[Congressional Record Volume 145, Number 2 (Thursday, January 7, 1999)]
[Extensions of Remarks]
[Page E34]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




               IMPROVING OUR NATION'S RETIREMENT SAVINGS

                                 ______
                                 

                           HON. BILL McCOLLUM

                               of florida

                    in the house of representatives

                       Wednesday, January 6, 1999

  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 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 IRA's. 
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 IRA's 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 IRA's 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 
nondiscriminatory as everyone would be treated the same.
  Finally, this proposal would correct some of the serious problems 
involved with IRA's and 401(k)'s when the beneficiary passes away. As 
someone who believes the estate tax 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\1/2\ 
years old. This would change that pointless provision, allowing the 
inheritor to hold the money in savings until he or she turns 70\1/2\.
  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 
nondeductible 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.

                          ____________________