- The Washington Times - Friday, May 4, 2001

Employers would benefit from a bill the House passed Wednesday that lets Americans contribute more tax-preferred money to their personal retirement funds, employment policy analysts say.
"It's not going to raise their costs in the long run," said Dick Toikka, chief economist for the Employment Policies Institute, a public policy think tank.
In fact, he said, employers could reduce their financial risk.
"401(k)-type plans are popular because they shift some of the investment risk to employees," Mr. Toikka said. "A lot of employers were getting into trouble with fixed-benefit plans that lost money."
The bill passed the House by a lopsided 407-24 vote Wednesday. But doubts linger about approval in the Senate, where a similar bill died last year.
The House measure would increase the deferred tax-contribution limits for IRAs and 401(k) plans and encourage employers to offer traditional pensions. While the federal government would lose about $52 billion in tax revenue over 10 years, the bill is intended to rescue many retirees from an overdependence on Social Security benefits.
"Social Security isn't enough," said Rep. Rob Portman, the Ohio Republican who sponsored the bill along with Rep. Benjamin L. Cardin, Maryland Democrat. "It's hard to live on. People need to have increased savings."
Mr. Cardin predicted the Senate also would pass the bill in its current session.
"This year we clearly have a strong bipartisan group in favor of this legislation," Mr. Cardin said. "It's a very important bill for savings in this country. It's a very important bill for individuals to take care of themselves when they retire."
Parts of the bill that could cost employers are provisions that allow pension benefits to vest in employees more quickly, such as after three years instead of five, Mr. Toikka said.
"If you had an employer plan that had some vesting, that could have some costs," Mr. Toikka said. "But this is voluntary with the employers. They could reformulate the plans to avoid any additional costs."
Supporters say the bill would increase the U.S. savings rate now at its lowest level in 67 years and supplement Social Security, which could be drained when 76 million baby boomers reach retirement.
The Portman-Cardin bill's incentives for IRAs and 401(k)s could also help employers overcome the administrative burden of traditional pensions, according to the Financial Services Roundtable, a Washington-based trade association for the 100 largest financial-services companies.
"For IRAs, it should not cost employers anything," said E.R. Gregory, spokeswoman for the association. "On the 401(k) side, I don't think it would cost employers anything but it would free them up to offer 401(k)s."


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