DES MOINES, IOWA (April 25, 2019) —
Good morning.
I’m honored to be speaking today in Des Moines.
It’s not lost on me that the Global Insurance Symposium is happening right here in Iowa.
Iowans don’t brag enough, but this event proves how Iowa is a hub for the insurance industry around the world.
I’m going to use this as an opportunity to update you on the work of the Senate Finance Committee.
The committee has a full agenda for the 116th Congress. We are focused on a number of critical issues, including retirement policy, prescription drug pricing, implementation of the new tax-law, international trade-negotiations, and oversight on other tax and health-care issues. This morning I’m going to cover two of those key priorities: retirement and health-care policy.
First, on retirement policy, it’s clear that we need to improve our retirement system. The system has not kept pace with changes in the economy, changes in workforce conditions, or with changes in the retirement environment.
We need to expand access and participation in retirement plans, particularly for smaller businesses. We also need to expand the system to bring in independent workers and people who work in the so-called Gig or On-demand Economy.
At the same time, we need to make sure workers can transition smoothly into retirement. We need to ensure that they have access to the savings they have worked so hard to put aside for retirement.
Recent studies have shown that a substantial percentage of workers do not have access to a retirement-savings program. These studies show that the gap in access is frequently the result of the relatively small number of retirement programs offered by smaller businesses. For example, a recent study by the Pew Charitable Trust found that 40 percent of workers in smaller business do not have access to a retirement-savings program. The Federal Reserve Board’s most recent survey of consumer finances found a similar gap in access to savings plans.
The reasons for these findings are simple. Small employers face challenges in helping their workers save for retirement. These barriers include complex rules and high costs. Offering a retirement plan can be a time-consuming and difficult process, not only in terms of establishing the plan, but maintaining it on an annual basis.
As a result, many smaller companies shy away from setting up plans altogether. And the resulting lack of access to a retirement plan makes it tough for workers in these smaller companies to save enough for retirement.
That’s why earlier this month I introduced the bipartisan Retirement Enhancement and Savings Act of 2019 — which typically goes by the nickname of RESA.
The centerpiece of the bill is a concept called “Open Multiple Employer Plans” or “Open MEPs.” The bill would expand the existing “multiple employer plan” to create Open MEP plans, which will allow unrelated employers to join together to sponsor a group retirement plan for their workers.
The Open MEPs improvements will remove regulatory barriers that have blocked the use of these plans in too many cases. For example, under current law, only businesses that have a significant common interest are allowed to set up a multiple employer plan.
RESA eliminates this “common bond” requirement to permit — within limits — more companies to band together and work with a third-party plan-administrator to offer retirement-saving opportunities to their workers through Open MEPs.
As part of these reforms, the third-party administrator would have to accept the fiduciary responsibility for operating the group plan. This will continue to protect the workers participating in the plan. But it will also allow small businesses that join an Open MEP to share part of their fiduciary responsibilities with the plan administrator, which will help reduce the cost and encourage participation.
RESA also eliminates the so-called “One Bad Apple” rule. Under this rule, if one employer within a multiple employer plan fails to meet any one of the rules covering these plans, then the entire MEP can be disqualified. This is true even if the other employers are fully compliant.
It’s easy to see why this sort of provision can discourage businesses from adopting these kinds of retirement plans and why this rule needs to be changed.
These common-sense changes would make it far more feasible for businesses of all sizes to offer retirement plans by harnessing economies of scale and reducing unnecessary administrative burdens on employers.
More importantly, open MEPs would open the door for millions of Americans to save for retirement, especially in growing sectors like the Gig Economy. It will go a long way toward strengthening retirement security if an online platform company can offer a retirement plan that all of its independent workers can join and put money away for their individual retirement.
RESA also will help retirees better manage their income in retirement by allowing them to transfer certain types of savings, including annuity products, without violating distribution rules. This will make annuities and other similar lifetime-income options more popular.
I should also note that RESA is budget-neutral from a fiscal perspective. The main offsetting provision involves an option under current law often referred to as the “stretch IRA.” This option allows a person to pass along an IRA or 401(k) account to a family member or other beneficiary with the recipient able to keep the inherited funds in a tax-deferred account. This allows the beneficiaries to continue saving for their own retirement as long as they take out a required minimum amount each year.
RESA would continue the stretch IRA option with a limit on the size of an account that would qualify for continued tax-favored retirement-savings for the beneficiary. For example, a daughter could still inherit up to $400,000 in an IRA from her mother and continue holding that IRA for the daughter’s retirement many years later.
This is a sound approach to funding the bill. It continues to encourage the next generation to save for retirement while ensuring that the retirement-security changes in this bill are fiscally responsible.
Retirement security is an important topic that is already getting a great deal of attention this year in Washington. The House Ways and Means Committee considered a retirement-savings bill earlier this month that is based on RESA. I look forward to working with House Ways and Means Committee Chairman Neal to reconcile our bills and get a final package to the President’s desk.
As important as the provisions of RESA are for improving the retirement system, we know there is more to be done. We live in a dynamic economy. As it evolves, so do the retirement needs of workers and employers.
This is why I am looking forward to the next round of pension reform. As the economy grows and evolves, our retirement system needs to keep pace with greater access for employees and independent workers and efforts to make sure retirees enjoy a financially-sound retirement.
We have some good ideas for next steps, but we need your help. Your companies manage these plans; you know the market; and you know what works and what doesn’t. So please let me know about your ideas. Let’s work together to make sure we have the best, most efficient retirement system possible.
Now let me turn to drug pricing.
I’ve heard from people all over the state of Iowa about high prescription-drug prices. I’ve heard stories of people leaving their prescriptions at the drug-store counter or rationing their insulin in order to make ends meet.
Both of these are prescriptions for bad health-care outcomes.
I’ve said it’s time for us to talk turkey with big pharma and the pharmacy-benefits managers about the factors that contribute to high prescription-drug prices.
As Chairman of the Senate Finance committee, I’ve held three hearings about drug prices this year.
Now, after doing our homework, we are writing legislation to address some of the systemic problems that make prescription-drugs unaffordable for some Americans.
I expect that legislation to be ready for introduction in mid-June of this year.
I also plan to continue to target those who game the system. Last week, President Trump signed legislation I wrote with Sen Ron Wyden.
The Right Rebate Act closes one loophole abused by pharmaceutical companies in the Medicaid program.
My investigation into the high cost of Epi-Pens was the impetus for that law. During the investigation, we found one company ripped off taxpayers to the tune of $1.6 billion for just that one drug.
I also want to let you know of other legislation that I’ve cosponsored.
The CREATES Act would address anti-competitive practices used by some brand pharmaceutical-companies to block entry of lower-cost generic drugs. These brand-companies abuse the FDA safety-process by denying generic companies access to samples of the branded drug-product and refusing to allow them to participate in the FDA-approved safety-protocol. The CREATES Act will allow generic companies to purchase the samples they need in order to gain FDA approval for generic versions of brand-name drugs. The bill will also give the FDA more discretion to approve alternative safety-protocols.
The Preserve Access to Affordable Generics and Biosimilars Act is another bill I’ve co-sponsored to stop the practice of pay-off agreements to delay the introduction of cheaper generic alternatives into the market. When brand and generic drug companies enter into these anti-competitive agreements, the price of those medications stay high. This bill would help to ensure that drug-competition can occur as soon as possible.
I will continue my oversight of the health-care system, both government agencies and private entities. This oversight work will inform future legislation.
To close, thank you for the opportunity to talk with you today. I am happy to take questions.
