bitter pills for us, but was necessary to uphold the full faith and credit of the united states of america. they walked away from that. then we go to the super committee, which was part of, what do we do next? and they walk away from any solution that was, that was not lopsided. you had to have revenue, no revenue. we just want cuts. and now we're faced with reconciliation, and then it took them a while to figure out that the pay roll tax cut was something that the american taxpayer, middle income families needed in our country. the house republicans were to the extreme, the republicans in the senate, the senate and democrats and republicans supported that. and the president went throughout the country, the american jobs act, with his proposal for how to create jobs. this is one piece of it, where there could be bipartisan

support in the senate. it took the house republicans a long time to figure it out. now, way overdue, they keep kicking the can down the road on transportation. so it's -- it's cute, but it isn't true. the president has not been, the president has been engaged, he has been engaged with the american people, and for that reason, the republicans had to come around on the pay roll tax cut in the house. so it is -- it's, i think it's a sign of things to come in the campaign. but i don't think if you go unanswered, and the fact is, what i know is that the president agreed to the grand bargain. the republicans walked away. >> leader pelosi -- >> you already did yours. okay. >> you talked about kicking the can down the road. seems to be an assumption the bush tax cuts, pay roll tax cuts, all that will not be debated or voted on before the elections. when there will be another

crisis of timing coming up. what are your thoughts on that? do you see it happening sooner and why do you think it looks like this is all getting pushed off? >> well, i don't -- we're hoping that the economy will grow to such an extent we would not need to do the pay roll tax again. you make an evaluation as to what you need at the time and i think the length of time it's been in effect, to give some indication of its necessary -- of a necessity to go forward with that. the bush tax -- they expire. there's no need to have any discussion about that. they expire in december. that's over. so i don't know what -- i do think that we should always be mindful and prepared to talk about simplification an fairness in the tax code, and that any work that any of us are doing in that regard should prepare us for a serious review and perhaps

change to the tax code in that regard, but it has to be something that is about growth. it grows the economy, supports the entrepreneurial spirit of america, and not just give tax cuts to the wealthiest people in our country, and allow them to use the money to send jobs overseas. yes? >> on the secret service, do you think congress will investigate or should it be left to federal law enforcement officers? >> i think you can take it one step at a time. i think that everybody should be on notice that we in congress feel responsible for oversight of every federal tax dollar that is spent, and so we want to subject all federal -- all spending to the harshest scrutiny. is it doing the job that it needs to do? is that -- because those of us who believe in a public space, no more space than we need. no more government than we need,

but we believe in the public space. also believe that we have to have accountability and transparency in all of that. so we reserve the right to look into anything, but for the purpose of the protection of the president and what that means, i think the investigation that they are conducting, hoping it's a thorough one. i mean, i do not know the particulars of it, but that investigation first and foremost about the safety of the president is one that, that the secret service should do. anything, you know, going aside from backing up from that with the gsa or whatever it is, you know, we have the right to look at any spending to make sure that the taxpayers' dollars are used well. especially those of us who believe in the public space. >> at this point you're not ready to say congress should take a look? >> do you know enough about this situation?

see, i don't either. and if you don't know, i don't know. because i know what you tell me. [ laughter ] along with the rest of the country. but it is -- it's so what would be the word? disgusting, disconcerting, every d word you can think of, but it is, nonetheless, something that needs to be looked at right away, because the security of the president is immediate and can't be put on a back burner. so i think that those responsible should report what they know, and if that's not satisfactory, then we reserve the right to go forward on it, but i don't -- i think generally we like to think, let's get the job done. let's not try to complicate matters. let's not politicize it. let's just -- let's just -- we're very proud of the work of elisha cummings, our ranking member on the oversight

