In a paper earlier this year, William G. Gale, J. Mark Iwry and Peter R. Orzag, scholars at the Brookings Institution, the liberal Washington think-tank, said the key to expanding retirement plan participation is tax incentives aimed specifically at lower income workers. Under their proposal, the SAVER credit would be made refundable and would be fully available to married taxpayers with incomes up to $30,000, declining for higher income workers and phased out completely for married taxpayers with incomes of $50,000 or more.
Mr. Iwry, the benefits tax counsel at the Treasury Department during much of the Clinton administration, confirmed he is advising Mr. Kerry's campaign on employee benefit issues, but wouldn't elaborate.
President Bush has not offered to extend the SAVER credit, although he has expressed a strong desire to make permanent the other tax law changes under the Economic Growth and Tax Relief Reconciliation Act of 2001, including higher contribution limits to retirement and pension plans.
Mr. Bush also is expected to continue seeking support from lawmakers for creating three new tax-sheltered savings accounts he proposed in the last two federal budget plans.
His proposals would create a Lifetime Savings Account, which would permit all Americans to contribute up to $5,000 a year in after-tax savings and pay no income taxes on the investment income or withdrawals; the Retirement Savings Account, which would consolidate deductible, non-deductible and Roth IRAs into a single tax-sheltered account into which people could contribute up to $5,000 a year in after-tax savings; and the Employee Retirement Savings Account, would create one account from the alphabet soup of 401(k), 403(b), 457 and SINGLE retirement plans.
If Mr. Kerry wins the November elections, "you're not going to see RSAs and LSAs," said David Koshgarian, a senior manager at the Washington Council, the lobbying arm of Ernst & Young, and previously the chief of staff to Rep. Ben Cardin, D-Md.
In fact, Gene Sperling, a senior economic aide to Bill Clinton who is now advising Mr. Kerry's campaign, lambasted the Bush savings accounts earlier this year as a "fiscal gimmick."
Mr. Kerry would make permanent the higher contribution limits for retirement and pension plans that were included in the 2001 law changes, said Jason Furman, director of economic policy for the Democratic contender, and a former official in the Clinton administration.
Mr. Kerry has said he would "increase the portability of retirement savings," but has offered no details.
If Mr. Kerry wins the White House, he would also likely offer a different long-term proposal for pension funding rules than Mr. Bush. He withheld voting in April for HR 3108, the Pension Funding Equity Act, which replaced the 30-year Treasury bond as the benchmark for valuing pension liabilities with a basket of corporate bonds.
The new law, which expires at the end of 2005, permits corporations with underfunded pension plans to reduce their pension contributions but includes little help for underfunded multiemployer plans because of a White House veto threat.
Senior officials in the Bush administration are developing a longer-term overhaul of the pension funding rules, which would streamline them, link the valuation of pension liabilities to a company's work force demographics and impose risk-based insurance premiums for the Pension Benefit Guaranty Corp. (Pensions & Investments, May 17).