[Congressional Record Volume 142, Number 138 (Monday, September 30, 1996)]
[Extensions of Remarks]
[Page E1831]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                 A PLAN TO BOOST SAVINGS AND INVESTMENT

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                           HON. BILL McCOLLUM

                               of florida

                    in the house of representatives

                      Saturday, September 28, 1996

  Mr. McCOLLUM. Mr. Speaker, I am introducing a bill today which will 
help all Americans save for their retirement years. It is no secret 
that our current savings rate is among the lowest in the industrialized 
world. A low savings rate not only adversely impacts a person's 
retirement, it does not create much capital available for savings and 
investment. Without this capital, our economy cannot expand at its 
optimal rate. It is my hope that this legislation, if enacted, would 
help correct this problem.
  My legislation would do several things. First, it would increase the 
amount of money one may contribute to an Individual Retirement Account 
[IRA], from $2,000 to $4,500, and still receive full deductibility. 
This amount is also indexed to inflation to protect its value from that 
silent thief of inflation.
  This would also remove a disincentive to establishing an IRA, that 
being the fear that the money will not be available without paying a 
substantial penalty when you need it. A person with an IRA would be 
able to make withdrawals, without penalty, for a first home purchase, 
education expenses, long-term care, financially devastating health care 
expenses, and during times of unemployment. Furthermore, no taxes would 
be paid on these withdrawals if they are repaid to the IRA within 5 
years.
  Current law offers no incentive for many people to establish IRAs. My 
bill would allow people who do not have access to a defined 
contribution plan (e.g. a 401(k) plan) to establish a tax-preferred 
IRA, regardless of their income. The legislation would also encourage 
the middle class to establish IRAs by raising the income phase-out 
levels from $25,000 ($40,000 for joint filers) to $75,000 ($120,000 for 
joint filers). This will provide not only incentives, but needed tax 
relief for the middle class. Again, these levels are indexed to 
inflation.
  Turning to 401(k) reforms, currently folks are hit with tax liability 
when taking their 401(k) benefits as a lump sum when leaving a job even 
if it is rolled into an IRA. This is not fair. Therefore, under this 
proposal, people would not be exposed to tax liability if the lump sum 
distribution is rolled into an IRA within 60 days.

  Just as contribution limits have been increased for IRAs in this 
legislation, they are increased for 401(k) plans as well. The tax-
deductible contribution limits would be $20,000 (in 1992 dollars) 
indexed to inflation.
  This would also encourage more firms to establish defined 
contribution plans by injecting some common sense into the law. It 
would allow firms to meet antidiscrimination requirements as long as 
they provide equal treatment for all employees and ensure that 
employees are aware of the company's 401(k) plan. This is truly non-
discriminatory as everyone would be treated the same.
  Finally, this proposal would correct some of the serious problems 
involved with IRAs and 401(k)'s when the beneficiary passes away. As 
someone who believes the estate tax is inherently unfair, indeed I 
advocate its abolishment, I feel that IRA and 401(k) assets should be 
excluded from gross estate calculations. This bill would do that. 
Furthermore, an IRA that is bequeathed to someone should be treated as 
the IRA of the person who inherited it. Current law forces the 
disbursement of the IRA when the deceased would have turned 70 and a 
half years old. This would change that pointless provision, allowing 
the inheritor to hold the money in savings until he or she turns 70 and 
a half.
  Similarly, anyone receiving 401(k) lump sum payments as a result of a 
death would not have the amount counted as gross income as long as it 
is rolled into an IRA. That amount would not be counted against the 
non-deductible IRA limit of $4,500.
  Mr. Speaker, I am excited about this legislation. I expect to 
introduce this legislation again at the beginning of the next Congress 
and look forward to hearing debate on it. It is absolutely essential 
that we continue to encourage personal savings and this is certainly a 
step in the right direction.

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