committee. he is a very reasoned approach, he has the taxpayers' interest at heart. he knows what the purpose of the investment is supposed to be, is the taxpayers' dollar being well spent, and let's not paint everybody with the same brush, if they have a few, several -- one is one. two is two. a few is three. several bad apples. so far several bad apples. thank you all very much. see you next week. a reminder, coming up tuesday, rodney king recounting his life in the days and years following the video recording of

his beating by the los angeles police. that's took place on march 3, 1991. mr. king recalls the riots in los angeles following the acquittal of four of those officers in the case, and he reports on his own legal problems and alcohol addiction. he'll speak at the schomburg center foreresearch in black culture from har phlegm new yle city. on our website, booktv.org. that's tuesday. this weekend on book tv on c-span2, live coverage from the "los angeles times" festival of books. coverage starts at 2:00 p.m. eastern, saturday and sunday. saturday at 3:30 p.m., biographers john farrell, jim newton and richard receives on claires darrow, divide d. eisenhower and jfk. at 7:30, call in with questions for steven ross, author of "hollywood left and right: how movie stars shaped american politics." sunday at 2:00 eastern, watch for eric alderman and his take

on liberals and the cause. and laumpy andrews, annie jacobsen and michael shermer. the entire schedule is online at booktv.org. from the colonial era, prohibition to today, drinking for better or worse has always been a part of the american landscape. saturday night, live on american history tv, a history of alcohol in america. watch our simulcast of back story with the american history guys. they regale with tales of beer and spirits in america. saturday night at 8:00 eastern. part of american history tv this weekend on c-span3. the house ways and means committee on tuesday heard from a panel of experts on the pros and cons of current retirement savings plans. the hearing was also to discuss possible changes to certain options as part of comprehensive tax reform.

all those who testified agree tax incentives of crucial to employer and employee participation. representative david camp chairs the committee, and this is two hours. good morning. we meet today to continue our dialogue about what i hope will result in a bipartisan path forward to reform our federal income tax system. in recent weeks, much of the discussion about tax reform has centered on the corporate side especially after japan lowered its corporate rate on april 1st leaving america with the dubious distinction of having the highest corporate tax rate in the industrialized world. it's simply unacceptable that american employs face such an undue burden at a time we desperately need them to get the economy growing and almost 13 million unemployed people back to work, but as tax filing day reminds us, only comprehensive tax reforms demands we meet

these and regardless how they're structured. as such we must consider this transforms today's broken code from one that impedes to one that improves prospects for job creation. last year the irs processed 142 million tax returns. also received 10.5 million extension forms at least in part due to the complex costly and time consuming nature of the tax code. with nearly 4,500 changes in the last decade, 579 of them in 2010 alone, the code is far too complex. and this complexity has led to of-increasing costs of complying with the federal tax code. according to the national taxpayer advocate in 2008, taxpayers spent $163 billion complying with the individual and corporate income tax rules. american families are not only spending more money complying with the tax code, they're also spending more time.

navigating through the tangled web of tax rules resultsed in taxpayers spending over 6 billion hours annually to comply with the code. whether it's the compliance and administrative burden, impact of temporary and expiring tax provisions and convoluted rules and plans decisions today's tax code is not just hampering employers but the ability of individuals and em mother ploye reasonable center. tax incentives for retirement saving, quickly becomes clear why we are taking the time to lay the foundation for comprehensive tax reform by gathering input from experts. as many americans work to meet the tax filing deadline, today's testimony reinforces the wide popularity of savings vehicles. overwhelming majority of american workers with access to workplace retirement -- to a workplace retirement plan are participating in that plan. according to the bureau of labor statistics, 78% of workers have

access to a work time plan and meaning 66% of all full-time workers participate. the plan's benefit tax ppayers d all walks of life. 2010, earning $30,000 to $50,000 participated in an employer-responsible ared retirement plan. if such a plan was available to them. according to data from the employee benefit research institute. similarly, irs data indicates 38% participating in the plans make less than $50,000 a year, while almost three quarters make less than $100,000 annually. the proliferation of tax favored retirement accounts occurred as specific needs have led congress to create new plans with different rules. some, however, have questioned whether the large number of plans with different rules and eligibility cry tier yee leads to confusion reducing incentives and retirement savings.

