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