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Office of the Press Secretary

For Immediate Release May 23, 1996


"Retirement Savings and Security Act"

Millions of Americans do not have adequate retirement savings and are worried about their retirement and being a burden on their children. The Retirement Savings and Security Act would empower more Americans to save for their retirement by expanding pension coverage, portability, and protections. The Act:

The Retirement Savings and Security Act meets these challenges with a five-part plan:

  1. New Small Business 401(k) Plan -- To Expand Pension Coverage. While 76 percent of workers in large businesses have employer-provided pensions, only 24 percent of workers in small businesses do. The Retirement Savings and Security Act offers small businesses a simple small business "401(k) plan", called the NEST, that could expand pension coverage to up to 10 million workers:
            $5,000 Tax-Deferred Contributions.  Workers could save 
            up to $5,000 a year tax-deferred through automatic 
            payroll deductions, in addition to employer 
            Employers Contribute Three Percent of Salary or One 
            Percent Plus a Match of Up To Five Percent of Salary.
            One-Page Form.  Cuts through the red tape with a 
            simple, one-page form without complicated employer 
            filing, calculations, or testing.  
            100 Percent Portable.  All contributions would be 
            immediately vested and fully portable.  
            The Retirement Savings and Security Act expands 
       coverage in many other ways as well.  It:  (1) simplifies 
       401(k) plans for all businesses as recommended by Vice 
       President Gore's Reinventing Government initiative; 
       (2) makes the nine million employees of non-profit 
       organizations eligible for 401(k) plans and enables 
       relatives who work in a family business to earn their 
       own retirement benefits; and (3) repeals unreasonable 
       limits on benefits for certain low- and middle-income 
       workers who are disabled, union, or State or local 
       government employees.

2. Expanded Individual Retirement Accounts (IRAs) -- To

       Increase Pension Coverage and Portability.  Deductible IRAs 
       are available to families who have pension coverage only if 
       household income is under $50,000, and generally can be 
       withdrawn penalty-free only after age 59?.  The Retirement 
       Savings and Security Act makes IRAs more attractive and 
       expands eligibility to 20 million more families:  
            Allows Withdrawals for Education and Training, First 
            Home Purchases, Major Medical Expenses, and During 
            Long-Term Unemployment:  Allows penalty-free IRA 
            withdrawals for these major life expenses to encourage 
            more families to save.  
            Doubles Income Eligibility:  The Act doubles the 
            income limits from $50,000 to $100,000 for married 
            couples, and from $35,000 to $70,000 for single 
            taxpayers for a deductible IRA where a family member 
            has pension coverage.   More middle-class families -- 
            especially those with two earners -- would be eligible 
            for this expanded IRA that reduces taxes by up to 
            $1,120 a year. 

3. Increases Pension Portability. Workers who change jobs and

       want to take their retirement savings with them and keep 
       saving currently face a multifaceted obstacle course.  The 
       Retirement Savings and Security Act, in conjunction with 
       administrative actions, could help over 5 million workers 
       each year who have an employer-sponsored pension plan and 
       who change jobs:  
            Takes Away 1-Year Wait To Save At a New Job:  Millions 
            of workers are forced to wait 1 year before they can 
            enter their new employer's pension plan.  The 
            Retirement Savings and Security Act changes law to 
            encourage private employers not to impose a 1-year 
            waiting requirement, and eliminates the waiting period 
            for new Federal employees to make pretax contributions 
            to the Thrift Savings Plan.
            Green Light for Employers to Accept Rollovers:  Today, 
            50 percent of workers in 401(k) plans are in plans 
            that do not accept rollovers from new employees.  The 
            Treasury will issue new rulings to make it easier for 
            employers to accept rollovers into their plans.
            Expanded IRAs and New Small Business 401(k) Plan Will 
            Increase Portability.  Expanded IRAs and the new small 
            business 401(k) plan are both fully portable.
            Ensures that Workers Can Find Benefits After They 
            Change Jobs and the Employer Goes Out of Existence.  
            Ensures workers get the benefits they earned, even if 
            they have long since left the job and the employer is 
            no longer in business, by using the Pension Benefit 
            Guaranty Corporation as a clearinghouse for terminated 
            Secures Portability for Veterans.  Changes tax rules 
            to ensure that veterans who serve their Nation are not 
            penalized and can continue their pension coverage when 
            they return from service.
            Guarantees Benefits for Workers on the Move.  Reduces 
            the vesting period from 10 to 5 years for 
            multi-employer plans -- which cover union workers such 
            as construction workers who frequently change jobs -- 
            to ensure they don't lose their benefits if they've 
            worked for 5 years.

4. Enhances Pension Protection and Security. The Retirement

       Protection Act, enacted in 1994 at the President's request, 
       has reduced pension underfunding for the first time in a 
       decade, protecting the benefits of 40 million workers and 
       retirees in traditional pension plans.  In 1995, the 
       Labor Department launched an initiative to protect savings 
       in 401(k) plans from misuse, recovering to date over 
       $7 million for approximately 9,000 workers.  The Retirement 
       Savings and Security Act further enhances pension security:
            Requires Prompt Action on Misuse of 
            Funds.  Requires plan administrators and 
            accountants to report promptly serious 
            misuse of pension funds, with fines of up 
            to $100,000.
            Protects Government Employees' Savings from Orange 
            County-Style Fiascos.  Requires State and local 
            government deferred compensation plans to be held in 
            trust so that employees do not lose their savings if 
            the government declares bankruptcy, as Orange County 
            recently did.
            Strengthens Protection of Nine Million Union Workers' 
            Savings.  Doubles the maximum level of annual benefits 
            guaranteed under multi-employer plans.  For 30-year 
            workers, the level would be increased from $5,850 -- 
            the level set in 1980 -- to $12,870.  
            Enhances Pension Protection for Survivors of Civil 
            Service and Railroad Pension Plan Participants, 
            Primarily Women and Children.  Provides survivors of 
            Civil Service Retirement System (CSRS) participants 
            who die before receiving benefits with the option to 
            receive an annuity; ensures that court orders 
            concerning distributions of contributions of deceased 
            employees and annuitants are obeyed; and provides 
            surviving spouses and dependents of railroad workers 
            with benefits fully comparable to Social Security 

5. Prevents Pension Raiding. In the 1980s, companies raided

       more than $20 billion from over 2,000 pension plans 
       covering 2.5 million workers and retirees.  Legislation in 
       1990 curbed pension raiding by imposing a stiff excise tax 
       of up to 50 percent on these pension reversions.  
            Oppose Proposals that Allow Corporate Pension Raids.  
            The Administration will continue to oppose any 
            legislation that encourages pension reversions, such 
            as the proposal in the GOP budget.
            Report on Pension Reversions.  To ensure that current 
            rules continue to prevent the abuses that were common 
            in the 1980s, the Retirement Savings and Security Act 
            requires the Secretary of Labor to report regularly on 
            activity in this area.

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