WASHINGTON — Key Republican and Democratic congressmen have rejected the centerpiece of President Bush's savings proposals in the federal fiscal 2005 budget.
Instead, they are drafting their own retirement legislation, which focuses on a new universal retirement account that is intended to expand coverage to middle- and low-income workers.
Reps. Rob Portman, R-Ohio, and Benjamin Cardin, D-Md., have publicly dismissed the lifetime savings account proposed by the president. They are working out the details of a new universal account, which hinges on the government depositing an annual match of up to $1,000 directly in the bank accounts of those who contribute to a retirement plan.
Both men are members of the powerful House Ways and Means Committee and are chief proponents of pension legislation in the House,
Their proposal differs from the SAVER credit, which is available only as a non-refundable tax credit, expires in 2006 and is available to individuals earning up to $25,000 and couples making up to $50,000. The universal account would make the government match available to all Americans with earnings below a set amount, including those who don't pay any income taxes.
The proposal could cost less than $50 billion over 10 years, according to a source who did not wish to be identified. It is expected to be part of a broader pension bill on which Messrs. Portman and Cardin are working.
A spokesman for Mr. Portman declined to provide any details, saying only: "They're working on a bill and details will be forthcoming."
"The two things they care about are increasing savings among the young and the low income, and certainly employer-sponsored plans," said a spokeswoman for Mr. Cardin, adding the bill is still in the "discussion stage."
The proposal has broad-based appeal among Democrats, who have argued strenuously for years in favor of incentives for low- and middle-income Americans to save for their retirement. Only 25% of households in the bottom 20% of the income ladder have any defined contribution plans or individual retirement accounts, according to a new study by Peter Orzag, a senior fellow at the Brookings Institution, Washington. (The study did not include defined benefit plans.)
"It is significant that Mr. Portman and Mr. Cardin would rally around a proposal like this. Until recently, refundable credits have been anathema for many Republicans," said James M. Delaplane Jr., partner in the Washington law firm of Davis and Harman and special counsel to the American Benefits Council, Washington.