The bill, sponsored by Reps. Rob Portman (R-Ohio) and Benjamin Cardin (D-Maryland), would make permanent several provisions aimed at increasing retirement savings and pension coverage. In its current form, provisions of the 2001 law are set to expire as of December 31, 2010 – a “sunset” provision included to ensure the legislation complied with Senate budget rules.
Not surprisingly, both Republicans and Democrats accused each other of playing election-year politics, with Democrats objecting to the need to act now when the provisions in question won’t expire for years, and Republicans claiming that Democrats were just trying to use the bill to highlight corporate abuses, rather than helping average workers.
The House version would make permanent:
- a phased-in increase in annual contribution limits to individual retirement accounts from $2,000 to $5,000
- a phased increase from $11,000 to $15,000 in the limit on individual contributions to 401(k) plans
- allowance for catch-up contributions to IRAs and 401(k) plans for people aged 50 and over
- enhancement of pension portability
- a reduction in the vesting requirements from five years to three years for employer matching contributions
- regulatory relief to encourage small business pension growth.
However, critics noted that the bill did not address the extension of the savers credit for lower income workers, which is also set to expire in 2006.
Representative Robert Matsui (D-California) sponsored a Democratic substitute to the bill, which was defeated 182-204, largely along party lines. While Matsui’s proposal was largely identical to the final version passed by the House, it did not address a number of additional items, including the lower income savers credit, as well as:
- imposing excise taxes on severance and retirement packages for executives where the firm has declared bankruptcy or where the stock of the firm has declined by 75%
- banning tax-deferred compensation benefits for executives if they are protected from bankruptcy or other financial problems
- discouraging corporate inversions, by requiring that corporate executives pay capital gains on their stock options if the firm moves overseas (a.k.a corporate inversions)
- a ban on the corporate deduction of more than $1
million in executive compensation if the sum is based on
performance derived from manipulating employee pension
protections for workers in top-heavy pension plans.
However, the House measure, which would add $6.1 billion to the 10-year cost of the cut, faces an uncertain future in the Senate. The House previously approved a permanent extension of retirement-plan contribution limits in April, alongside a bill that would have permanently extended all of last year’s tax cuts. At the time, Senate Majority Leader Thomas Daschle, (D-South Dakota) said he’d “never” take that bill up.