WASHINGTON - Sen. William V. Roth Jr.'s replacement of Sen. Bob Packwood as chairman of the Senate Finance Committee already is boosting chances for expanded IRAs and capital gains tax cuts.
But some pension lobbyists, consultants and retirement policy experts worry those changes could come at the expense of employer-sponsored retirement programs.
That's because Mr. Roth, a Delaware Republican, champions individual benefits, while Mr. Packwood, R.-Ore., believed group benefits were more meaningful.
Mr. Roth, now head of the powerful tax-writing committee, has championed the expansion of individual retirement accounts ever since 1986 tax law changes limited the ability of working Americans to make tax-deductible contributions to such accounts.
"I predict that 1995 will be the year of the expanded IRA. There is support for a better IRA in the Senate, in the House of Representatives and even in the White House, so it's clear that the IRA's time has come," Mr. Roth said when he introduced the Roth-Breaux expanded IRA legislation Jan. 4, the day after the new Republican majority took office. He has introduced expanded IRA legislation in every session of Congress since 1986.
The Roth-Breaux Super IRA bill introduced this year would restore the full deductibility of all contributions to IRAs and would let non-working spouses contribute $2,000 a year to their own IRAs. It would also create a new type of back-ended IRA, where contributions would be made from after-tax income, but investment earnings would continue to grow tax-free and distributions would not be taxed.
Yet Mr. Roth's effort to expand IRAs could hurt efforts to boost retirement savings by allowing penalty-free early withdrawals for certain big-ticket items such as medical bills and college tuition, some say.
And, his rise to the top of the Senate Finance Committee comes at a time when pension lobbyists and representatives of employer groups are making a renewed effort to push for passage of pension simplification legislation.
Such legislation twice passed Congress but died on President Bush's desk in 1992, when it was vetoed as part of a larger tax bill.
IRAs take precedence
In keeping with his minimalist approach to government regulation - which he has demonstrated as chairman of the Governmental Affairs Committee this year - Mr. Roth has supported such pension simplification legislation in the past, but there's little doubt, most people say, that IRAs take precedence.
"If there's $2 billion to spend on IRAs or pensions, it's pretty safe to say it will be on IRAs," said Will Sollee Jr., counsel in the Washington law firm of Kilpatrick & Cody and a tax counsel to the Senate Finance Committee until earlier this year.
Mr. Roth's IRA legislation is estimated to cost the U.S. Treasury $2 billion to $3 billion a year in lost revenue.
Dallas L. Salisbury, president of the Employee Benefit Research Institute and a longtime observer of the Washington benefits scene, concurs. Recalling how Mr. Packwood - then Senate Finance Committee head - vigorously defended 401(k) retirement programs over IRAs in the battle to pay for tax cuts instituted by the 1986 law, Mr. Salisbury said the pendulum would have swung the other way if Mr. Roth had headed the influential committee.
A former Senate Finance Committee staffer recalled when Mr. Packwood examined data on IRA use by the middle class, the senator noted such accounts were used more by wealthier Americans, who needed no help in saving for their retirement.
"Chairman Roth will go the other way in a heartbeat," said the former staffer, who declined to be identified.
Mr. Roth, by his own admission, is "committed to protecting workers' pension benefits." When Mr. Roth co-sponsored pension simplification legislation in June 1991, he recalled joining the Senate Finance Committee in 1973 and asking then-Chairman, Sen. Russell Long, D-La., to establish a subcommittee on pensions. The committee did.
Mr. Roth also noted he was chairman of the conference committee on the Pension Protection Act of 1987 that strengthened requirements on employer contributions to pension funds.
Nonetheless, his devotion to pension issues fades when compared with his advocacy of tax cuts.
Mr. Roth gained prominence as the co-author of the Kemp-Roth tax reduction plan, the 30% across-the-board income-tax cut enacted by President Reagan in 1981. Last month, he sponsored a bill to cut in half the capital gains taxes on the sale of appreciated real estate, securities and other assets.
He also enthusiastically supports an overhaul of the nation's tax code and has declared it will be one of his top priorities after work on the federal budget legislation is completed. But so far, he hasn't said which approach he favors.
A flat tax proposal, favored by House Majority Leader Richard Armey, R-Texas, and several other Republicans could emasculate the private pension system by removing employer incentives to contribute to pension funds.
Differing philosophies
Mr. Roth's philosophy stands in stark contrast to Mr. Packwood's distaste for tax cuts that could erode efforts to reduce the nation's burgeoning budget deficit.
Several times this year Mr. Packwood, as chairman of the Finance Committee, declined to guarantee tax cuts promised by the House Republicans' Contract with America unless deficit reduction efforts were first guaranteed intact.
Moreover, while Mr. Roth has held the torch for individual benefits, Mr. Packwood consistently espoused the view that group benefits are more meaningful.
"There are two schools of thought of how the tax code should be used - only to generate revenues, (or) as Packwood felt, also to achieve certain social policy, such as to pay for employee benefits and health care," said Stuart J. Brahs, a lobbyist with the Principal Financial Group, Washington. He also was head of the Association of Private Pension and Welfare Plans in the mid-1980s, when Mr. Packwood led the Finance Committee.
"Mr. Packwood is probably one of the most knowledgeable members of Congress about pensions, private savings and the retirement system," Mr. Brahs said.
Former committee staff members said Mr. Packwood believed that if the tax code was going to provide favorable treatment for employer-sponsored pension plans, those plans must broadly cover rank-and-file workers.
During the crafting of the Tax Reform Act of 1986, for example, Mr. Packwood was instrumental in ensuring the vesting period for pensions was shortened to five years from 10 years, expanding non-discrimination rules to provide greater coverage for lower-paid workers and severely cutting back the ability of employers to limit pensions paid to lower-paid workers already receiving Social Security benefits.
In the early '80s, Mr. Packwood was key in stalling efforts to eliminate 401(k) and cafeteria plans, to erase the favorable tax treatment for employer-provided benefits such as life insurance and to place a cap on employer-paid health insurance premiums, while increasing contribution limits to IRAs.
"It was his role as chairman that kept a lot of favorable treatment of pensions and employee benefits," said Edward Davey, national director of health and welfare benefits at Buck Consultants Inc., Secaucus, N.J. Mr. Davey was executive director of the APPWP at the time.
