WASHINGTON – Rep. Ben Cardin, D-Baltimore, reintroduced a bill Wednesday that supporters say would make looming retirement easier for baby boomers by raising contribution limits to their IRAs and 401(k)-type plans.
The Comprehensive Retirement Security and Pension Reform Act would also let older workers catch up by contributing the new maximum right away and by making pensions more “portable” from job to job.
The bill passed the House last year 401-25, but was swept aside in the Senate’s end-of-session business. But Cardin said he anticipates swift passage in both chambers this year, even in the next two weeks in the House.
“I think the bill on its own could perhaps pass both the House and the Senate because it’s gotten so much attention and so much support,” he said. He added that it could also fit easily into the president’s first tax bill.
But opponents say it is little more than a boon to high-income workers and may even cause workers in small businesses to lose benefits. They note that few people contribute the maximum to their pensions now, so raising the cap would do little for middle- or low-income workers.
“Sometimes we call it welfare for the well-off,” said Karen Ferguson, director of the Pension Rights Center. “There’s a lot of hype about the bill, and the reason . . . is it’s a bonanza for financial institutions.”
The legislation was designed to address what Cardin and his Republican co- sponsor, Rep. Rob Portman of Ohio, said are “dangerously” low levels of private savings in the nation. It would increase the limit on employees’ annual contributions to 401(k)-type plans from $10,500 to $15,000 by 2003. Workers over 50 could sock away the maximum amount immediately.
The bill would also boost the individual retirement account contribution limit from $2,000 — set in 1981 — to $5,000 by 2003, raising the cap by the inflation rate in later years. A “catch-up” provision for older workers would also apply.
Cardin and Portman touted the measure Wednesday as a boon to the nation’s faltering economy by encouraging saving.
“We reintroduced this legislation to address what has really become a tremendous retirement crunch in this country, but we’ve also done it to give a needed boost to the economy,” said Portman.
The bill has 259 sponsors and was hailed this week by groups ranging from labor unions to the U.S. Chamber of Commerce, where a spokeswoman said they “just love the bill.”
Geoffrey Manville, spokesman for the ERISA Industry Committee, a benefits trade group, said it is “crucial that this legislation is passed now.”
“People need time to save for retirement. Employers need time to fund their plans,” he said.
And baby boomers face a particular crunch, Manville said.
“Many of them will look at the assets they’ve put aside . . . and realize there’s not enough there. Folks are going to have to step up their savings in order to retire,” he said.
Other supporters say the bill aims to reverse years of damage done when Congress set low contribution limits in an effort to reduce the federal deficit.
“We’re particularly interested in returning the limits to somewhere close to where they used to be” in the mid-1980s, said Deanna Johnson Keim, spokeswoman for the American Benefits Council.
But Ferguson said that only 5 percent of 401(k) holders now contribute the maximum amount to their plans, so low- and middle-income workers would not benefit from the bill.
“It’s a tax giveaway, pension take-away bill,” she said.
David Certner, director of economic issues for the American Association of Retired Persons, said the harm to pensions could come from the bill’s proposed changes to so-called “top-heavy” rules. Those require employers to distribute pension benefits more equitably among workers at all pay levels.
The bill’s supporters say these changes will encourage more small businesses to provide pensions, but Certner fears lower-income workers will lose important protections, “so that a number of people who are getting benefits at the lower level will not get benefits.”
Certner applauded the thrust of the bill, but lamented its narrow scope.
He said the AARP would like to see incentives for low- to moderate-income workers, such as a tax credit for those who contribute to pension plans. Certner said the Senate is now working on a pension reform bill with such a provision.
Cardin said he could support such a credit, with some reservations. While the cost of his bill is estimated at about $52 billion, he said a tax break for lower income workers could nearly double that.
“I support that provision. It’s just expensive,” he said. “If we can find the money, I’m all for it.”