House Ways & Means Committee Chairman Kevin Brady (R-Texas) says that Congress is “seeking ideas” on how to increase saving, including retirement saving. Brady made his remarks at the Financial Services Roundtable’s Jan. 25 meeting, “Breaking Down the Barriers to Financial Security,” held in Washington, DC.
“We’re not a nation of savers, and we need to be,” Brady told attendees.
Brady did not provide specifics on any plans or proposals regarding retirement saving, nor on current retirement plans and the laws and regulations governing them. But he did offer broad principles that make it clear that saving for retirement is on the congressional radar screen.
Brady cited the multiplicity of education saving vehicles and his conviction that they can be streamlined, indicating that the same approach could be applied to other kinds of saving. One of the key approaches when considering retirement saving is “making sure we have the right incentives in place,” he said, adding that “we’re looking at how we reward saving.”
Brady noted that those in Congress who are considering tax reform are looking at “how we simplify our retirement vehicles.” At the same time, however, he indicated interest in maintaining current incentives “and building on them.”
While Brady said that there will be action on tax reform in 2017, he noted that it is politically difficult to achieve and added a caveat: “The truth is, tax reform doesn’t please everybody.”
The DNA of the Retirement System
The tax code “is the DNA or the retirement system in this country,” remarked Lenny Glynn, managing director of public policy Putnam Investments, in a panel discussion that followed Brady’s remarks. Joining Glynn were Gregory Burrows, senior vice president, Retirement and Investor Services with the Principal Financial Group, and Christine Marcks, president of Prudential Retirement.
Burrows told attendees that he prefers to diverge from how tax incentives are commonly characterized. “These are not tax expenditures,” he said, but rather tax deferrals — deferrals with an eventual high yield. Marcks also called for a change in terminology and the mindset behind that terminology, arguing for reframing the way retirement plans are currently characterized — as retirement savings plans — and instead treating them as retirement income plans.
There are things we can do better, Burrows noted, such as educating employers about retirement saving, but the panelists generally did not advocate radical change to retirement plans or the existing incentives to save.
“There is nothing wrong with the 401(k) that can’t be fixed with what’s right about the 401(k),” said Glynn, citing how helpful he considers auto enrollment and auto escalation to be, and how optimal “full automaticity” could be.
“Let’s look at the successes and spread them out systemwide,” said Glynn. Marcks struck a similar note, remarking that “it’s a matter of enhancing what we have.” Burrows, too, advocated an incremental approach, arguing that building on the current system is “essential.”