THE WHITE HOUSE
Office of the Press Secretary
CLINTON ADMINISTRATION -- WORKING TO ENCOURAGE PRIVATE SAVINGS March 26, 1998
Today, the Clinton Administration is announcing several important savings education initiatives to encourage the American public to increase their savings to better prepare for retirement. For five years, the Clinton Administration, working with the Congress, has helped to enhance the availability of retirement programs through various pension initiatives and more. But that is not enough. Today, only two-thirds of workers with the opportunity to participate in a 401(k) plan do so. We must continue to encourage people to take full advantage of their savings options -- and that requires a strong public education campaign.
SAVER SUMMIT ON RETIREMENT INCOME SAVINGS. On June 4-5 of this year President Clinton, in conjunction with the Congressional leaders of both parties, will host the first national summit on retirement income savings. The Administration, in accordance with the SAVER Act, has chosen 100 summit participants, in close consultation with the Congressional Democratic leadership.
The participants, which include representatives of seniors' organizations, trade associations and labor unions, as well as small business owners, women's pension advocates, leaders of major financial services institutions, and top researchers, encompass a wide range of perspectives and knowledge concerning pension and savings issues.
Through the summit, employers will be provided information about the types of plans that are available, including traditional defined benefit pension plans, as well as a relatively new defined contribution plan that is especially designed for small businesses. The summit participants will also work to identify the best ways to educate workers about the importance and methods of saving for retirement.
LABOR DEPARTMENT RETIREMENT EDUCATION PUBLIC SERVICE ANNOUNCEMENTS. The Department of Labor is unveiling a series of radio and television public service announcements designed to encourage people to save more for retirement. The public service announcements focus on the wide range of reasons for, and the consequences of, inadequate retirement savings. The announcements, which will be sent to program directors of television and radio stations all over the country, are part of the broader Department of Labor retirement education campaign launched in 1995, which includes over 200 public and private sector partners.
SAVINGS AND INVESTING EDUCATION CAMPAIGN. A coalition of business, consumer and government organizations is launching a grassroots campaign on March 29 to help Americans become better informed about saving and investing, in order to avoid costly mistakes. Americans have more money invested in the stock market than ever, but tens of millions lack the basic information needed to achieve financial security. In the words of SEC Chairman Arthur Levitt, "we are in the midst of a financial literacy crisis, and many will pay a high price." The coalition undertaking the campaign includes the SEC, the New York Stock Exchange, the Treasury and Labor Departments, AARP and the National Association of Securities Dealers. The Facts on Saving and Investing Campaign is kicking off with a series of events the week of March 29 to April 4, including a National Roundtable on Saving and Investing on March 30. Securities regulators from 21 other North, Central and South American nations will also offer investor education programs in their countries next week.
THE ADMINISTRATION'S RECORD ON SAVINGS
The President's 1998 pension legislative package promotes pension plans among small businesses, where pension coverage is particularly low, by encouraging employers to give workers the option of contributing to Individual Retirement Accounts (IRAs) through payroll deduction, providing a tax credit to small firms that establish pension plans, and creating a simplified defined benefit plan for small businesses. The 1998 pension package builds on past Presidential initiatives that have expanded pension coverage, made those pensions more secure and simplified pension plan administration.
PENSION REFORMS OF 1997. The Taxpayer Relief Act of 1997 included a number of provisions supported by the President that will promote retirement savings, such as the following:
Broadens the availability of IRAs in various ways. Doubles the thresholds for phasing out deductible IRA contributions, from the prior law $25,000 for singles and $40,000 for couples to $50,000 for singles and $80,000 for couples.
PENSION REFORMS OF 1996. In 1996, President Clinton proposed the Retirement Savings and Security Act containing a variety of pension coverage, portability and security initiatives. Later that year, the President signed the minimum wage bill, which included many of these pension provisions. The law, which represented the most significant pension legislation in ten years, made the following improvements in the private pension system:
Expanded Pension Coverage by Creating a New Small Business 401(k)-type Plan with no red tape and a simple short form to make it easier for small businesses to provider workers with pensions. The President first proposed his small business pension plan in June 1995 at the White House Conference on Small Business. The bill also simplifies pensions for businesses of all sizes as recommended by Vice President Gore's Reinventing Government initiative and first proposed in June 1995.
Increased Pension Portability by Taking Away the 1-year Wait to Save at a New Job. Amends the law that previously encouraged employers to make new employees wait a year before they could join a 401(k) plan. Protected Government Employees' Savings from Orange County-Style Fiascos. Requires State and local government retirement savings plans to be held in trust so that employees do not lose their savings if the government declares bankruptcy, as Orange County did.
Improved Spousal Protections. In accordance with the minimum wage legislation, the Treasury Department has helped protect spousal benefits in the choice of an annuity and during divorce proceedings by issuing sample language, written in plain English, that retirement plans can give spouses and others to clarify what spouses' rights and benefits are.
Expanded Access to 401(k) Plans. The legislation makes 9 million employees of non-profit organizations, as well as employees of Indian tribes, eligible to participate in 401(k) plans.
Increased Pension Coverage for Relatives Working in Family Businesses. The repeal of the family aggregation rule makes it easier for relatives who work in family businesses to earn their own retirement benefits.
Promoted Portability for Veterans. The legislation changes tax rules to ensure that veterans on active duty can continue their pension coverage when their service ends.
THE RETIREMENT PROTECTION ACT OF 1994. In December 1994, President Clinton signed the Retirement Protection Act, which protects the benefits of more than 40 million American workers and retirees in traditional pension plans.
The Act helped to bring about the Pension Benefit Guaranty Corporation's (PBGC) first surplus in its 22-year history. The Act strengthened funding rules for underfunded plans; enhanced PBGC's compliance authority; required underfunded plans that pose the greatest risk to pay their fair share for protections; and ensured that workers in underfunded plans get an easy-to-understand notice about their plan's funding level and PBGC guarantees.
THE 401(k) ENFORCEMENT PROJECT. In 1995, the Labor Department launched an initiative to protect savings in 401(k) plans from misuse, recovering to date just over $38 million for over 40,000 workers.