Reuters - The House of Representatives approved a bill on Friday to overhaul the creaking U.S. private pension system and prevent more spectacular airline pension defaults, and sent the measure to the Senate for possible action next week.
WASHINGTON (CNN) -- A pension overhaul bill that is so popular in the House it has passed five previous times was approved for a sixth time Wednesday. Supporters hope to get it to the president's desk this year despite warnings of continued difficulty getting it through the Senate.
The legislation, which backers boast would be the most comprehensive change to retirement plans in a generation, hikes the tax-deferred contribution limits on Individual Retirement Accounts (IRAs) and 401(k) plans and makes other changes that are designed to increase the number of workers participating in the retirement plans. The House approved it by a 407-24 vote.
Similar legislation has been introduced in the Senate, but aides there say the bill is one of several popular tax relief measures that are not part of the $1.35 trillion tax cut package being negotiated this week in the Capitol. The aides said the bill could be taken up on its own at a later date, but declined to say when or if that would happen.
Under the House bill, the tax-deferred contribution limit for IRAs would increase from $2,000 per year to $5,000 per year. The increase would be phased in over the next three years. The limit on 401(k)s would rise from $10,500 to $15,000 by 2006.
The bill also makes provisions for workers age 50 and older who would be allowed to "catch up" on their retirement savings by contributing an additional $5,000 per year.
As a means of increase the number of small businesses offering pension programs, the bill reduces fees businesses must pay to the federal agency that guarantees those pensions.
"We do a number of things to encourage small businesses to offer plans, make it easier, less expensive, less liability for the small business employer to be able to offer plans," Rep. Rob Portman, R-Ohio, a co-author of the bill, said in an interview. "This will help a lot of lower and middle income workers who tend to work in these businesses and now have no coverage at all."
Some liberal groups oppose the bill because they say it helps higher income workers save more for their retirement but doesn't do enough to provide pension benefits to lower income workers.
"It doesn't go far enough toward coming to the assistance of the very people we need to get into the pension system of America," Rep. Richard Neal, D-Massachusetts, told CNN. "When you consider half of the American people are not in a pension system, there's a reason for it. And for low income Americans who go to work every day, there is no incentive to get them into the pensions systems or to have an employer develop a pension system."
The bill has wide support from the financial industry, which would benefit from the higher investment rate it is expected to stimulate.