July 14,2000

Roth's Retirement Savings Package Wins Approval

Annual IRA Contribution Would Increase to $5,000

WASHINGTON -- The Senate today approved a package of retirement savings provisions offered by Senate Finance Committee Chairman William V. Roth, Jr. (R-DE) as an amendment to H.R. 8, the Death Tax Elimination Act.

"Every American should have the opportunity to save for retirement. With these provisions, Americans will now be able to contribute more to their traditional and Roth IRAs, which can make a huge difference when they retire. The catch-up contribution for Americans over the age of 50, is especially important for women who have taken time away from the workforce to raise their families," Roth stated. "The proposal makes it simpler and easier for small businesses and employers to provide retirement savings programs for their employees. That is good for all Americans."

Description of Roth Amendment Regarding Retirement Savings

Individual Retirement Accounts. Increases the current law IRA contribution limitations to $5,000 in 3 years in $1,000 increments; increases the income limits on who can make deductible IRA contributions and eliminates the income limits for Roth IRA contributions; increases the income limits on who can make a rollover from a traditional IRA to a Roth IRA to $1 million.

Expanding Limits on Employer Retirement Savings. Increases the current law limits on the maximum deduction for contributions to 401(k) plans, 403(b) plans, and 457 plans to $15,000 and to $10,000 for SIMPLE plans; increases the maximum amount of benefit that can be provided under a pension plan; increases the maximum amount of compensation that can be taken into account under a retirement plan; allows catch-up contributions for plan participants age 50 and older; establishes new non-deductible accounts in 401(k) and 403(b) plans to be treated like Roth IRAs; expands the deduction and contribution percentage limitation for defined contribution plans.

Small Business Provisions. Establishes a small business only simplified defined benefit plan, reduces PBGC fees for new plans and small business plans; simplifies some top heavy rules; allows plan loans to small business owners; expands PBGC benefit guaranty for business owners.

Employer Retirement Plan Simplification Provisions. Provides full deductibility for ESOP plan dividends if continued to be invested in the ESOP; modifies various non-discrimination rules; corrects rules for investing in employer stock and real property; eliminates IRS fees for new plans.

Pension Portability. Expands the types of plans and the types of distributions that a tax-free rollover distribution can be made to; simplifies when distributions and plan to plan transfers can be made; enhances ability to purchase service credit under a government plan.

Retirement Education and Participant Disclosure. Provides enhanced disclosure upon a reduction in benefits; requires enhanced annual benefit statement ; eliminates unnecessary disclosure material; expands time frame for participant disclosure ; clarifies tax treatment of employer provided retirement education.

Defined Benefit Plan Provisions. Increases funding opportunities for employers; provides relief for participants in multiemployer plans; expands missing participant program to multiemployer plans; changes timing of plan valuations.

Miscellaneous Employee Benefit Provisions. Clarifies rules regarding employer-provided transit passes; clarifies tax treatment of 457 plans on divorce.