FOR IMMEDIATE RELEASE
April 23, 2001 (202) 225-8933

Markup Wednesday, April 25^th at 10:00 AM in 1100 Longworth

WASHINGTON – The amount Americans could put into tax-favored Individual Retirement Accounts (IRAs) would grow from $2,000 to $5,000 under a bill the House Ways and Means Committee will consider. The markup is scheduled for Wednesday, April 25^th at 10:00 AM in 1100 Longworth. Enjoying broad bipartisan support, HR 10, the Comprehensive Retirement Security and Pension Reform Act of 2001, would enact the first IRA contribution limit increase since 1981.

"The personal savings rate in this country is too low, and far too many individuals are not covered by an employer-provided retirement plan or IRA. This pension and retirement savings reform legislation will address these problems by raising contribution limits, allowing workers to rollover their retirement assets when they change jobs, and simplifying the pension laws so that small businesses will be more likely to offer retirement plans for their employees," said Ways and Means Chairman Bill Thomas.

Highlights of the bill, HR 10, are as follows (These provisions are nearly identical to provisions in the House-passed version of H.R. 1102, the Portman-Cardin pension reform legislation from the last Congress which passed the House overwhelmingly).

• The current-law $2,000 IRA contribution limit for both traditional and Roth IRAs would be increased to $5,000 ($3,000 in 2002, $4,000 in 2003, and $5,000 in 2004), and indexed for inflation thereafter.
• Taxpayers age 50 and above would be permitted to contribute $5,000 to an IRA immediately beginning in 2002 (no phase-in would apply). These "catch-up" contributions would enable older taxpayers to more fully prepare for retirement.

• The bill contains over 50 provisions designed to improve retirement security, including:.

• Increased contribution and benefit limits in employer-provided retirement plans;
• Additional salary reduction "catch-up" contributions for workers age 50 and above;
• Shortened vesting requirements for employer matching contributions;
• Increased portability of retirement plan assets, making it easier for employees to roll over assets when they change jobs; and
• Simplified pension rules to encourage small businesses to offer pension plans.

Background on Pension/IRA Issues

• 76 million Baby Boomers will retire within the next 15 years, but studies show that older Baby Boomers have less than 40% of the savings needed to avoid a decline in their standard of living after they retire.
• In June, 1998, the Department of Commerce recently published the first negative personal savings rate (as a percentage of after-tax income) since 1933. The personal savings rate has declined each year since 1992 and is now at its lowest rate in 66 years. [source: Bureau of Economic Analysis]
• Half of all private sector workers still have no pension coverage. [source: Department of Labor]
• While 55% of male retirees have a pension plan, only 32% of female retirees have one. [source: U.S. Department of Labor]
• Only 20% of small businesses with 25 or fewer employees offer a pension plan. [source: Employee Benefit Research Institute (EBRI)]
• While 401(k) plans are popular options for many employees, many workers do not save enough in them. The average account balance in 401(k) accounts is only $37,323, and half of all 401(k) plan participants have account balances with their current employer of less than $10,000. [source: EBRI]
• Due to complex rules, high administrative costs and other barriers, participation in defined benefit plans has declined steadily. The number of active workers in defined benefit plans dropped 15% from 1985 to 1994. By 2005, less than half of the participants in defined benefit plans will be active workers. [source: Pension Benefit Guaranty Corporation]
• There has been no net growth in retirement coverage since 1980. [source: Markland, Pensions & Investments, September, 1996]

• Statistically, a typical retiree gets 40% of his or her income from Social Security, 19% from employer-provided pensions, 18% from personal savings, and 20% from earnings. But less than half of individuals aged 65 and older receive pensions [source: Social Security Administration]
• 401(k) plans are an important source of retirement security. According to the most recent federal statistics, there are 25.2 million active participants -- 24% of the eligible workforce -- paying into 401(k) account. [source: Pension Welfare Benefits Administration, 1993].
• In the five years since the government figures were released, figures released by Cerulli Associates in 1998 indicate that 401(k) coverage now includes about 36 million active participants – or about 36% of the total workforce.
• Employer-provided pensions pay out more in benefits ($379 billion in 1997) than Social Security ($316 billion in 1997). [source: EBRI]
• Pensions benefit workers who need the most help in achieving adequate retirement savings. 77% of pension plan participants make less than $50,000 per year. Most current pension recipients are middle income. [source: ACLI analysis of 1998 Current Population Survey]