New Pension Reform Would Allow More Americans to Save for Retirement
Thursday October 10, 2002
As millions of Americans move closer to retirement, we need to do all we can to encourage increased retirement savings. Since 1995, I have worked with my Republican colleague Rep. Rob Portman to give Americans greater control over their retirement savings.
Recently, Rep. Portman and I introduced the Protecting America's Savings Act, legislation that will help more low-and moderate-income Americans save for retirement; raise the age for minimum required distributions; make it easier to rollover retirement accounts; and accelerate contributions into retirement savings accounts.
In an effort to increase the number of low-to-moderate income Americans who save for retirement, the bill would expand and make permanent tax credits for lower-income savers. It would provide a tax credit for individuals with incomes up to $32,500 and joint filers with incomes up to $65,000 who contribute to a workplace retirement plan or IRA.
The measure also addresses the financial scandals that have surrounded the collapse of Enron, Worldcom, and others. It would impose a 50% excise tax on "golden parachute" payments to executives two years prior to bankruptcy or while in bankruptcy, and it would direct the Secretary of the Treasury to study and report to Congress on new ways to protect savings and defined contribution plans.
Because millions of Americans are living and working longer, the bill would modify the existing requirements that force workplace pension plan participants and IRA holders to begin drawing down their savings at age 70-1/2. The change would delay the required minimum distribution age to 75 without penalty and would exclude $300,000 from the minimum distribution rules.
The Protecting America's Savings Act also would allow non-spousal beneficiaries to roll over inherited retirement plan savings into an IRA and withdraw money as an annuity. Currently, only surviving spouses may use a rollover in this manner. It also would allow individuals to rollover or transfer retirement plan assets to a spouse's retirement plan or IRA during their lifetime.
The measure also includes provisions that: accelerate IRA retirement plan catch-up contributions; eliminate IRA marriage penalties; allow additional employer contributions to SIMPLE plans; accelerate income eligibility for deductible IRAs; accelerate workplace retirement plan contribution amounts; allow catch-up contributions for federal employees; and allow periodic payment reductions without penalty.
These changes in retirement savings opportunities will hopefully improve our nation's dangerously low savings rate, which has declined at an alarming rate. In 1992, the rate of savings was 8.7% of disposable income. Since then, the rate has dropped every year, reaching a low of 0.1% in 2000.
Americans understand the realities of modern life and that they need to take more responsibility for their retirement security. Congress must do its part to provide people with the tools they need to take more control over their retirement savings.
