ACTION

FROM THE COMMITTEE ON WAYS AND MEANS

FOR IMMEDIATE RELEASE, Contact: (202) 225-3625
October 7, 2002
No. FC 29-A

Thomas Announces Committee Action
H.R. 1619, a Bill to Increase the Limitation on Capital Losses Applicable
 to Individuals, and H.R. 5558, the “Retirement Savings and Security Act of 2002”

Congressman Bill Thomas (R-CA), Chairman of the Committee on Ways and Means, today announced that on Tuesday, October 8, 2002, the Committee ordered favorably reported, H.R. 5558, the “Retirement Savings and Security Act of 2002,” as amended, by a recorded vote of 24-10.  In addition, the Committee ordered favorably reported, H.R. 1619, a bill to amend the Internal Revenue Code of 1986 to increase the limitation on capital losses applicable to individuals, as amended, by a recorded vote of 24-11.

DESCRIPTION OF H.R. 1619 AS APPROVED:

 Under present law, taxpayers can deduct up to $3,000 of net capital losses from their income ($1,500 for married persons filing separately).  This amount has not been increased since 1978.  H.R. 1619, as amended, would adjust the 1978 figures for inflation by increasing the net capital loss limits to $8,250 ($4,125 for married persons filing separately).  The increased limits also would be indexed for inflation for all years after 2002.  The provision is intended to provide some tax relief to the millions of taxpayers who recently lost money in the stock market.

 DESCRIPTION OF H.R. 5558 AS APPROVED:

 Under present law, seniors are required to start making minimum distributions from tax-favored retirement arrangements, such as Individual Retirement Arrangements (IRAs) or 401(k) plans, no later than April 1 of the calendar year following the year in which they attain age 70 1/2.  H.R. 5558 would gradually increase the minimum distribution age from 70 1/2 to 75.  The provision is intended to provide individuals with more control and flexibility over their retirement savings.

Under present law, the annual contribution limits under tax-favored retirement arrangements is gradually increasing over the next several years.  H.R. 5558 would accelerate the scheduled increases so that the higher limits would take effect beginning next year.  The contribution limits would be accelerated as follows:

• The limit on annual contributions to an IRA would increase from $3,000 this year to $5,000 in 2003 instead of 2008.

• The limit on annual elective deferrals to a qualified arrangement (such as a 401(k) plan or tax-sheltered annuity) would increase from $11,000 this year to $15,000 in 2003 instead of 2006.

• The limit on annual deferrals to an eligible deferred compensation plan of a tax-exempt or State or local government employer (a §457 plan) would increase from $11,000 this year to $15,000 in 2003 instead of 2006.

• The limit on annual elective deferrals to a SIMPLE plan would increase from $7,000 this year to $10,000 in 2003 instead of 2005. 

Under present law, individuals who have attained age 50 can make additional catch-up contributions to tax-favored arrangements.  The amount of the catch-up contribution is gradually increasing over the next several years.  H.R. 5558 would accelerate the scheduled increases in catch-up contribution limits as follows:

• The catch-up contribution limit for IRAs would increase from $500 this year to $1,000 in 2003 instead of 2006.

• The catch-up contribution limit for qualified arrangements and section 457 plans would increase from $1,000 this year to $5,000 in 2003 instead of 2006.

• The catch-up contribution limit for SIMPLE plans would increase from $500 this year to $2,500 in 2003 instead of 2006.