WASHINGTON -- With the chances of a Social Security overhaul this year fading fast, lawmakers are turning to pension legislation to ensure people headed for retirement in the next decade or so will have enough money on which to live.
A growing number of lawmakers from both parties are jostling to sign on to retirement legislation being offered in the House and the Senate.
Already dozens of legislators have added their names to a broad retirement bill introduced by Sens. Bob Graham, D-Fla., and Charles E. Grassley, R-Iowa, last month, as well as to the huge pension bill introduced earlier in the House by Reps. Portman, R-Ohio, and Ben Cardin, D-Md.
Among those co-sponsoring comprehensive bipartisan pension legislation for the first time were Sens. Chuck Robb, D-Va., and Christopher "Kit" Bond, R-Mo.
Moreover, when Sen. William V. Roth Jr., chairman of the Senate Finance Committee, introduced his own pension bill in mid-March, Sen. Max Baucus, D-Mont., co-sponsored the legislation that once would have been seen as drawing only Republican support.
"Pension legislation has built up a head of steam on its own and, unlike Social Security, it has bipartisan support, a key ingredient for getting something done this year," said Frank McArdle, manager of the Washington office of Hewitt Associates LLC.
However, since pension bills usually piggyback on broader tax legislation, the question is whether Democrats and Republicans can bury their differences on other tax issues and agree on a big tax package, and whether President Clinton will sign such a package.
No action is expected until the fall, since House Ways & Means Committee Chairman Bill Archer, R-Texas, has said the tax-writing committee will not present a bill until after August.
A "slam-dunk"
"If the right bill doesn't move this year, (pension legislation) is still a slam-dunk next year. Much of that stuff has been approved by both parties," said Randolf H. Hardock, a partner in the Washington law firm of Davis & Harman, and a former senior Clinton administration official.
Meanwhile, the Clinton administration is at war with itself over whether to back provisions that could prompt employers to maintain existing pension plans and to set up new ones, but might also erode some of the current protections that ensure employers do not offer richer benefits to top executives over lower-income workers.
David M. Strauss, executive director of the Pension Benefit Guaranty Corp., since last summer has advocated a rewrite of pension rules that would reverse the steep decline in defined benefit plans.
Mr. Strauss' suggestions, which he says would cost the U.S. Treasury less than $1 billion a year, have resonated with employer groups, labor unions and pension lobbyists, and lawmakers seeking to expand private pension coverage.
Senior Treasury Department officials object strenuously to many of the proposals Mr. Strauss backs. While some of their concerns are based on the revenue losses the government's coffers might suffer, others are based on whether the incentives would generate new savings by lower- and middle-income workers, or simply prompt higher-income workers to transfer their savings from taxable to tax-sheltered accounts.
Loosening rules?
For example, Mr. Strauss backs raising the amount of salary on which employers base pensions, lifting the limits on pensions that companies can pay out each year, and loosening the "top-heavy" rules. He maintains rank-and-file workers are more likely to receive pension coverage if the rules are loosened to permit employers to offer more pensions to middle and senior managers.
But at a recent hearing before the House Oversight Subcommittee, Donald C. Lubick, assistant Treasury secretary of tax policy, testified against loosening the top-heavy rules, stating that while the administration favors some simplifications, the fundamental principle underlying the tax code is that "tax rules should not be avoided by simply shifting ownership of a business among family members."
Portability favored
Among the provisions that stand the best chance in any pension bill are those on portability, which would cost the government virtually nothing. These provisions would allow employees to move retirement money between 401(k) retirement plans, 403(b) plans offered by non-profit organizations and government 457 deferred compensation plans. They also would speed up the vesting of employer contributions to defined contribution plans to three years from five years if employees are vested all at once, or over six years from seven now, if they are vested for a portion of the money each year.
Other favored provisions:
* Eliminating of the "full-funding" limit, which prevents employers from contributing more than 155% of their current liabilities to their pension funds. The limit already is scheduled to be scaled up to 170% of current liabilities under tax law changes enacted a few years ago.
* Giving employees more information about changes their companies make from traditional pension plans to the new cash balance plans. Prompted by concerns that older workers might not realize how much they might lose when their companies convert to the hybrid plans, Sen. Daniel Patrick Moynihan, D-N.Y., and Rep. Jerry Weller, R-Ill., already have introduced legislation that is considered to be on the fast track.
* Creating Roth 401(k) and 403(b) plans, which would let employees tuck away up to $15,000 after taxes in new retirement plans from which they could make tax-free withdrawals at retirement. The provision is not looked upon kindly by the administration because it would offer more tax advantages to middle-income and upper-income employees who have more disposable income. But, because employees would be contributing to the plans with after-tax money, sources say it could help pay for other changes.
* Offering small-business incentives. The Clinton administration, lawmakers and pension lobbyists agree on several provisions that would make it easier for small companies to offer pension plans, including tax credits and waiver of rules that apply to large companies.
* Increasing limits. Despite disagreements within the administration, lawmakers agree on raising limits allowing workers to contribute more to their defined contribution plans and individual retirement accounts, and allowing employers to set aside more in traditional pension plans.
