Lawmakers eye retirement help for gig economy workers

Lawmakers on Tuesday weighed ways to provide retirement benefits for independent contractors and other so-called gig economy workers. 

“Retirement savings options for those in the gig economy are quite limited compared to those of their counterparts in the traditional workforce,” said Sen. Mike Enzi (R-Wyo.), at a hearing of the Senate Health, Education, Labor and Pensions Committee’s subpanel on primary health and retirement security, which he chairs.

“And where they do exist they impose complex burdens on the individual that will ultimately discourage savings.”

Senators from both sides acknowledged the issue.

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“As we fight for workers’ protections today, we must also fight to secure the financial stability they will depend on tomorrow. Retirement often seems years away, but the challenges we face are urgent,” said Sen. Patty Murray (D-Wash.).

Unlike other industries, the gig economy is made up of workers paid to complete temporary jobs or projects, such as Uber drivers.

Some have a full-time method of employment but use side jobs to supplement their earnings. Others rely solely on freelance jobs for their income.

MBO Partners, a business services company, estimates that there are 40 million independent contractors in the United States. Approximately one third of these workers say saving for retirement is one of their top challenges.

Experts testifying before the committee agreed that freelance workers should receive retirement benefits but were divided on how to achieve that goal. 

Camille Olson, a partner at Seyfarth Shaw speaking for the Chamber of Commerce, said the solution lies in adjusting the definition of an independent contractor.

Currently, only employees can be placed on a company’s retirement plan. In order to extend these benefits to freelancers, businesses must change their classification to employee, which means new requirements and costs.

Excluding retirement savings from the definition of an employee would allow companies to extend benefits to gig economy workers without penalty, Olson argued.

“What’s the biggest impediment? It’s the companies that have the resources … to provide information, administration of benefits, and transfer of funds … if it didn’t hurt the legal status for all other purposes,” Olson said.  

Monique Morrissey, an economist with the Economic Policy Institute, opposed that idea.

“We need to strengthen, not loosen, the distinction between employees and independent contractors,” she said. “I don’t have sympathy for companies who want to have it both ways.”

Morrissey suggested expanding Social Security, which could reduce the number of retirement accounts gig economy workers juggle.

Expanding Social Security would also require closer scrutiny of tax returns. She said many self-employed workers have greater incentive to underreport income or overreport expenses.

Troy Tisue, president of the retirement planning group TAG Resources, highlighted multi-employer plans (MEPs).

This option would allow employees to maintain the same retirement packages between different employers. Tisue said such agreements offer independent contractors a more manageable savings plan.

“The administrative burden is quite heavy for people who don’t do this [accounting] for a living and when you get a 20-page document it’s more than a little bit daunting,” Tisue said. “It may put things off until they have an understanding, which may never come around.”

At the hearing’s end, Enzi voiced optimism that lawmakers would be able to address the issue eventually, “probably in the form of legislation.”