Wednesday, March 24, 1999

Portman retirement-fund bill raises hackles at Treasury




BY PAUL BARTON
Enquirer Washington Bureau

        WASHINGTON — For the second time in three years, Rep. Rob Portman is finding himself battling the Treasury Department over a major public policy proposal.

        The House Ways and Means subcommittee began holding hearings Tuesday on a bill by Mr. Portman and Rep. Ben Cardin, D-Md., that would increase the amounts that workers could stash away tax-free in a defined contribution plan such as a 401(k).

        The bill is also intended to streamline federal rules on pensions and retirement plans so small businesses can offer them to their employees more easily.

        “Not all is well with our pension system,” said Mr. Portman, R-Terrace Park. “Right now only half of all workers have a pension plan. That means millions of workers don't have access to one of the key components to retirement security.”

        A key part of the Portman-Cardin bill would increase contribution limits on various types of savings plans.

        In a 401(k), the amount contributed tax-free would increase to $15,000 a year from $10,000.

        But Treasury Department officials, who fought Mr. Portman over Internal Revenue Service reform in 1997, said they were not convinced that raising the contribution limits would do much to help lower- and middle-income workers.

        Only a very small percentage of retirement plan participants are affected by the current limits, and those who would benefit most would be among the wealthiest Americans, Donald Lubick, assistant treasury secretary, said in written testimony.

        “To date, there is no reliable evidence to indicate that these additional tax preferences will result in any appreciable increase in new plan coverage,” he said.

        But Messrs. Portman and Cardin contend that raising the limits would help many baby boomers catch up on the amounts they will need for a secure retirement and provide incentives for more small-business owners to establish plans for their employees.

        If passed into law, the Portman-Cardin bill is expected to cost the federal treasury less than $10 billion over five years.

       



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