offering ideas for participation in retirement plans and better targeting the incentives. these ideas range from simplification and consolidation of existing plans and accounts to changing the default rules governing whether an employ participates to additional incentives such as savers credit. at the committee continues its work it's porptd to keep in mind these affect average people who depend on these resources for retirement and must ensure we do not inadvertently take steps resulting in consequences that threaten the retirement security of ordinary families. as this committee considers tax reform, three important principles to keep in mind. simp plapification, increased participation, particularly by low and middle income taxpayers and three whether the tax benefits of effectively and properly targeted. regarding the first of these principles in august 2010 the president's economic recovery advisory board known as the

volcker commission presented options for simplifying savings and retirement incense irans in their report on tax reform options. these options are worthy of consideration and discussion. we also have an expert panel of witnesses before us today that will evaluate how existing tax rules measure up to these criteria. i'd like to emphasize that today's hearing isn't about drawing conclusions but it is about making sure that as congress approaches comprehensive tax reform we do so well armed with information. washington spent too much time acting first and asking later. that's proven to be the wrong approach. america's families and job creators deserve better than a trial and error approach to crafting policy. this is our opportunity to gather input and get the facts and i look forward to the discussion and will now yield to the ranking member mr. levin for the purposes of an opening statement. >> thank you, mr. chairman. welcome. thank you for coming. today's hearing is this committee's commercial examination of what tax reform might mean for a very specific

set of tax provisions, those designed to promote retirement savings. tax preferred retirement savings have benefited tens of millions of american families. the estimates of exactly how many vary, but most find that 40% to 50% of all workers are covered by an employer sponsored retirement plan, some 60 million to 70 million people. employer-sponsored plans including defined contribution and defined benefit plans, private and public sector, hold assets of $9.3 trillion held that amount as of the end of last year, and an additional 49 million households hold $4.7 trillion in iras. the tax preferred retirement

system is voluntary. employers are not required to offer retirement plans. but i think we'll hear today that employers basically understand the current system, and that it works for them in terms of allowing them to offer retirement benefits to their workers. i note that most of this committee agrees with that. a rez resolution is recognized in support of our current system co-sponsored by 115 members including 26 members of this committee, reflecting, i think, bipartisan agreement that these provisions are vital to encouraging retirement savings. that is not to say the current system cannot be improved. of course, it can be. today i believe we'll hear about several ways to do that, including proposals to expand

and grow 401(k)s and iras and expand the savers' credit. but what should be clear is that the basic structure of our current system should be preserved, and that this structure should not be repealed to pay for tax reform. tax reform should approach retirement savings incentives with an eye towards strengthening our current system and expanding participation, not as an opportunity to find reven revenue. i think one of our witnesses, mr. hardic, summed this up nicely, in his and your written testimony, and i quote. the retirement savings, tax expenditures should not be reduced or tinkered with to pay for other initiatives whether inside or outside of tax reform process. those funds are the primary retirement nest egg of millions of american families. they should not be taxed in

order to finance more government spending, deficit reduction, or to offset other tax initiatives, including lower marginal tax rights. finally, i want to just note that while today's hearing is toke focused on defined contribution plans, our retirement security policy in this country has traditionally been a three-legged stool, with personal savings constituting just one of those legs. the other two legs define benefit pensions and social security are indeed also vital components of insuring americans' retirement security. so thank you again, and all of us look forward to your testimony. >> thank you, ranking member levin. next it's my pleasure to welcome the excellent panel of witnesses seated before us today. today's witnesses have extensive

experience studying or working with tax favored retirement accounts, and their experience will be helpful as we take a look at how the complexities in this part of the tax code affect individuals and employers. first i would like to welcome an introduce dr. jack vanderhide, the research director at the em mother research institute in washington, d.c. dr. vanderhide has been with the employer benefit research institute since 1988. has published more than 100 papers on employee benefits. second we'll hear from judy miller, chief of actuarial issues and retirement policy at the american society of pension professionals and actuaries. ms. miller specialized in employer sponsored retirement programs nearly 40 year opinions third, welcome mr. bill sweetnumb a principle at the law group in washington, d.c. he served as benefits tax counsel at the george w. bush treasury department. fourth, we'll hear from mr.

