[Congressional Record Volume 141, Number 15 (Wednesday, January 25, 1995)]
[Extensions of Remarks]
[Page E178]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


                 INTRODUCTION OF SUPER IRA LEGISLATION

                                 ______


                          HON. RICHARD E. NEAL

                            of massachusetts

                    in the house of representatives

                      Wednesday, January 25, 1995
  Mr. NEAL. Mr. Speaker, today Mr. Thomas and I are introducing the 
Savings and Investment Act of 1995, commonly referred to as the Super 
IRA bill. Since I have been a Member of Congress, I have been very 
concerned about our low national savings rate. I share the belief of 
chairman Alan Greenspan of the Federal Reserve that our low national 
savings rate is our number one economic problem.
  The savings rate has declined significantly since the 1950s. In 1993, 
U.S. net national saving was only 2.7 percent of net national product, 
compared to 12.3 percent in 1950. In a recent study, Professors R. 
Glenn Hubbard and Jonathan Skinner concluded raising the Individual 
Retirement Account (IRA) contribution limit would increase net national 
savings by $4 for every dollar lost in government tax revenue. 
Professors Hubbard and Skinner believe the decline in the national 
savings rate is a cause for serious concern because of the links 
between saving, capital formation, productivity, and American living 
standards.
  I believe the purpose of this legislation is to increase our national 
savings rate. IRAs are a proven tool to boost our savings. Most 
contributions to IRAs are made by middle income families. All Americans 
should be able to contribute to IRAs. We need to provide individuals 
with an incentive to save for their retirement. The U.S. personal 
saving rate dropped from 5.2 percent of GDP in 1960-1980 to 3.4 percent 
in 1991-1994.
  Under this legislation, all Americans would be eligible for fully 
deductible IRAs. Current law only allows those taxpayers who are not 
covered by any other pension arrangement, and whose income does not 
exceed $40,000 ($25,000 singles) to be eligible for a fully deductible 
IRA. These limits would be gradually lifted over time. The $2,000 
contribution limit will be indexed for inflation in $500 increments in 
the year in which the indexed amount exceeds the next $500 increase.
  The legislation creates a new kind of IRA option. Taxpayers will be 
offered a new choice of IRA. Under this new type of IRA, contributions 
will not be deductible, but if the assets remain in the account for at 
least 5 years, all income will be tax free when it is withdrawn. A 10 
percent penalty will apply to early withdrawals, unless one of the five 
exceptions is met.
  The legislation includes a provision which I believe is very 
important. The bill allows spouses who work at home to contribute up to 
$2,000 to their own IRA to the extent of their own income. In addition, 
the legislation waives the 10 percent penalty on early withdrawals if 
the funds are used to buy a first home, to pay educational expenses, to 
cover catastrophic health care costs, during long periods of 
unemployment, or to purchase of long-term care insurance. Similar 
penalty withdrawal rules will apply to 401(k) and 403(b) employer-
sponsored plans.
  We have to encourage individuals to save for their retirement. I 
believe this legislation is a step in the right direction. I urge you 
to support this legislation.


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