The US House of Representatives yesterday voted 401-25 for a bill raising contribution limits for individual retirement accounts and 401(k)s while encouraging more businesses to offer pensions. 182 Democrats joined nearly all Republicans in favor of the bill, which will now go to the Senate.
The leading Republican sponsor of the bill, Rep. Rob Portman (R, Ohio) said: 'By expanding retirement savings options, we'll be helping those workers who need the most help in saving for retirement.'
The bill would gradually raise annual IRA contribution limits from $2,000 to $5,000 and boost annual 401(k) plan contributions from $10,500 to $15,000. People over age 50 would have accelerated 'catch-up' limits, which would particularly benefit women who left the work force temporarily to care for children.
The bill's measures would reduce government revenue by $52.2 billion over 10 years. It will probably pass the Senate and will join the other tax-cutting bills with which the Republicans are taunting President Clinton. He must either veto populist bills in the run-up to the presidential election, or submit to the Republican tax-cutting agenda. Neither choice is electorally appealing.
After the vote, the White House released a statement saying the president 'strongly opposes' the bill because it would mainly add to retirement tax benefits for higher-income people rather than the lower-income workers most in need of help saving money. The v-word was not mentioned, however.
The White House statement went on: 'A better approach is to enact pension and retirement savings incentives to reach tens of millions of working Americans who do not participate in employer-provided pension plans and have little or no retirement savings'.
The number of traditional employer-provided pension plans dropped from 114,000 in 1987 to 45,000 in 1997, and only about half of people over age 65 receive income from pensions.
IRAs were authorized in 1974 but contribution limits have been increased only once, by $500 in 1981. More than 36 million people now participate in 401(k) plans but the average account balance is only about $37,300, says the Employee Benefit Research Institute.
'The work force has changed, our retirement needs have changed, and the pension system has changed,' said Rep. Bill Archer, (R, Texas), Chairman of the House Ways and Means Committee. 'This is the right legislation at the right time.'
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