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.
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.