Wednesday, September 06, 2000
Roth bill raises limits on savings
Includes 'catch-up' option for ages 50 up
The Associated Press
WASHINGTON Senate Finance Committee Chairman William Roth, namesake of the popular Roth IRA, unveiled legislation Tuesday that would create a similar 401(k), and raise contribution limits, for individual retirement accounts and 401(k) plans.
We need to make it easier and more appealing for Americans to save for retirement, both through their employers and through their own individual retirement accounts, said Mr. Roth, R-Del.
The bill, similar to a measure the House passed overwhelmingly in July, would raise annual contribution limits to 401(k) plans from $10,500 to $15,000. For IRAs, the limits would rise from $2,000 to $5,000 a year.
A new 401(k) option would be created that, like the Roth IRA embraced by millions of people, would let people contribute after-tax dollars that could later be withdrawn tax-free.
There also would be a catch-up provision for people over 50 to contribute up to $7,500 a year to an IRA, aimed primarily at women who left the work force to raise children and haven't been able to keep pace with their retirement savings.
The White House, which opposed the House bill, reacted coolly to the latest measure as well but did not issue a veto threat. Treasury Secretary Lawrence Summers said the bill could make it easier for businesses to provide pensions for top executives while not helping rank-and-file employees and lower-income people who don't have retirement plans.
We think the highest priority needs to be on helping those who don't take advantage of any tax-favored savings right now, Mr. Summers said.
President Clinton and Vice President Al Gore support creation of retirement savings accounts for lower-income people in which the government would provide a tax-credit match.
Yet many Democrats in Congress support the concepts in the Roth legislation, which will be brought to the Senate floor this month under budget rules that limit debate and amendments.
So many of these provisions have Democratic sponsors, said Sen. Bob Graham, D-Fla. I am optimistic we can arrive at a bipartisan consensus.
Ultimately, the bill could become a vehicle for several other end-of-session tax provisions as Congress searches for concrete accomplishments to show voters. Other candidates include repeal of the 3 percent telephone excise tax and a 10-year, $76 billion package of business tax breaks coupled with a $1 increase in the $5.15 minimum wage over two years.
Senate Minority Leader Tom Daschle, D-S.D., said Democrats would consider the overall cost of all these tax cuts in deciding whether to support Mr. Roth's retirement package.
Mr. Roth's retirement measure would also:
Create a tax credit to offset the first three years of costs for small businesses that start new retirement plans for employees.
Reduce from five to three years the time it would take an employee to be fully vested in an employer's retirement program.
Require a company to provide a written notice, including examples and explanation of rights, when a pension plan is converted to a cash balance or other hybrid program that could reduce their long-term benefits.
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