WASHINGTON - A wildly popular catch-all pension bill could be on its way to becoming law within weeks.
The Comprehensive Retirement Security and Pension Reform Act sailed through the House of Representatives by a stupendous 407-24 votes May 2. It was included in the Senate's version of the $1.35 trillion tax cut package that Sen. Charles E. Grassley, R-Iowa, chairman of the Senate Finance Committee, unveiled late in the day May 11.
Republican Senate leaders had threatened to keep the pension legislation out of the Senate's version of the tax legislation so that all of the money - already less than the $1.6 trillion President George W. Bush had sought - could be devoted to reducing income tax rates, as well as repealing the federal estate tax.
The Senate Finance Committee intends to debate the tax package this week; Republican lawmakers have promised to send the tax bill to Mr. Bush for his signature by the Memorial Day weekend.
The Senate Finance Committee was a key stop for the pension package because House Majority Leader Richard Armey, R-Texas, virtually had guaranteed inclusion of the pension package in the broader tax-cut bill the House is expected to craft later this month.
The Republican-controlled House, already has passed a series of bills that would enact Mr. Bush's tax plan as he had proposed it, and now will have to put those bills together into one large package that fits within the $1.35 trillion ceiling.
Although the pension bill could have been included in the final tax package even without the Senate Finance Committee's endorsement, the task would have been considerably harder. And with little guarantee that lawmakers will be able to pass a second tax bill later this year, the pension package might have had to wait in line for yet another year. At a news conference May 2, Mr. Armey called the pension package second in importance only to Mr. Bush's tax cut proposal.
Lobbyists representing employers, the money management industry and a broad coalition of unionized labor and public sector workers agree.
"The bill not only makes very fundamental pension reforms but fundamental investments in the employer-sponsored system," said James M. Delaplane Jr., vice president of retirement policy at the American Benefits Council, Washington.
Still, the Senate Finance Committee's version of the pension bill, with an expected price tag of $40 billion over 10 years, is a considerably slimmer, lower-budget version of the legislation initially offered by Mr. Grassley and the ranking Democrat on the Senate Finance Committee, Sen. Max Baucus, D-Mont. Similar legislation unanimously approved by the Senate Finance Committee in September would have cost more than $80 billion over 10 years.
Messrs. Grassley and Baucus worked hard to keep the pension legislation in the tax package by stretching out over many more years the increases in contribution limits the legislation proposes.
The pension package that passed the House on May 2 was estimated to cost $51.5 billion over 10 years.
Among the key provisions of the pension bills are:
* Both the Senate Finance Committee version and the House version would allow employees to set aside up to $15,000 in employer-sponsored 401(k)s. The limit now is $10,500. Initially the limit was intended to rise to $15,000 over five years, but that is expected to be stretched out over a longer period in the senate version.
* The Senate Finance Committee version would allow workers with incomes of up to $80,000 a year to contribute to tax-deductible individual retirement accounts. The House version had no similar provision.
* Both versions also would allow workers over age 50 to contribute an extra amount annually to their IRAs and employer-sponsored retirement plans. The House would permit an extra $5,000 contribution; the Senate Finance Committee bill would permit an extra $7,500. The House would subject the extra contribution to non-discrimination tests, while the Senate version would not.
* Both versions would allow workers to set aside up to $5,000 annually in both tax-deductible and Roth IRAs, up from the current $2,000. That increase would be the first in more than two decades.
* Both versions would allow workers switching jobs between the public and private sector would be able to move their retirement money among various kinds of employer-sponsored plans.
* Both versions would speed up vesting so employees could collect an employer's contributions within three years instead of five.
* Both versions would allow workers to collect up to $160,000 a year in pensions, up from $135,000.
* Both versions would allow employers to provide more generous benefits to workers by contributing up to 20% of payroll, up from 15% at present.
* The Senate Finance Committee version would permit low- and middle-income workers to claim a temporary, non-refundable tax credit of up to $1,000. The credit would be available to married couples with adjusted gross income of less than $50,000 or individuals earning less than $25,000. The Senate Finance Committee version also would give small employers a tax credit to offset the cost of settitng up new plans.
* The House version would allow employers and employees to contribute the lower of $40,000 a year or 100% of pay to all types of defined contribution plans, up from the current $35,000 or 25% of pay, whichever is lower. The Senate version simply would remove the 25% ceiling.
* Both versions would permit employers to take as much as $200,000 of pay into account in structuring pension benefits, up from $170,000 now.
* Both versions also would create after-tax Roth 401(k)-type plans.
* Both versions would allow small businesses could set up pension plans with less red tape.
* Both versions would force employers to give workers clearer information about any future benefit cuts when they retool their pension plans into cash balance plans.
* Both versions would allow employees to reinvest their dividends from employer stock ownership plans in the plans without losing any tax deductions.