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Jim Davis, owner of Iowa Title and Realty, told the committee that he thinks employees should be required to fulfill one year of service at their companies before being eligible for a pension plan. Providing a longer time period before eligibility provides employees an incentive to stay at a company, which Davis said is preferable for small-business owners to retain employees. “We need to give business owners a reason to offer [a plan],” said Susan Breen-Held, consulting actuary at Principal Financial. Some incentives might be to increase compensation limits, or either raise or remove compensation limits for five years when the plan is first established, she said. In addition, she suggested lowering the administrative cost for small businesses by reducing some testing requirements from annually to every three years—or for very small plans, exempting them completely from testing. Harkin said his proposal takes the administrative burden off of employers, which Davis agreed makes it easier for employers to offer a benefit. Breen-Held told the committee that DB and DC are both important sources, and the soundest way to provide adequate retirement benefits is not through one plan type but looking at the system as a whole through strengthening each part of the system. “I’m not sure that we believe that the system is broken today,” she said. “I think that what you have is a very firm foundation … Is it perfect? No, but I do believe that it provides a starting place so that we can look at what’s working, what’s not working and learn lessons and build on those lessons…” The lessons learned are that a voluntary system must be simple to operate, and it must give employers more tax incentives to offer these plans. In addition, employees must understand the value of the plan and of having an annuity, she said.
Jim Davis, owner of Iowa Title and Realty, told the committee that he thinks employees should be required to fulfill one year of service at their companies before being eligible for a pension plan. Providing a longer time period before eligibility provides employees an incentive to stay at a company, which Davis said is preferable for small-business owners to retain employees.
“We need to give business owners a reason to offer [a plan],” said Susan Breen-Held, consulting actuary at Principal Financial. Some incentives might be to increase compensation limits, or either raise or remove compensation limits for five years when the plan is first established, she said. In addition, she suggested lowering the administrative cost for small businesses by reducing some testing requirements from annually to every three years—or for very small plans, exempting them completely from testing.
Harkin said his proposal takes the administrative burden off of employers, which Davis agreed makes it easier for employers to offer a benefit.
Breen-Held told the committee that DB and DC are both important sources, and the soundest way to provide adequate retirement benefits is not through one plan type but looking at the system as a whole through strengthening each part of the system.
“I’m not sure that we believe that the system is broken today,” she said. “I think that what you have is a very firm foundation … Is it perfect? No, but I do believe that it provides a starting place so that we can look at what’s working, what’s not working and learn lessons and build on those lessons…”