WASHINGTON — Limits on contributions to individual retirement accounts and 401(k) plans would be raised and more businesses encouraged to offer pensions under a bill the House is expected to consider this month.
The legislation, sponsored by Reps. Rob Portman, R-Ohio, and Ben Cardin, D-Md., is similar to provisions included in last year's vetoed $792 billion Republican tax cut.
But sponsors — 90 Democrats and 90 Republicans as of Tuesday — hope its chances of moving through Congress and getting signed into law by President Clinton will be improved because it is not encumbered by other, more controversial items.
"We're doing this the right way — a pension reform bill on its own," Cardin said.
The bill, scheduled to be considered Thursday by the House Ways and Means Committee, could reach the House floor as early as next week. It is intended to beef up tax-free contributions and deductions to private retirement plans that have not changed in some cases for 20 years.
The measure would:
Gradually raise the current $2,000 annual contribution limit for traditional and Roth IRAs to $5,000 in 2003. The limit would thereafter rise each year based on inflation. A catch-up provision would allow taxpayers age 50 and up to begin contributing the full $5,000 in 2001.
By 2005, increase the limit on salary reduction contributions to 401(k) plans from $10,500 now to $15,000 and index that amount for inflation. Limits on employer matches would also be increased. People age 50 and over would get an extra $5,000 limit, or $20,000 total.
Create a new 401(k) plan similar to the popular Roth IRA, which differs from a traditional IRA in that withdrawals, not contributions, are tax free.
Shorten employer-offered pension vesting from five years to three years, increase pension portability from job to job and simplify rules so that more businesses will offer pensions.
Portman said the measure would help address a national retirement savings problem in which only about half of all private-sector workers have a pension — and only 20 percent of small businesses.
"It addresses a real and growing concern for millions of Americans who are trying to figure out how best to save for their retirement needs," Portman said.
In the past, opposition from Democrats has focused on the measure's lack of government assistance in helping the poor save for retirement. House Democrats are split on the bill, and the White House has reacted coolly to the idea.
Cardin said he would favor creation of retirement savings accounts for lower-income people, but both main sponsors insisted that issue should not delay a bill that would help millions of middle-class working people.
"I wouldn't want to jeopardize this foundation," Portman said.