Witnesses brainstormed on Capitol Hill Wednesday about ways to help employees of small businesses save more for retirement.
Jim McCarthy, managing director at retirement plan services at Morgan Stanley, New York, recommended that Congress find ways to improve the SIMPLE IRA program, by increasing contribution limits and making plan assets more portable.
SIMPLE IRA plans “have lower administrative costs than the traditional 401(k) plan, less liability, and permit the owner to reduce the employer contribution in the event of a downturn,” McCarthy said at hearing of the U.S. House Small Business Committee finance subcommittee, according to a written version of his remarks.
Sal Tripodi, president of the American Society of Pension Professionals and Actuaries, Arlington, Va., recommended encouraging the smallest, least stable employers to set up programs to permit employees to contribute to individual retirement accounts through a payroll deduction system.
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“Statistics show that where an employee has a mechanism for making retirement contributions at the workplace, the percentage of employees who actually save for retirement dramatically increases,” Tripodi testified.
But Paula Calimafde, chair of the Small Business Council of America, Wilmington, Del., urged Congress to maintain big gaps between SIMPLE IRA plans, payroll deduction IRA programs and other programs that make it relatively easy for workers to tap their nest eggs.
“Over the years, the data has consistently shown two things,” Calimafde said. “Give the money to an employee and they won’t save it. Give the money to an employee with easy access, and they’ll get to it and spend it.”