On September 25, the House approved, 291-118, a resolution (H. Res. 544) urging Congress to make permanent the retirement provisions included in last year’s tax cut package (P.L. 107-16) (see The Source, 6/8/01).
All of the tax breaks in last year’s law, including the retirement provisions, are scheduled to expire on December 31, 2010. The House, on June 21, approved a bill (H.R. 4069) that would make the retirement provisions in the tax law permanent (see The Source, 6/21/02). The Senate has not considered similar legislation.
Current law increases the contribution limits for both the traditional and Roth IRAs to $5,000 by 2008 and raises the amount that an individual may contribute annually to a 401(k) plan, a tax-sheltered annuity, or a simplified employee pension plan to $15,000 by 2006.
Additionally, individuals 50 and older are allowed to make “catch-up” contributions to their IRAs and pensions. 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.
Rep. Robert Matsui (D-CA) called the resolution “irrelevant.” He explained, “This will not take effect until the year 2010, eight years from now. We are not even going to be around.” He added, “Maybe that is why we are doing it now, because we want to make sure our legacy is going to be effective in 2010.”
“Retirement plans are based on rules that need to be consistent over a career, not just 10 years,” argued Rep. John Sullivan (R-OK), sponsor of the resolution. “The law, as passed last year, gives employees the additional resources to appropriately plan for their retirement,” he said. “In addition, the measure allows workers age 50 and older to make catch-up contributions, a provision that will significantly help women who are more likely to spend more time away from the workforce,” he added.
