WASHINGTON - Democrats are ready to strike early on pension legislation this year, even though Republicans hold the majority in both the House and Senate.
Observers believe the bipartisan cooperation that resulted in inclusion of the pension package in the Small Business Job Protection Act of 1996 might lead to more pension legislation clearing Congress this year.
The three major pieces expected to be introduced in the next session are:
*A broad effort to expand pension coverage and make it more portable.
*A "technical corrections bill" to pension simplification; and
*An attempt, known as Pension Simplification II, to make it easier for small businesses to set up retirement plans. It also would allow employees to add to employer contributions to defined benefit plans.
Republican lawmakers, meanwhile, support efforts to streamline the regulation of the private pension system and encourage employers to set up retirement plans, but have not yet articulated their plans.
What is hardest to predict, however, is whether the noise over the bleak future of Social Security will result in anything more than yet another commission examining ways to fix the ailing system.
Portability the centerpiece
Portability is the centerpiece of the Democrats' Retirement Security Act, an omnibus pension package to be among the first 10 bills they introduce when Congress convenes on Jan. 20.
The measure would especially benefit part-time workers and women who move in and out of the work force.
Details haven't been worked out yet, but one possibility is creating a clearinghouse, along the lines of the Teachers Insurance and Annuity Association - College Retirement Equities Fund, that would set up separate accounts for workers and let them invest their retirement savings in an array of choices. The clearinghouse would be privately run but administered by Congress.
The proposal is intended to prod small savers into investing in mutual funds. Under one scenario, workers probably would be offered a limited number of choices at first but would later be able to transfer their money into any mutual funds they want.
Sen. James Jeffords, R-Vt., who will chair the Senate Labor Committee, joined forces last session with Sen. Jeff Bingaman, D-N.M., to introduce such a bill. Now, it appears the Democrats are trying to make it their own.
The provision is intended to appeal to small businesses that don't have the resources to set up a 401(k) retirement plan for their employees. The tax-deductible contribution limit could be as low as the $2,000 workers can now set aside through individual retirement accounts. Under another scenario, the limit could be as much as $5,000, but still not as high as the $9,500 workers can set aside through employer-sponsored 401(k) retirement plans.
Also part of the Senate Democrats' bill are provisions that didn't pass the last Congress:
*A modified version of a bill introduced last year by Sen. Barbara Boxer, D-Calif., that would limit to 10% of a 401(k) plan's assets the extent of employee contributions that can be invested in employer stock.
*The Comprehensive Women's Pension Protection Act introduced in September by Sens. Carol Moseley-Braun, D.-Ill., and Barbara Dennelly, D-Conn., which intends to protect women's rights to pension benefits in case of a divorce or husband's death.
*Expanded IRA coverage by raising the income levels of those eligible for tax-deductible individual retirement accounts, and indexing the annual $2,000 contribution for inflation to as high as $5,000. The provision also would let people tap their IRAs to pay for medical emergencies, extended unemployment, college tuition or a first home.
Fixing last year's law
A technical corrections bill to fix problems created by last year's pension law is expected to address whether employers will be violating federal pension law if they amend pension plan documents so employees aged 701/2 no longer automatically begin receiving benefits.
Under last year's law, only employee-owners with more than a 5% stake in a business must start receiving their pensions at that age, even if they are still working.
The Republicans' plans
After years of introducing legislation and working on several pension issues, Mr. Jeffords moves to the forefront as head of the Senate Labor Committee. But it's unclear how strong he will be in his new position.
Health care will take a large chunk of the senator's time, and he lacks an experienced pension expert on his staff.
It's expected the new chairman will host hearings on pension issues fairly early in the session, but the topic has yet to be decided.
In the House, Harris Fawell, R-Ill., chairman of the House Subcommittee on Employer/Employee Relations, is expected to hold hearings in February to explore ways to make it easier for employers to offer pension plans. The topics are expected to be broad, and no specific legislation has been developed yet, sources say.
One source said Mr. Fawell might see how Social Security augments the private pension system.
Sen. Orrin Hatch, R-Utah, and Rep. Rob Portman, R-Ohio, are expected to re-introduce identical legislation in the Senate and House that would permanently exempt public pension plans from conducting costly anti-discrimination testing like private sector plans do to prove they don't favor top officials over rank-and-file workers. They introduced similar legislation in the last session. The current law that exempts public plans expires in 1999.
Employers' wish list
The third, most ambitious piece of legislation expected to be introduced this year is a wish list cobbled together by the Association of Private Pension and Welfare Plans with help from other employer groups.
The proposal includes a radical suggestion to let employees add to their employers' contributions to traditional pension plans to help their retirement savings grow faster.
Participation by employees would be voluntary, but their contributions would be tax-deductible. What's more, employers would also be able to make tax-deductible contributions.
"It enhances the attractiveness of defined benefit plans" to employees, said Lynn D. Dudley, the APPWP's director of retirement policy.
Other provisions include:
*Allowing employees older than 50 to tuck away more than the $9,500 a year they now can contribute to 401(k) retirement plans. Employers still would have to run tests to show the plans don't favor highly paid executives.
*Increasing - to $9,500 from $6,000 - the amount of contributions that employers and employees can make to the newly created Savings Incentive Match Plan for Employees, or SIMPLE, plans for small businesses.
*Allowing employers to set up defined contribution profit-sharing plans in addition to SIMPLE plans.
*Simplifying non-discrimination rules for conglomerates operating many businesses.
*Letting employers include anticipated pay raises in the contributions they make to employee retirement plans.
*Giving workers more than 60 days to roll over savings from 401(k) plans into individual retirement accounts when they change jobs.
*Easing penalties on employers that run afoul of the funding limits. Employers now must pay a 10% penalty on contributions they make above the limits. And employers that violate pension law would risk paying penalties, instead of losing the tax-favored status for their pension plans.
*Bringing non-qualified deferred compensation plans under the Employee Retirement Income Security Act to receive legal protections.
"Voter demographics" is what is driving this interest in pension issues, said Mark Ugoretz, president of the ERISA Industry Committee, a Washington employer group.
"Baby boomers are coming to an age where they are more interested in retirement security, as opposed to spending and consumer issues," he said.
Mr. Ugoretz said he wouldn't be surprised if President Clinton includes pension issues in his State of the Union address this month.
In the Clinton administration, Assistant Secretary of Labor Olena Berg has been interviewing for top administration posts, one of which is commissioner of the Social Security Administration.
Ms. Berg, who has served as assistant secretary since 1993, received high marks from Washington experts. During her tenure, Ms. Berg shepherded several interpretive bulletins including investment education vs. advice, safe annuity providers and economically targeted investments. The department also provided a clarification letter on derivatives, an education campaign on pension rights and a nationwide enforcement effort protecting 401(k) plan assets.
Then again, Ms. Berg might stay at the Labor Department because President Clinton's choice for labor secretary, Alexis Herman, has little, if any, retirement security experience.
Alicia Munnell, a member of the Council of Economic Advisers, is also being considered for the six-year term at Social Security, which was vacated in late 1996 by Shirley Chater.
There's no word yet on who might replace Ms. Berg, should she decide to move onto another position. Other administration officials, including Pension Benefit Guaranty Corp. Executive Director Martin Slate and PBGC Deputy Nell Hennessy, are in holding positions, waiting to see where Ms. Berg goes.