david john a senior research fellow in retirement security at the heritage foundation. mr. john published and testified extensively on the improvement of retirement security plans. finally, we welcome randy hardic from a parder in at from davis d hartman llp in washington, d.c. mr. hardic is an arisa and regulatory compliance specialist who maintains a practice focused on advising employers and institutions on retirement and savings issues and he is testifying today on behalf of the american benefits council. thank you all again for your time today. the committee has received each of your written statements and they will be made part of the formal hearing record. each of you will be recognized for five minutes for your oral remarks. we'll begin with you and you are recognized for five minutes. >> thank you. chairman, ranking member levin, and members of the committee, thank you for the opportunity to speak with you today on the issues involved in tax reform and tax favored retirement accounts. i am the research director of the employee benefit research

institute. this is a nonpartisan institute that has been conducting original research on retirement and health benefits for 34 years. we do not take policy positions and do not lobby. my testimony today draws on extensive research conducted over the last 13 years with its retirement security projection model as well as annual analysis of the behavior of tens of millions of individual participants from tens of thousands of 401(k) plans dating back in some cases as far as 1996. measuring retirement income adequacy is an extremely important and complex topic. figure one of my written testimony shows that when we modeled the baby boomers and gen xors earlier this year 43% of the households were projected to be at risk of not having adequate income for basic retirement expenses plus uninsured health care costs. even though the number is quite large the good news is this is 5 to 8 percentage points lower

than we found in 2003. it would be my pleasure to explain in more detail later why american households are better off today than they were nine years ago even after the financial and real estate market crises in 2008 and 2009. but the short answer is, the extremely positive impact from aut matich enrollment 401(k) plans. it's difficult to imagine any voluntary strategy more effective at dealing with retirement income adequacy than increasing the likelihood of eligibility and qualified retirement plan. figure five of my written testimony shows the importance of defined benefit plans for retirement income ad kwausy and figure six shows a similar analysis for 401(k) plans. we see that the number of future years the workers are eligible for participation in defined contribution plan makes a tremendous difference in their at risk ratings. gen xors for example with no future years of eligibility are going to run short of money 61% of the time whereas those with 20 or more years of future

eligibility would experience the situation only 18% of the time. knowing the percentage of households at risk for inadequate retirement income is important for public policy analysis. equally important is knowing how large the accumulated deficits are likely to be. the aggregate deficit number is estimated to be $4.3 trillion for all baby boomers and gen x-ers. while trillion dollar deficits are useful in focusing attention on the problem they do little to help policy makers understand exactly where these deficits are coming from. for example, figure three of my written testimony provides information on the retirement savings shortfalls for gen-xors. the average deficit decreases substantially with additional years of future eligibility and defined contribution plan and gen-xors fortunate enough to have at least 20 years of future eligibility find their average deficits reduced more than 70% of the average deficits for those with no future years of

eligibility. research has shown repeatedly that there is an additional type of 401(k) plan under current tax incentives and it has the potential to generate when combined with social security benefits would replace a sizable portion of the employees' preretirement income for those with continuous coverage. our research has also shown the automatic enrollment type of 401(k) plan when combined with automatic escalation provisions appears to have the pro-tension to produce even larger retirement accumulations for most of those covered by such plans. recently, however, there have been proposals to modify the existing tax incentives for defined contribution plans by either camping annual contributions or changing the before tax nature of employee and employer contributions in exchange for a government matching contribution. last september the senate finance committee held a hearing that focused to a large extent on the second type of proposal. we presented preliminary evidence at that time that the possible impact of such a

