WASHINGTON - Presidential candidates President Clinton and Senate Majority Leader Robert J. Dole are jockeying for position in the pension and retirement savings arena, a key issue in this year's election.
"Being good on pensions is good politics," said Frank McArdle, manager of the Washington research office of Hewitt Associates L.L.C. "There's a great deal of insecurity about retirement and downsizing and how it affects people. It's a real bread-and-butter issue."
The candidates know this. Both have come up with similar themes of pension portability and coverage; the two also are trying to be both employer- and employee-friendly. And both candidates are trying to revive issues that died in earlier trials.
Many in the pension community said they could not remember when pensions played such an important role in presidential politics. Experts agreed baby boomers nearing retirement are pushing the issue.
According to a December 1995 national survey by Lake Research, Washington, 69% of registered voters polled said they would increase their rate of personal savings if individual retirement accounts were expanded to allow them to save more money tax-free. Also, 81% of younger voters - the least likely to save - said they would increase their personal rate of savings if IRAs were expanded.
Lake Research also reported 33% of voters said expanding IRAs was the highest priority tax proposal when asked to choose among that, a child care tax credit or a cut in the capital gains tax. Thirty percent picked the tax credit and 26%, the capital gains tax cut.
"This is a wake-up call for all politicians," Hewitt's Mr. McArdle said. While Mr. Dole focused last year on IRAs and small-business issues, sources said the campaign is working on new retirement policies. Campaign officials refused to comment on any developments.
Mr. Clinton's pension package, unveiled last week at a White House Rose Garden ceremony, is called the Retirement Savings and Security Act, and includes:
More than doubling the guarantee for multiemployer plans to $12,870 per worker;
Expanding the Pension Benefit Guaranty Corp.'s missing participant program to defined contribution plans;
Reducing red tape to encourage employers to take new employees' rollovers from previous companies; and
Allowing contributions to salary reduction plans on an employee's first day of work.
Mr. Clinton reaffirmed his "absolute opposition" to a Republican reversion proposal that would allow companies to tap surplus pension assets to use for other purposes, an administration source said. Martin Slate, executive director of the PBGC, said under the president's proposal, the secretary of labor would be required twice a year to report on companies that are taking reversions to the president, Congress and the public.
"We will all know if raiding starts again," Mr. Slate said.
"I do not believe ....... that we ought to turn around and repeat the mistakes of the past," Mr. Clinton said last week at the ceremony. He was referring to the 1980s, when companies took more than $20 billion from more than 2,000 pension plans covering 2.5 million workers and retirees, White House statistics showed.
The Clinton proposal includes revivals of the pension simplification package from last year, such as a provision to safeguard assets of public sector employees' Section 457 deferred compensation plans by requiring them to be held in trust.
Meanwhile, individual retirement accounts also are slated for an adjustment, to double individuals' income eligibility to $100,000 from $50,000 for married couples, and to $70,000 from $35,000 for single filers. Individuals would be able to withdraw assets penalty-free for education, first home purchases, major medical expenses and long-term unemployment.
Plus, the proposal includes a shorter vesting period for multiemployer plans from 10 years to five years.
The proposal also will resurrect an enforcement bill that was stalled for several years, then reintroduced late last year by Sens. Jim Jeffords, R-Vt. and Paul Simon, D-Ill. The enforcement initiative would require plan administrators and accountants to report serious misuse of pension funds; they could face fines of up to $100,000 if they fail to do so.
Mr. Clinton reintroduced his NEST, or National Employee Savings Trust, which would be a new type of small business 401(k)-like plan. Employees could save up to $5,000 in tax-free contributions; employers would contribute 3% of the employee's pay, or 1% plus a match - 100% for the first 3% of pay and at least 50% on the next 2% of pay. Contributions would be vested immediately and would be fully portable.
"We can help to make retirement worth looking forward to and not dread," Mr. Clinton said in announcing the proposal at the Rose Garden.
The proposal also includes a provision that would allow non-profit organizations to sponsor 401(k) plans.
Mr. Dole already has a similar small-business proposal, which was released last September at a Senate Committee on Small Business hearing. Sources expect him to push it again during the campaign.
Mr. Dole's Savings Incentive Match Plan for Employees would be an optional plan for employers with 100 or fewer employees who do not have a qualified retirement plan. After two years' service, employees could contribute to an IRA or a 401(k) plan up to $6,000 annually, with employers matching the contribution up to 3% of compensation. The employee would be fully vested immediately and the contribution would be tax free. Distributions would be taxed like those in an IRA, and employees would be subject to a 25% tax if they withdraw funds within the first two years.
An administration source said none of the Clinton ideas will be employer mandates; some of the proposals are an attempt to reduce barriers employers face when trying to create a retirement plan for employees. For example, about half of defined contribution plans do not accept rollovers for fear of disqualifying the plan, the administration source said. The Clinton proposal encourages rollovers by saying a plan would not be disqualified if the employer made an unintended error.
The source added the Clinton administration is interested in moving some of the older proposals that were stymied by the budget bill impasse.
Lynn Dudley, director of retirement policy at the Association for Private Pension and Welfare Plans, Washington, said she was pleased with the Clinton proposal, but wasn't sure how some of the provisions - such as the employee rollover to another 401(k) plan - would work out logistically.
She didn't think Mr. Dole would be hurt politically by not putting out a comparable proposal.
She noted Mr. Dole will "get his mileage out of focusing on the SIMPLE proposal.... The Clinton administration can make hay out of reversions and (Mr.) Dole can just say he did not support it."
Several observers said it's too early in the election cycle to decide which candidate has the better retirement policy. What's important, they say, is that both candidates consider retirement issues as critical public policy.