March 16,1999


Introduce Bill With Expanded IRAs, Roth 401(k) and 403(b) Plans

WASHINGTON -- Building on the success of the Roth IRA, Senate Finance Committee Chairman William V. Roth, Jr., and senior Finance Committee Democrat Max Baucus (D-MT) today introduced a bill to help Americans save more for retirement in both private savings plans and employer-sponsored retirement plans.

(NOTE: Finance Committee staff will conduct a walk through of the bill, on background, for credentialed press at 1:00 pm today, Wednesday, March 17, in room 215 of the Dirksen Senate Office Building.)

"Nearly half all Americans report that they have less than $10,000 in savings. Of people aged 51 to 61 -- those ages just prior to retirement -- 30% have less than $10,000 in savings. And close to 40% of baby boomers have less than $10,000 in savings," Roth stated. "We need to alleviate this problem by providing more incentives for Americans to save for their retirement.

"I hear from Americans every day who say that the laws on pensions are too restrictive, and prevent them from saving as much as they would like. Why do we attach strings to savings in this country? We should not be placing arbitrary and complex limits on saving money. We should be encouraging everyone to save as much as possible with few restrictions and simple laws," Roth stated. "That is why we are introducing this legislation.

"If we're going to reverse the decline in the savings rate in America, and help Americans plan for their retirement years, we must create a culture of savings in our country," U.S. Senator Max Baucus (D-Mont) said.

"And if we're going to help Americans save, we need to provide incentive s to small businesses, because only one in five Americans working for small businesses has access to pension plans where they work. That represents 40 million Americans who don't have pension coverage. We simply must make it easier for small businesses to start pension plans and provide pension coverage to their employees.

"We must help Americans make their Golden Years truly golden, so they can look forward to a secure financial future," Baucus stated.

"If we can increase savings, we can not only help individuals with their retirement and alleviate some of the pressure on Social Security, but we can help keep our economy growing," Roth added. "This bill can help Americans build a secure retirement and a strong future for the country."

The new Roth/Baucus pension and private savings expansion legislation would include provisions to:

• Create the "Roth" 401(k) and 403(b) plans. Modeled on the Roth IRA, this provisions would allow individuals to contribute after tax money to a 401(k) or 403(b), and remove the money tax free on retirement.

• Increase the contribution limits on all IRAs to $5000 (from $2000). The maximum contribution limit for the IRA is $2000, which has never been indexed for inflation. If the IRA limit was indexed for inflation, today it would be $4,930.

• Increase other pension plan limits. 401(k) plans and 403(b) plan annual maximum contribution would be increased to $15,000; SIMPLE plans would be increased to $10,000 annual maximum contribution.

• Eliminate income caps on IRAs. Before 1986, all Americans, regardless of income, could save in a tax favored IRA. Roth's legislation would eliminate all income caps on IRAs to allow all Americans to save in a Roth IRA or a traditional IRA.

• Allow "catch up" contributions for workers returning to the workforce. Parents who take time off from work would be allowed to contribute more to their pension plan after age 50 to "catch up".

• Increase pension options for small businesses.

A more detailed summary is attached.