NU Online News Service, Feb. 3, 2004, 5:56 p.m. EST, Washington – President Bush is including a modified version of his controversial lifetime savings account plan in his 2005 budget.[@@]
In addition, the administration is proposing simplification of retirement savings rules, new incentives for individuals to purchase health insurance, permanent repeal of the estate tax and a modification of the tax rules related to charitable remainder trusts.
Looking first at savings, the administration’s LSA proposal would allow all individuals to contribute up to $5,000 annually (down from $7,500 in its original design) to a savings account that would earn interest free of taxes.
Individuals could withdraw money from LSAs at any time for any purpose without penalty.
What Your Peers Are Reading
In addition, the administration is proposing a simplified individual retirement savings plan called retirement savings accounts. Annual contributions to RSAs would be capped at $5,000 and interest would be tax free.
But tax-free distributions could occur only after age 58 or in the event of death or disability.
As for employer-sponsored plans, all 401(k) and similar defined contribution plans would be replaced by a simplified employer retirement savings account proposal that would ease nondiscrimination rules.
Turning to health, the administration is proposing a tax credit for the purchase of health insurance. The maximum credit would be $1,000 per adult and $500 per child, and it would phase out at $30,000 of income for individuals and $60,000 for families purchasing a family policy.
In addition, the administration is proposing an above-the-line deduction for high-deductible insurance premiums.