Compliance July 26, 2005

Democrats Launch 'AmeriSave' Pension Reform Alternative

July 26, 2005 (PLANSPONSOR.com) - A pension reform plan advanced Tuesday by US House Democrats calls for "middle and working-class families" to get a government match of $1 for every $1 invested in a 401(k) plan or IRA up to $1,000.
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In unveiling their AmeriSave program, Democratic leaders said qualified Americans would get the match after they filed a tax return and that the matching funds would be deposited directly into their IRA or retirement plan. “The AmeriSave Match will not involve creating a new type of account; instead, it builds on a successful model of 401(k)s and IRAs by increasing incentives to participate,” the Democrats asserted in  material released Tuesday . The Democrats claimed that nearly 100 million Americans would ultimately be eligible for the new match.

The new proposal also hit on another hot-button issue in the retirement services circle: providing financial advice to plan participants – a component of the competing GOP plan (See  Latest GOP Pension Reform Bill Includes Advice ). Under the Democratic plan, employers would get an unspecified tax credit by “encourag(ing) access” to independent financial advisors for those eligible for the program’s matching contribution. The Democratic plan also encourages automatic enrollment and faster vesting periods to be eligible for the employer match.

The plan relies on a series of unspecified tax credits to:

  • help defray employers’ retirement plan administrative costs
  • make it easier for workers to deposit part of their federal tax refund into the retirement plan
  • offer employees the opportunity to buy annuities with their retirement assets.

Turning Over Plans

Finally, the Democratic plan promises to reform bankruptcy and pension laws to prevent companies from improperly turning their pension plans to the nation’s private pension insurer, the Pension Benefit Guaranty Corporation (PBGC). United Airlines sparked a torrent of criticism when it worked out a deal with the PBGC to turn over its pension plans (See  Judge Affirms Ruling For United’s Pension Plan Termination ). The bill would require companies to consider “workable alternatives” to the termination of pension plans and give employees and retirees a stronger voice in the process.

Tuesday’s bill also requires:

  • more information to be released about underfunded plans
  • corporate executives to suffer financial penalties if pension benefits are cut
  • that workers are able to opt out of a cash balance plan conversion.

“Democrats will strengthen retirement security without adding to the deficit,” the lawmakers said. “The AmeriSave Plan will increase national savings and grow our economy while helping middle-class families prepare for a brighter future. “

Unveiling the AmeriSave proposal Tuesday was Representative Nancy Pelosi (D-California), the House Democratic leader, as well as Representatives Bob Menendez (D-New Jersey), Charles Rangel (D-New York), Ben Cardin (D-Maryland), Earl Pomeroy (D-North Dakota), Ron Kind (D-Wisconsin), and Rahm Emanuel (D-Illinois).

More information about the Republican pension plan is  here .

More information about the Bush Administration’s pension proposal is  here .

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