On June 21, the House approved, 271-142, legislation (H.R. 4019) that would make permanent the retirement provisions included in last year’s tax cut package (P.L. 107-6).
All of the tax breaks in last year’s law, including the retirement provisions, are scheduled to expire on December 31, 2010. Under H.R. 4019, the sunset for the retirement provisions would be repealed.
Arguing in favor of the bill, Rep. Jennifer Dunn (R-WA) said that the legislation would help all women to become more independent. It would “allow women to devote more money into retirement savings and to maintain their benefits as they move from job to job,” she continued, also pointing out that the bill would allow “women who take time off from work to catch-up” on their retirement savings.
“The Republican leadership has ignored the corporate malfeasance in this bill,” accused Rep. Nancy Pelosi (D-CA). “Only the Democratic substitute would keep tax dollars from disappearing in the Bermuda Triangle,” she said.
Current law gradually increases over seven years the contribution limits for both traditional and Roth IRAs to $5,000 by 2008. Contribution limits would rise from $3,000 in 2002 to $4,000 in 2005, and $5,000 in 2008. The law also increases from $10,500 to $15,000 over five years the amount that an individual may contribute annually to a 401(k) plan, a tax-sheltered annuity, or a simplified employee pension plan from $10,500 to $11,000 in 2002, $12,000 in 2003, $13,000 in 2004, $14,000 in 2005, and $15,000 in 2006.
Additionally, individuals 50 and older are allowed to make “catch-up” contributions to their IRAs and pension plans. From 2002 through 2005, individuals in this group may make an additional annual contribution of $500 to an IRA, and in 2006, these individuals may contribute an additional $1,000 to an IRA. For pension plans, an individual in this age group may make an additional $1,000 contribution in 2002, $2,000 in 2003, $3,000 in 2004, $4,000 in 2005, and $5,000 in 2006.
The law also provides a portability provision to allow workers to take their retirement savings with them when they change jobs.
The House rejected, 182-204, a Democratic substitute by Rep. Richard Neal (D-MA) that also would have made permanent the retirement provisions in last year’s tax cut package. The substitute also would have made changes to retirement tax provisions affecting executives of large corporations, including a provision that would have required corporate executives to pay a capital gains tax on stock options when a corporation reestablishes itself overseas. The substitute also would have required corporate executives to pay a 20 percent fee on large severance and retirement benefits when the corporation declares bankruptcy.
The House also rejected, 186-192, a motion to recommit the bill.
