(Photo by Gabe Licht) [Order this photo]
Half of all Americans had a pension plan in 1980, compared to just 20 percent today, he said. Forty percent of Americans have 401k plans, with an average of $70,000. Another 40 percent have less than $10,000 in savings without a pension or 401k plan.
"We need to have a better savings retirement system for the future and we need to make it easier for businesses to have some form of system," said Harkin, the chairman of the Senate Health, Education, Labor and Pensions Committee. "It's tough for businesses to set up pension plans because employees move. That's why the nation moved to 401k plans."
The longtime Iowa Democrat called the committee's proposal "somewhere between what we know as a pension and a 401k."
Employees would be automatically enrolled unless they opted out, and the money would be invested by retirement firms.
"The only thing the business would have to do is make sure a portion of your check was sent in, just as they do withholding now with Social Security," Harkin said.
Employers may be required to match a certain percentage of contribution. For example, if employees contribute 4 percent of their income, employers would contribute a half percent. Employers could also use a higher matching percentage to attract employees.
In contrast to a 401k, an employee would not be able to withdraw the funds in a lump sum, but would receive a monthly annuity instead.
Contributions would be designated before the deduction of federal taxes.
He clarified that the program would be privately run and most likely overseen by a board including government officials.
Harkin was joined by Karl Nolin, Bill Ziegler and Les Hicks to discuss the proposal.
Nolin, of Nolin Milling in Dickens, shared how his family business contributes 15 percent of its employees' salaries to a Simplified Employee Pension program instead of paying into Social Security. While Nolin said the program has worked well for his business, it does not work for everyone.
Ziegler relayed his experiences as a union employee whose pension plan was replaced with a 401k in 1978. He prefers the guarantee of an ongoing payment.
Hicks said medical insurance and other costs eat into the Social Security and pension payments he and his wife receive. He advised several high school students in the audience to get a pre-tax pension plan, if possible, when they enter the workforce.
One of those students asked Harkin about the longevity of Social Security.
"Do you believe the United States of America will exist when you retire?" Harkin responded. "If the U.S. exists, you will get Social Security because it is backed by the full faith and credit of the U.S."
For that reason, Harkin believes attempts to privatize Social Security would weaken it. He has proposed a plan that would eliminate the cap that prevents individuals from paying Social Security on more than $110,000 per year. He said his plan would extend the life of fully-funded Social Security from 2032 to 2050.
If no changes are made to Social Security, he said it would continue to a lesser degree.
"From 2033 on, for the next 75 years if we don't do anything, Social Security will be paying 75 percent of what they thought they would be paying," Harkin said.
He said part of his reason for holding town hall meetings to talk about pensions and retirement is to promote a national conversation about the issue.
"I think this would be a good issue for our candidates to be discussing."