Pension reform legislation (H.R. 10) was easily approved by the House Ways and Means Committee on April 25 and by the House Education and the Workforce Committee on April 26. Sponsored by Reps. Rob Portman (R-OH) and Benjamin Cardin (D-MD), H.R. 10 would allow workers to save more for their retirement and would make it easier for workers who change jobs to take their retirement benefits with them. By 2005, the bill would raise contribution limits on Individual Retirement Accounts (IRA’s) from $2,000 to $5,000, and on employer-sponsored 401(k) savings plans from $10,500 to $15,000. Workers who are 50 or older would be allowed to contribute up to $5,000 in “catch-up” contributions to an IRA or a 401(k) plan starting immediately in 2001. The bill, which has passed the House five times over the last several years, is expected to be considered by the House on May 2.
Ways and Means Committee
The Ways and Means Committee approved the bill by a vote of 35-6. Rep. Portman called it a “bipartisan measure that will help the 70 million Americans who are without pensions.” Rep. Jennifer Dunn (R-WA) said that the bill has “a lot of attractive provisions, particularly the catch-up provisions that will allow the $5,000 contribution to an IRA to occur” this year. This is “particularly good for women who had to, or chose to, stay at home with their families,” she said.
Several members of the committee criticized the bill. Rep. Richard Neal (D-MA) said that the bill “does very little for low-income workers.” “We will be back again,” he warned. Rep. Pete Stark (D-CA) called the bill “top-heavy.” He, too, expressed concern about “lowest-income workers receiving a decent retirement income.”
Rep. Nancy Johnson (R-CT) disagreed: “I think this is a giant step forward for workers.” This bill “strips out a lot of regulatory problems and makes it easier for small businesses to provide pensions,” she said, adding that “if you can get employers to participate, these workers will get pensions.”
Rep. Neal offered two amendments aimed at helping lower-income workers. One amendment, which would have offered refundable tax credits to low- and middle-income families, was defeated, 15-24. The other amendment would have offered tax credits for small businesses starting new pension plans, but it was defeated, 16-24.
Two amendments were approved by the committee. One by Rep. Sam Johnson (R-TX), adopted by voice vote, would allow homeowners to set up pension plans for their domestic workers. An amendment by Rep. Clay Shaw (R-FL) would allow cruise ships to consider Americans only, not foreign workers, when determining pension plan participants. The Shaw amendment was approved by a vote of 27-12.
Education and Workforce Committee
The Education and Workforce Committee approved H.R. 10 by a voice vote. Chair John Boehner (R-OH) noted that the bill “enhances fairness for women.” “It allows workers over age 50 to make additional ‘catch-up’ contributions to their pension plans and lowers the vesting requirement for employer matching contributions from five to three years,” he said, adding that “these provisions will provide women who have re-entered the workforce later in life with a more secure environment.”
“We all have a stake in this bill,” said Rep. Robert Andrews (D-NJ), who cited the “incentives for small businesses to offer pension plans” and the “catch-up provisions” as reasons for his support of the bill.
Rep. John Tierney (D-MA), however, said that “the bill doesn’t go far enough.” “We need to do something more” for those workers who “make $25,000 or less.”
Rep. Andrews offered an amendment with identical language included in the two amendments offered by Rep. Neal during the Ways and Means Committee mark-up. The amendment, which would have targeted lower-income individuals, was withdrawn because it did not fall under the jurisdiction of the committee.
Rep. Dennis Kucinich (D-OH) offered an amendment that was rejected by voice vote. The amendment was intended to protect workers who lose money when they are forced to switch from a defined benefit plan to a cash balance plan. Defined benefit plans are based on a percentage of a worker’s salary plus his or her years of service. Cash balance plans are a combination of defined benefit plans and defined contribution plans, under which employers make contributions into an employee’s account. This money is usually invested in the financial markets. The Kucinich amendment would have given an employee the option of choosing to stay in the old pension plan, even though the employer was changing to a cash balance plan.
An amendment by Rep. Tierney would authorize a study on the effect of the provisions of the legislation, especially for low and middle-income workers. It was approved by voice vote.