The House GOP Solutions Group for Savings Restoration issued March 24 a blueprint for the upcoming introduction of the Savings Recovery Act, which immediately won support from the American Benefits Council.
The proposal from the Solutions Group, which is led by House Republican leader John Boehner (R-Ohio), provides a Republican alternative to stimulate the economy and provide tax breaks to encourage increased savings for retirement and college, and to make investments now through lower capital gains taxes.
In introducing the proposal, Boehner said that “Recent polling suggests that Americans’ concerns about their savings even trumps concerns about losing their jobs.” Unfortunately, he continued, “Washington Democrats have done nothing to address this savings crisis. In fact, Washington is pursuing policies that are causing Americans’ savings to evaporate more quickly, and some even advocate wiping out 401(k)s entirely and replacing them with government-run accounts. That’s unacceptable and not the solution Americans need.”
The GOP proposal would:
? Raise the contribution and catch-up limits for individuals and families.
? Extend the existing SAVERs Credit to contributions made to 529 college savings accounts, effectively reducing by up to half the cost of a family’s contribution to the plan.
? Double the Social Security earnings limit from $14,160 to $28,320, allowing more older Americans to increase their income without being hit by the Social Security earnings penalty.
? Immediately suspend the capital gains tax on newly acquired assets for the next two years, raising and indexing to inflation the amount of capital losses allowed against ordinary income to $10,000, and suspend taxes on dividend income through 2011.
? Temporarily provide an increased glide path for recognizing losses and two additional years to resolve pension funding shortfalls.
? Block efforts to wipe out 401(k)s entirely and replace them with government-run accounts.
James Klein, president of the American Benefits Council (ABC), said in a prepared statement that the group applauds the GOP proposal. “The provisions directly related to defined benefit pension plans and defined contribution retirement savings plans are critically important to protect retirement income security for millions of Americans,” Klein said. “The bill provides critically needed temporary funding relief for defined benefit pension plans, while continuing to ensure that these plans will be fully funded in the long-term and will provide all promised benefits.”
“These funding relief provisions are an essential component of economic recovery,” Klein continued. “A principal purpose of the legislative and executive branch responses to the economic turmoil since last fall has been to ensure the flow of credit to businesses and individuals. Absent pension funding relief, however, many companies are finding it impossible to obtain that credit which is essential to save jobs and invest in job-creating initiatives. Helping businesses recover is the most effective way to keep defined benefit plans healthy, since such plans depend on employers for future contributions and new benefits.”
Klein said the Council also supports temporary increases in the limits on elective contributions and catch-up contributions to retirement savings arrangements, such as 401(k) plans.