Should the federal government be involved in retirement savings for the American people? One prominent senator seems to think so, a measure that could threaten opportunities for benefit and retirement advisers to do their jobs if enacted.
In a May 13 speech at the National Press Club in Washington, Sen. Marco Rubio (R-Fla.) who is widely reported to be considering a 2016 presidential bid said he plans to propose allowing Americans not covered by an employer-sponsored plan to access the federal plan that Congress uses, called the Thrift Savings Plan.
It is one of the most efficient savings plans in America, he said. It charges fees which are a fraction of those in most private defined-contribution plans, allowing beneficiaries to save more.
The proposal drew immediate fire from Brian Graff, CEO/Executive Director of the National Association of Plan Advisors and the American Society of Pension Professionals & Actuaries, known as ASPPA. It sounds like Rubio wants to Obamacare retirement savings. Graff fears such a move would reduce opportunities for benefit advisers to help expand private retirement plan sponsorship and employee enrollment in those plans.
Rubio has long been considered a rising star in the Republican Party and has opposed most features of the Affordable Care Act.
According to Rubio, 75 million Americans work for companies that do not offer a retirement plan. And those who do probably wont for their full career, he said.
The senator sounded pessimistic about the viability of employer-sponsored plans among a significant portion of the population. Many Americans figure the unpredictability of modern careers has made employer-sponsored plans a thing of the past, he said. Even when these plans are offered, many employees are not made aware or choose not to go through the trouble of enrolling.
He did not offer any thoughts on how that would be different if such people were allowed to enroll in the Thrift Savings Plan.
Rubios speech also addressed the need for changes to the Social Security system to shore up its financial viability, a politically delicate issue that congressmen are frequently reluctant to discuss. He noted that in the past 80 years, Congress has only increased the retirement age by two years, from 65 to 67. This simply wont be enough in the long run, Rubio said.
Raising retirement age
He recommends a gradual increase in the normal retirement age to account for the rise in life expectancy. He expressed the hope that if action is taken soon, people currently over the age of 55 would not be impacted.
Rubio also proposed eliminating the combined employer/employee 12.4% Social Security payroll tax for people who have reached the age of eligibility for Social Security benefits. These seniors have already paid their fair share, and we shouldnt punish them for choosing to keep working rather than immediately cashing in, he said. He also suggested employers would find these people more attractive job candidates due to the fact that they would not subject employers to their share (6.2%) of the payroll tax.
Finally, Rubio proposed elimination of the 50% tax on earnings of Social Security beneficiaries applied to annual earnings exceeding $15,000.
Stolz is a freelance writer based in Rockville, Md.
