Cardin: I started the first opportunity that I had. At the age of 23, I was a state legislator and we had a good pension plan that I contributed to. I also started an IRA, … the first year that they were permitted. Every year that I have worked, I put the maximum away for retirement. I don't think I have missed a year. I'm 56.



401Kafı: Why are you interested in retirement issues?

Cardin: For many reasons. First, we know we have a Social Security problem in the future. When Social Security was created it was only supposed to be one of the three legs of a stool for security retirement for retirees. People are relying too much on Social Security and not enough on private savings and retirement.

"People are relying too much on Social Security and not enough on private savings and retirement." - Rep. Benjamin Cardin

There's a second issue of wealth disparity. We're finding that many people when they retire have virtually no wealth. If they had retirement accounts we would have more wealth among our seniors.

Third, … we consume more than we save and that's not healthy for the long-term growth of the U.S.



401Kafı: What's your take on how Congress views retirement issues? Is it a priority?

Cardin: I do think Social Security is a primary issue. Most members of Congress feel pretty strongly that we need to improve retirement opportunities for working people. They're very committed to try to modernize the pension laws to deal with it.



401Kafı: What are the big issues working people face in preparing for retirement?

Cardin: (They) don't have a lot of extra disposable income. Too many find it difficult to put money away for retirement. So they don't.

The most common reason why younger workers don't contribute to pensions is that they're putting all available dollars in to educating their children. In our bill, at age 50, we'll let you put an extra $5,000 away. So if you couldn't take advantage of early leveraging of compound interest we'll at least let you double up your contributions at age 50 when you still have at least 15 years remaining before you retire.

"If an employer doesn't offer a retirement plan, it's more difficult for lower-wage workers to actually put money away." - Rep. Benjamin Cardin

If an employer doesn't offer a retirement plan, it becomes even more difficult for an employee to put money away. One of the things that we find is if an employer doesn't offer a retirement plan it's more difficult for lower-wage workers to actually put money away.

One of the things that we try to do in our pension bill is make it easier, particularly for small businesses, … to offer pension plans. If the employer … is putting some of the employer's money into the plan, that's quite an incentive for working people to put money away for retirement.



401Kafı: What keeps small businesses from offering pension plans?

Cardin: In the last two decades as we've made the pension system more complicated, we've put a lot of things into the pension laws that are all well-intended. The cumulative effect has made it more difficult for smaller companies to offer pension plans because of all the different tests and the costs involved of setting up the plans. So more and more small businesses have given up their retirement plans.



401Kafı: Does Congress plan to look at trying to clarify the fee structures within 401(k) plans?

Cardin: I think it's reasonable to expect certain … performance from those that handle retirement funds. Part of that is education: letting the employee know what is involved, what the costs are, what the different options are, perhaps offering some more choice to the consumer. And part of that would be the cost of the investment options. You don't want to make it more difficult for employers to set up pension plans. But on the other hand we want to offer legitimate consumer protection.



401Kafı: What's in the laws to improve the worker's awareness of the need to save for retirement?

Cardin: We actually encourage certain types of educational efforts. There's certain information employers are required to give to employees. We're trying to make the accounts more understandable.

(That way) people have a better understanding of what's involved in putting money away for retirement … the tax advantages … the money that they're going to need to replace their wages … that type of information. And, most importantly, how much easier it is if you start early.



401Kafı: There are many calls to raise retirement contribution limits. Those seem to help higher-wage workers. What's being done for the lower-wage worker?

Cardin: On first blush, one would think when you raise the limits on what people can contribute that's going to help wealthier individuals. My first response might be: 'So what? Don't we want to get more money put into savings in our country?'

But there's a reason that affects low-wage workers. … The person who makes the decision whether to set up a plan or not is normally not the low-wage worker, but the person who owns the company. If you don't give that (the business owner) an adequate opportunity (to save) within the pension plan, he (may choose) to have no pension plan at all.

Lastly, we should at least keep up with inflation. If the limits were right 20 years ago, and I think they were, then we should at least have a comparable limit today. We don't. The limits are fixed by statute. They're not indexed. And they haven't kept up with inflation.



401Kafı: What is the chance that pension reform will pass in 2000?

Cardin: If we have a vehicle, I think it's very good.

(But) … it's unlikely the bill can pass on its own. It will need to be included in a broader bill. There's a question whether the Congress, next year, will be able to pass a broader bill that the President will sign.

One area could be an increase in the minimum wage that attracts certain changes in the tax code that primarily helps smaller businesses.

(Also,) 2000 is an election year and there may be a desire to pass tax relief. If we do, we would attach some pension changes to that legislation.

And last we still have Social Security. We'll also include pension provisions in the Social Security legislation.

"We still need to deal with Social Security. We need to make sure it's affordable and solvent for the foreseeable future." - Rep. Benjamin Cardin

401Kafı: What are some the longer-term retirement issues that still need to be addressed if your law is passed?

Cardin: We still need to deal with Social Security. We need to make sure it's affordable and solvent for the foreseeable future. We can help that by bolstering the private retirement side and helping relieve some of the pressure on Social Security. If we do both … then I think we (will) have gone a long way to resolving the problems with retirement security.

Article Archives