Last week, the Senate Committee on Health, Education, Labor & Pensions (“HELP”) held a hearing on what Sen. Tom Harkin (D-IA), the HELP Committee’s Chairman, refers to as the “retirement crisis.” Sen. Harkin states that the “retirement income deficit” (which he defines as the difference between the assets people need for retirement and what they have available) is approximately $6.6 billion. The hearing was largely in response to Harkin’s report in which he outlines, in broad strokes, his plan to enhance retirement security. Sen. Harkin’s plan has two basic prongs: (1) strengthen Social Security and (2) create a new retirement fund option that will be government-run, but largely privately funded.
On the Social Security side, Sen. Harkin proposes to increase the benefits payable by modifying the formula for calculating benefits and improving the built-in cost of living adjustment for Social Security benefits. He also proposes to remove the cap (currently, $110,100) on wages subject to the Social Security tax over a 10-year period. The removal of the cap would come with an increase in benefits for those with wages over the cap, but the additional benefits would be less than the enhanced benefits he proposes for wages below the cap.
The more interesting side of his proposal is to build a system of “Universal, Secure, and Adaptable (‘USA’) Retirement Funds.” USA Retirement Funds, in addition to having a subtle patriotic flair, would basically be individual accounts for each employee that would provide lifetime income benefits, like a pension.