House OKs Bill Raising Limits for IRAs, 401(k)s

W A S H I N G T O N, July 19 -- — The House overwhelmingly passed a bill raising contribution limits for individual retirement accounts and 401(k)s today, hoping to boost Americans’ anemic private savings rate, but President Clinton says it doesn’t do enough for low-income people.

The House voted 401-25 to send the measure to the Senate, with182 Democrats joining nearly all Republicans in favor. Senatesupporters say they will push for action in early September.

Sponsors called the bill a partial answer to a U.S. savings ratethat recently dropped to zero as a percentage of after-tax incomeand remains at Depression-era levels. The aging baby boomgeneration also faces a Social Security system in future financialjeopardy — and 75 million Americans have no employer-sponsoredretirement plan.

“We are committed to helping all Americans have more peace ofmind, and more financial security, in their retirement years,”said Rep. Rob Portman, R-Ohio.

IRA Limits to $5,000

The bill, which would reduce government revenue by $52.2 billionover 10 years, would gradually raise annual IRA contribution limitsfrom $2,000 to $5,000 and boost annual 401(k) plan contributionsfrom $10,500 to $15,000. People over age 50 would have accelerated “catch-up” limits,which would particularly benefit women who left the work forcetemporarily to care for children. Several changes would be made infederal pension rules to encourage more employers to offer pensionsand permit workers to carry retirement plans from job to job.

“This encourages employers to continue to put money on thetable to help lower-wage workers,” said Rep. Ben Cardin, D-Md.“It’s a well-balanced approach.”

IRAs were authorized in 1974 but contribution limits have beenincreased only once, by $500 in 1981. More than 36 million peoplenow participate in 401(k) plans — roughly a third of the U.S. workforce — but the average account balance is only about $37,300, theEmployee Benefit Research Institute says.