Cardin's Pension Legislation Would Repeal Roth 401(k) Option

April 29, 2005 ( - US Representative Benjamin Cardin (D-Maryland) has introduced the Pension Preservation and Savings Expansion Act of 2005 that he says attempts to make it easier to save for retirement.

The bill would remove the Roth 401(k) option, however. Under the proposed legislation, Roth 401(k)s – which are authorized under the Economic Growth and Tax Relief Reconciliation Act of 2001, and which employers can begin to offer on January 1, 2006 – would no longer be offered to employees. These accounts are made with after-tax dollars, and can be tapped without penalty in most cases. According to Cardin, the accounts are causing the market to be swamped and are not helpful.

The bill has been put forth before (See Portman-Cardin III Debate Tabled Until After August Break ).

According to a statement from Cardin, the bill aims to:

  • improve the “savers” tax credits for low- and   moderate-income Americans by making the credit both refundable and permanent,  as well as expanded. The credit would be available regardless of income tax liability.
  • make permanent some of the change instituted in 2001, such as the availability of catch-up contributions for   individuals over 50, increased contribution limits, and increased portability of retirement savings.
  • allow tax refunds to go directly to retirement   accounts. 
  • provide incentives for employers to include   automatic enrollment and automatic increase designs in their retirement   plans. 
  • provide workers with new protections for   their 401(k)-type plans and gives them better access to retirement   planning services.  Under the proposed legislation, companies also would be required to provide workers with anexplanation of accepted investment principlesin their 401(k) plan;
  • exempt individuals with less than $100,000 in   savings from requirements that they must begin to take their Minimum   Distribution at age 70½. Also, the bill proposed to reduce the excise tax for those who fail to taketheir proper distributions from 50% to 25%.

In 2001, Cardin and US Representative Rob Portman (R-Ohio) sponsored the Comprehensive Retirement Security and Pension Reform Act (See  Portman Cardin Rides Again ) that was enacted into law. Although Portman recently was appointed the US Trade Representative, Cardin recently vowed to continue his pension reform (See  Cardin: Still in Pension Reform Fight ) efforts.

Those efforts may be seen in a different legislative venue, however. Cardin recently announced that he was throwing his hat into the ring for the Maryland US Senate seat being vacated by the retiring Senator Paul Sarbanes.