Legislation (H.R. 1102) aimed at helping to expand workers’ retirement savings was unanimously approved, 19-0, by the Senate Finance Committee on September 7. The bill was approved by the House in July (see The Source, 7/21/00, p. 3). Before receiving approval from the Senate committee, the House-passed version was amended with a substitute offered by Committee Chair William Roth (R-DE).
Committee members praised the legislation and the substitute amendment, saying that Americans should be encouraged to save more for retirement. Sen. Roth said H.R. 1102 adheres to a “philosophy of self-reliance” by helping to “give families an opportunity to provide for themselves.”
Sen. Charles Grassley (R-IA) described the U.S. tax code as outdated, adding that it is increasingly likely that workers—especially women caring for children or elderly relatives—will take time out of the workforce, and will change jobs frequently. “The times have surely changed and the tax laws are far behind,” he said.
Women often have fewer retirement assets than men, because they are more likely to take time out from the workforce to care for family members, and because they often have lower salaries on which to base pensions. In addition, women usually require more retirement funds, as they tend to live longer.
Sen. Roth’s substitute would expand slightly on the House-passed version of H.R. 1102. In addition, the Senate version is a budget reconciliation measure, meaning that amendments would be prohibited during Senate floor debate. The House Ways and Means Committee is expected to produce a reconciliation measure by September 12.
Both versions of H.R. 1102 contain a section focused specifically on helping women to increase their retirement savings. Some of the provisions included in the Senate committee’s version would:
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The legislation emphasizes portability, with several provisions designed to help workers carry over pensions savings when they change jobs. In addition, the bills would increase the annual amount that an employer can contribute to an employee’s pension plan.
Both measures would allow larger annual contributions to Individual Retirement Accounts (IRAs). The current limit of $2,000 would be increased to $5,000. For individuals aged 50 and older, the limit would be $7,500.
Additionally, the Senate committee’s version would institute a non-refundable tax credit to encourage retirement savings for low-income individuals and families. For individuals earning less than $25,000 annually and families earning less than $50,000 annually, a retirement tax credit of $2,000 would be available.
In addition to Sen. Roth’s substitute, the committee approved, by voice vote, an amendment offered by Sens. Connie Mack (R-FL), Orrin Hatch (R-UT), and Frank Murkowski (R-AK). The amendment is designed to alleviate the marriage tax penalty as it applies to the conversion of IRAs. Under current law, income limits for converting Roth IRAs into regular IRAs are $95,000 to $110,000 for individuals and $150,000 to $160,000 for couples filing joint tax returns. The amendment would increase the range for joint filers, making it $190,000 to $200,000, or double the range for individuals.
