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March 19, 2001
Bill Cited As Critical Pension Reform Legislation
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The Comprehensive Retirement Security and Pension Reform Act, or H.R.10, was reintroduced by Reps. Rob Portman (R-OH) and Ben Cardin (D-MD) last week. Both chambers or Congress passed the measure last year and it was part of the 1999 federal tax bill vetoed by then-President Clinton for unrelated reasons.
"Congressmen Portman and Cardin's 'Comprehensive Retirement Security and Pension Reform Act' is critical to promoting American workers' retirement security. It's targeted to individuals, and would be a perfect fit for any tax measure aimed at helping individual Americans," said Carroll A. Campbell Jr., president and CEO of the American Council of Life Insurers (ACLI).
"The data tells the story about the need for this legislation," Campbell said. "Fewer than half of U.S. workers have pension plan coverage, and about 25 percent of workers have failed to even begin saving for retirement. Moreover, our savings rate has dropped to below zero for the first time since 1932. We will have a retirement security crisis very soon if Congress fails to promote individual savings and encourage employers to start up, maintain and expand their plans," he said.
"This bipartisan legislation would make the nation's retirement plan system significantly more responsive to the retirement savings needs of working Americans, said Investment Company Institute President Matthew P. Fink. "It is crucial that Americans of all income levels and in all workplaces have adequate opportunities and incentives to achieve retirement security."
Fink noted that the contribution levels on pensions and IRAs are outdated: "Today's $2,000 contribution maximum was established 20 years ago and no longer provides sufficient savings opportunities. This failure to keep pace with inflation has hindered the efforts of many Americans, especially those with no employer-sponsored plan alternative, to accumulate retirement savings."
Key provisions of the bill would:
- Raise the limits on the amount workers can contribute to 401(k)-style retirement plans to $15,000 by 2005 from the present $10,500.
- Allow individuals age 50 and older to make additional annual contributions up to $5,000 in 401(k)-style plans to "catch up" for years when they weren't able to contribute. Those "catch up" provisions would be especially helpful for baby boomers who are trying to prepare financially for their rapidly approaching retirements, and for working women who are the most likely to be in and out of the work force during their younger working lives.
- Raise the limit on IRA contributions from $2,000, a level established in 1981, to $5,000 - and indexed for inflation after that. Beginning this year, taxpayers 50-and-over would be permitted to contribute $5,000 to an IRA under the bill.
- Shorten the time when a worker would be eligible for pension benefits. Workers would become vested in employer matching contributions in three years, instead of five.
- Ease the rules on rolling over retirement savings among private-sector, public sector and non-profits' plans.
"Time is running out," he said. "The fact is, every eight seconds, another baby boomer turns 50. Holding up these crucial incentives isn't going to stop the clock. Every delay robs working Americans of the time they need to save and accumulate assets for retirement - and especially for baby boomers, that time is too precious to waste. Over the next 30 years, retiring baby boomers will double the number of Americans age 65 and over to 70 million - and because of increasing life spans, nearly half of them will live to age 90," Campbell said.
"In all, the Portman-Cardin bill represents sound public policy. The smartest step Congress and the administration can take right now is to reward individuals and employers willing to take responsibility today for providing greater retirement security for tomorrow's retirees," Campbell concluded.
Click here to read a summary of the bill.