers are doing so doesnt add an Administrative Burden but also how. For example, a small employers are filing tax payments on behalf of employees quarterly, couple the contributions to the saving plan with what theyre already doing to pay their quarterly taxes instead of instituting a new regulatory requirement that they need to do his contributions and some other way, shape or form at some other point in time. Anything to minimize administrative or in Regulatory Burden will be extremely helpful. You can also think about providing a modest tax incentives to companies that they offer savings plans. If you offer savings plan, we give your breakout employer taxes. I would agree with everything purchased that. Out of the pension protection act, additional requirements are probably very good things. We have so i have free disclosure, which is valuable at the participant manuel family spent time and energy to mail out fee disclosure information to participants that are minimally engaged in the plan and are not going to be interested in the Expense Ratio offered under that plan. That was the regulation well intended, but didnt have all the impact it was designed to have. Trying to manage necessary regulation with regulation thats not going to have a bacon pact, just echoing that important part. Is this going to get us there that make in the plain simpler . I think so. Do make say difference for people. Very valuable, thank you very much. I would like to continue, professor warren, senator warren find of questioning because thats very helpful. I remember in order to be the governor of tennessee, walked across the state many years ago and theres no one to talk to do, the cows are along the road. I was thinking if i got elected, would if i could make a tax form for some sort of list that i could hand to somebody who wants to start a business and safe from the states point of view, this is everything we care about. These are all the taxes on the regulation, complete us. If you do all these things come you dont have to worry about us, the state anymore. When i got into office, i never was able to do that. But still, simplicity is pretty big here. Weve seen a think that the law passed a few years ago has taught us in games about the value of the default position about autoenrollment, automatic escalation henry no Financial Literacy is not a high level among a lot of of us, even if we spend a lot of time, these things can get confusing. We dont want to take anyones freedom away to make his or her own decision about this. Automatic enrollment, or automatic changes are default position said that her reflect the reality of an individual may be one promising further separate to take a new senior advice about what they should be as once said. It was this simple form because thats what im thinking. I wonder what happened if i invited to to write a fluorescent admitted to us. Lets say youre about to go into business. Dr. Madrian compasses that she what you do. He studied the status and you know whats going on today than we do. Why dont you write for us a simple plan we could put into the sofa and starting a business or have a Small Businessman marty Small Businessman Marty Pei Mei fica tax and got the minimum wage and im worried about the Health Care Law comes somebody says to me, what you do something about retirement . Im going to say i might not make any money this year. But if its so simple that i could do it and its good for my employees and good to do, maybe we could do that. And we could make it a pilot program. We dont have to do it for everybody in the whole country at once. So i would invite each of you, if you would like to come this to submit to meet our us your idea of a simple plan, free of anything you can think of and still make a responsibility that would encourage an enterprise to start or offer a voluntary plan that would promote savings levels you think are appropriate. Id like to ask one question. Would you do it for any business clinics in the judo for a Small Business kites and if so, how would you define the enterprise he would do such a thing for . Anyone have a response . Been that ill start by saying im going to go back to my class next monday and im going to give them your challenge will see what they come up with. Im quite serious. Are likely to come up with excellent ideas. Give them the idea that youre going into business in the credit for things to do. How would she do this . Last year, the cfp be called some sort of a competition. To redesign the mortgage disclosure form and list the great thinkers in society. At the Consumer FinancialProtection Bureau would do that, it would double it would increase my appreciation of the agency, which is not very high right now. But the mortgage disclosure form is a good example. We dont want to do something bad to somebody. When a pileup in your down here getting a loan, anybodys got a Mortgage Loan is absurd. Nobody reads it. Nobody can read it or understand it. Youre less disclosure because of more regulation. Rather than complain, lets start from scratch and see what could we do . Lets follow up senator warrens comments in mind and that of others here. All of you think simplicity mix of a different and im sure thats true. Any comments on any of that . Thank you for the opportunity. We look forward to it. We have a lot of good ideas to bring them forth. Thank you very much, senator alexander. And now senator murphy. Thank you, mr. Chairman. One important hearing. Just one quick thought. To my mind, the most important barrier to save