proposal on future 401(k) accumulations in recent months results from two new surveys have allowed us to modify the effects even more accurately and last month we published new results showing projected changes in 401(k) balance at retirement age due to expected modifications of planned sponsors and participants and reaction to that proposal. figure 11 in my written testimony shows a 22% reduction in 401(k) balances at retirement for young workers in the lowest income co inco incomecortile those at risk for insufficient retirement income. figure 12 shows the average reduction for low income employees in these plans are 36 and 40%. in conclusion given that the financial fate of future generations of retirees appears to be so strongly tied to whether they are eligible to participate in employer sponsored retirement plans, the logic of modifying either completely or marginally

incentive structure for employees or employers for defined plans at this time needs to be thoroughly examined. the potential decrease of retirement income resulting from either employer modifications to existing retirement plans or employees reducing future contributions to these plans needs to be analyzed carefully when considering the overall impact of such proposals. thank you and i look forward to your questions. >> thank you. thank you very much. ms. miller, you're recognized for five minutes. >> thank you, chairman camp, ranking member levin, and members of the committee. i'm judy miller, chief of actuarial issues and director of retirement policy for the american society of pension professionals and actuaries. the more than 8,000 members work with retirement plans and employers of all times but our primary focus is small business. two key factors -- the deferral nature of the incentive and the nondiscrimination rules that make employer sponsored plans very efficient in delivering benefits across the income

spectrum. first, unlike other tax incentives, incentives for retirement savings are deefrls. they're not permanent exclusions. employer paid health benefits are excluded from income or mortgage interest is deducted those amounts will never be taxed. with the traditional retirement savings account, no income taxes are paid on contributions when they're added to the account but those same contributions are included in the taxable income when the amounts are paid from the plan. in other words, every single dollar that's exempt from tax now will be subject to income tax in the future. since most of those retirement years are outside the government's five or ten-year budget window, looking at the so-called tax expenditure for defined contribution retirement plans on a short-term cash basis greatly over states the cost of this incentive. in fact, new estimates by former jct staff show that a better measure of the expenditure for defined contribution plans is more than 50% less than the jct cash basis estimate over a five-year period. so as you consider these issues, let's not forget that this is a

deferral. the amount of revenue you might think you're raising if you cut retirement savings incentives today is not real revenue gain. it's a bookkeeping fiction. the second distinguishing feature is the nondiscrimination rules that make sure incentives don't discriminate in favor of the highly paid. the result is this tax incentive is more progressive than the current progressive tax code. households making less than a hundred thousand dollars pay 26% of all income taxes but they get over 60% of the tax benefit of this incentive for defined contribution plans. this analysis actually under states the benefit for the households because it doesn't recognize that a good part of the small business owner's so-called tax savings is transferred to work ners the form of contributions. let me explain. a small business owner usually considers a plan when the business has finally become profitable. the owner setting up a retirement plan can save enough money on personal income tax to pay most of the cost of the matching contributions required for employees by nondiscrimination rules.

it is a beautiful thing really. deferred income taxes for the owner become current contributions for the workers. data clearly shows the key to promoting retirement security is workplace savings. over 70% of workers earning 30,000 to 50,000 participate in a plan at work but less than 5% go save on an i.r.a. on their own. bureau of labor statistics data shows 78% of workers have access to workplace retirement plan with 84% participating. almost 80% coverage is a success story. more needs to be done but the committee should build on the success of the system. we support the auto ira proposal. mr. neillsville for example is a way to expand work place savings by building on the current structure. recent tax reform proposals include dramatic cuts in maximum contribution limits, cap on the value of the current year's exclusion for households making over a certain dollar amount, or conversion of the current year's income exclusion to a credit. all of these proposals would reduce the incentive for small business owners to