The Congressional Record is a unique source of public documentation. It started in 1873, documenting nearly all the major and minor policies being discussed and debated.
“RETIREMENT SECURITY” mentioning the U.S. Dept. of Commerce was published in the Senate section on pages S10606-S10607 on Oct. 17, 2000.
The publication is reproduced in full below:
RETIREMENT SECURITY
Mr. BAUCUS. Mr. President, I rise to urge that Congress enact the Retirement Security and Savings Act, which has passed the House and been reported unanimously by the Senate Finance Committee. This is a balanced, bipartisan bill. It will encourage people to set their own money aside for retirement, by reforming the private pension rules and increasing the amount that people can put in an individual retirement account. It also will create two important new savings incentives. One is a tax credit for small businesses that set up pension programs for their employees. The other is a tax credit for low and middle income people who save for their own retirement. If, before adjourning, we can find a way to enact this bill, it will be a significant addition to the record of the 106th Congress. Let me explain why.
The American people have many wonderful qualities. But, these days, unfortunately, thrift is not one of them. During the last 20 years, personal savings rates have consistently declined, from 9 percent of GDP in the 1970s to less than 1 percent now. In fact, the preliminary net personal savings rate for August is the lowest rate since the Commerce Department began keeping records in 1959. So what? Why does this matter?
In the first place, a low savings rate means that less capital is available for new investments. Perhaps that is not a pressing issue right now, with a booming economy. But it should be. Over the long run, a low cost of capital is essential to our international competitiveness. On top of that, a low savings rate means that people aren't putting their own money away for retirement. That makes them more dependent on Social Security. In fact, 16 percent of today's retirees depend exclusively on Social Security for their retirement income, and two-thirds depend on it as their primary source of retirement income.
We need to protect Social Security. But that is not enough. After all, Social Security only replaces about 40 percent of the income earned during our working years. If retirees continue to rely so heavily on Social Security, there will still be far too many Americans spending their retirement years one step away from poverty. We need to supplement Social Security, by encouraging more Americans to save for their retirement. And we can start by passing the Retirement Security and Savings Act, as reported by the Senate Finance Committee.
As a threshold matter, the bill does two important things. First, it reforms the tax rules for pension plans. It makes pensions more portable. It strengthens pension security and enforcement. It expands coverage for small businesses. It enhances pension fairness for women. And it encourages retirement education. Second, the bill increases the contribution limits for individual retirement accounts. IRAs have proven to be a very popular way for millions of workers to save for retirement, particularly for those who do not have pension plans available through their employers. The IRA limits have not been increased since they were created almost two decades ago. An increase is long overdue. These are positive changes. However, by and large, they reinforce the conventional approach to retirement incentives. That approach can best be described as a ``top down'' approach. We create incentives for people with higher incomes, hoping that the so-called nondiscrimination rules will give the higher paid folks an incentive to encourage more participation by others, such as through employer matching programs. I do not have a problem with this approach, as far as it goes. But it does not do enough to reach out to middle and lower income workers.
That is why I am particularly pleased that the bill goes further, by creating two new savings incentives. One creates a new incentive to encourage small businesses to establish pension plans for their employees. The other creates a new matching program to help workers save their own money for retirement. Let me discuss each in turn.
First, the incentives for small businesses. Unlike larger companies, most small business owners do not offer pension plans. While three out of every four workers at large companies are participating in some form of pension plan, only one out of every three employees of small businesses have pensions. This leaves over 30 million workers without a pension plan. It is not that small businesses do not want to provide pension plans. They simply cannot afford to. Record-keeping requirements are too complex and expensive. The bill addresses this, by creating two new tax credits.
The first is a tax credit of up to $500 to help defray the administrative costs of starting a new plan. The second is a tax credit to help employers contribute to a new plan on behalf of their lower paid employees. In effect, it is a match of amounts employers in small firms put into new retirement plans for their employees--up to a limit of 3 percent of the salaries of these workers. Taken together, these new incentives will make it easier for small businesses to reach out to their employees and provide them with a pension. In addition, the bill creates a new tax credit that is aimed primarily at workers who do not have a pension plan available to them, to encourage them to save for themselves.
Only one-third of families with incomes under $25,000 are saving for retirement either through a pension plan or in an IRA. This compares with 85 percent of families with incomes over $50,000 who are saving for retirement. We clearly need to provide an incentive for those families who are not saving right now, and the individual savings credit included in the Finance Committee bill will provide that incentive.
Here is how it works. A couple with a joint income of $20,000 is eligible for a 50 percent tax credit for the amount that they save each year, for savings of up to $2,000. People with higher incomes get a smaller match, up to a joint income of $50,000. According to the Joint Tax Committee, almost 10 million families will be eligible for the individual savings credit. This will provide a strong incentive for these families to begin setting aside money for their retirement. That, in a nutshell, is how the credits work. Let me respond to the common criticisms of the proposal.
One is that the tax credit for low and moderate income workers is not refundable and therefore will not benefit lower income families that have no tax liability. All that I can say, in response, is that I am a realist. I agree that the credit should be refundable. But, this year, a refundable credit is not in the cards, because it generates strong opposition from the majority. Another criticism, from a different direction, is that the credit is targeted to a specific income class, and provides taxpayers in that income class with too much of a benefit. I disagree. This is not a novel approach. Many provisions of the tax code are phased out at higher income levels, as a way of targeting benefits and reducing the revenue loss.
Another thing. By targeting lower and moderate income workers, the credit provides balance. The benefits of the other provisions of the bill go primarily to higher-paid workers. After all, if we increase the amount that can be deferred in a 401(k) plan more from $10,000 to
$15,000 a year, we are only benefiting folks who can afford to make that much of a contribution. So a credit targeted to low and moderate income workers provides the overall bill with balance.
In conclusion, I urge the leadership, on the tax-writing committees, in the Senate, in the House, and in the administration, to work together to secure passage of this important legislation. We continue to have a rip-roaring national economy. But many people have been left behind, good people, who are working hard to make ends meet. Let us reach out to them. Let us make an effort to give every working person in this country a real stake in the American dream. Maybe some young worker will see this tax credit and start to put away a little money that he or she otherwise would have spent. That money will compound, and so will the virtue of thrift. And that, Mr. President, will be good for all of us.
The PRESIDING OFFICER. The distinguished Democratic leader is recognized.
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