House panel pushes more retirement savings

The annual dollar limit on Thrift Savings Plan contributions could rise by $4,500 over the next five years, under a bill approved Wednesday by a House panel. The House Ways and Means Committee overwhelmingly approved a bill that would increase the amount Americans may contribute to tax-deferred 401(k) and 403(b) retirement plans from $10,500 a year to $15,000 per person, phased in by 2006. The deferral limit applies to TSP contributions as well. The bill (H.R. 10) also boosts the amount that a person can contribute to an Individual Retirement Account, including both traditional and Roth IRAs, from the current $2,000 a year to $5,000, phased in by 2004. In addition, the bill includes "catch-up" provisions, allowing workers age 50 and older to begin in 2002 putting the full $5,000 a year into their IRAs and up to $5,000 above their regular pension contributions instead of phasing in the increases, according to a summary put out by Rep. Rob Portman, R-Ohio, the bill's sponsor along with Rep. Ben Cardin, D-Md. This would enable them to catch up with opportunities lost when they weren't able to save or were out of jobs. Portman and Cardin said these and other changes would help people put away more money for their retirement years, a time when half the labor force has no pension coverage. The bill is estimated to cost an estimated $52 billion over 10 years. Backed by all Republicans and most Democrats, the measure has over 300 co-sponsors, Portman said. House Ways and Means Committee Chairman Bill Thomas, R-Calif., said the bill is essentially the same as last year's Portman-Cardin bill that passed the House easily. The final committee vote to approve the bill was 35-6 [Vote 4], with all the opposition coming from Democrats who said it did little or nothing for the lowest-income workers -- such as those making under $25,000 a year -- while providing ways for the best paid workers and small business owners to improve their own pensions. "This legislation is not bad legislation--it's good. But it doesn't do anything for low-income workers," Rep. Richard Neal, D-Mass., said. Additional bill provisions increased the maximum annual allowable pension payment to a person in a traditional (defined benefit) pension plan from $140,000 to $160,000; boosted the maximum annual allowable combined employer-employee contributions to a defined contribution plan from $35,000 to $40,000, and the maximum amount of pay on which a pension formula can be based from $170,000 to $200,000, according to the summary put out by Portman. In addition to the $10,500 IRS limit on Thrift Savings Plan contributions, federal employees can only contribute up to 10 percent of pay to their TSP accounts, depending on their retirement plan. The percentage limits will rise 1 percent per year until 2006, when the percentage limits will be eliminated.