The House Ways and Means Committee last week approved legislation aimed at enhancing retirement savings, but the bill falls far short of what some would like to see.
The bill, H.R. 5558, was approved by a 24-10 vote and may be brought to the floor of the House this week.
The legislation essentially allows Americans to increase contributions to individual retirement accounts and 401(k) plans sooner than allowed by current law.
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Specifically, the IRA contribution limit would go to $5,000 from the current $2,000 beginning in 2003 rather than 2008.
For 401(k) plans, the contribution limit would increase to $15,000 from the current $10,500 in 2003 rather than 2006.
In addition, workers age 50 and older would be allowed to make “catch up” contributions of $1,000 to an IRA and $5,000 to a 401(k) plan in 2003 rather than 2006.
Finally, H.R. 5558 increases the age when Americans are required to begin drawing money out of their IRAs and 401(k) plans to 75 from the current 70 1/2.
The provisions in H.R. 5558 came from a proposal called the Protecting Americas Savings Act that was developed by Reps. Rob Portman, R-Ohio, and Ben Cardin, D-Md.
Their original proposal, which was much more extensive, had strong industry support.
In addition to accelerating the increased contribution limits to IRAs and 401(k) plans, the Portman-Cardin proposal would have established a permanent tax credit for low- and moderate-income Americans.
Also under the proposal, single taxpayers with incomes up to $32,500 and joint filers with incomes up to $65,000 could have received a tax credit of up to $1,200 for contributions to a retirement plan.
The Portman-Cardin proposal would have also increased the contribution limits to small business-oriented plans.
H.R. 5558 drew praise from the industry, despite its being scaled back from the original Portman-Cardin proposal.
“We certainly are in strong support of any measure that promotes retirement security,” says Jack Dolan, a spokesman for the American Council of Life Insurers, Washington.
“What passed the committee contained provisions of the new Portman-Cardin bill, which we are behind,” he says.
In other news, the Internal Revenue Service announced last week that a settlement initiative regarding broad-based, leveraged corporate-owned life insurance plans will be terminated, although taxpayers have 45-day window from the date of publication in the Internal Revenue Bulletin to enter into the settlement arrangement.
After that, IRS said, it and the Justice Department will “vigorously defend or prosecute all future COLI litigation.”