Roth Unveils Tax Cut to Help Americans Save for Retirement
Committee to Act Thursday on Legislation
WASHINGTON -- Senate Finance Committee Chairman William V. Roth, Jr. (R DE) today released details of the Retirement Security and Savings Act, legislation that would expand retirement savings opportunities for millions of Americans. The Committee is scheduled to mark up the proposal on Thursday at 10:00 am in room 215 of the Dirksen Senate Office Building.
"Despite a roaring economy, many Americans still are not saving enough money for retirement. This is in part due to restrictions in the tax code that create
disincentives for saving. We need to make it easier and more appealing for Americans to save for retirement both through their employers and through their own individual retirement accounts. When workers save for their future, they are saving for America's as well. The proposal that I am unveiling today corrects many of the disincentives in the tax code to make it easier for Americans to save," Roth stated.
The proposal includes private savings and pension plan provisions that:
• Increase the amount individuals can save in an IRA from $2,000 annually to$5,000 annually;
• Allow savers over age 50 to contribute $7,500 annually to an IRA. This would allow people who temporarily leave the workforce (for example, women who opt to stay at home with their children for a few years) to catch up on their retirement savings when they re-enter the workforce;
• Increase the 401(k), 403(b), and 457 plan contribution limits to $15,000 annually (from current law $10,500);
• Increase the SIMPLE plan contribution limits to $10,000 annually (from current law $6,000);
• Creates a "Roth" 401(k) which would allow workers to contribute after tax dollars to their 401(k) plan and withdraw the funds upon retirement tax free (as with a Roth IRA);
• Create a tax credit for small employer plan contributions and start-up costs which will help offset the first three years of costs that small businesses incur when starting a new retirement plan for their employees;
• Allow workers over the age of 50 to make "catch up" contributions to their401(k), 403(b), and 457 plans;
• Require faster vesting on employer matching contributions from 5 years of employment to be fully vested to 3 years and from 7 year graded vesting to 6 year graded vesting;
• Require participant disclosure (enforced by tax penalties) when a company converts its pension plan to a cash balance or similar hybrid plan and eliminate the potential for a participant's normal retirement benefit to be "worn-away" by the conversion;
• Make it easier to transfer funds between retirement plans.
A more detailed description of all of the provisions of the legislation is on the Joint Committee on Taxation's web site at www.house.gov/jct or the Finance Committee's web site at www.senate.gov/~finance and is available in the front office of the Senate Finance Committee at 219 Dirksen Senate Office Building. The description is approximately 80 pages and is too long to fax.
A revenue table on the proposal will be available later Tuesday, and will alsobe posted on the web site.
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