Today the U.S. Senate Finance Committee will mark up legislation originated by Sens. Chuck Grassley (R-Iowa) and Bob Graham (D-Fla.). Passage of this legislation would be a step toward securing valuable tools for working people trying to plan for a secure retirement and the employers who want to help them.
These tools grew out of The Pension Coverage and Portability Act, which Grassley and Graham introduced last year with broad, bipartisan support. This legislation would help workers carry pensions with them when they change jobs. It would cut the red tape that has long been a barrier to employers' setting up private pension plans. It would make it cost-effective for small businesses to offer pension plans and for employees to take full advantage of them.
Currently, the business sector that is least likely to offer pension coverage to its employees is also the most important to our economic prosperity -- small businesses. In Florida, more than one million jobs have been created since 1992. Of those, 72 percent are in companies with less than 20 employees. While 78 percent of workers in firms of more than 1,000 employees have retirement benefits, only 13 percent of those who work in small businesses enjoy the same.
"Each year that passes is one year closer to baby boomer retirement. Employers want to help their employees to be prepared. Congress needs to give them the tools to do so," Grassley said.
"Government should encourage Americans to save, not stand in their way," Graham said. "We cannot let today's economic boom lull us into complacency about tomorrow. Instead we should use these good times to encourage retirement planning by both individuals and businesses."
The Pension Coverage and Portability Act is the grandchild of Graham and Grassley retirement security legislation passed in 1997 (the Retirement Security for the 21st Century Act). Congress did not enact important provisions of that measure. In the years since, Americans from around the country have contributed additional suggestions for ensuring financial security in retirement. Today's legislation combines provisions from the original 1997 bill and the new ideas. The Grassley-Graham measures are part of a comprehensive retirement income security bill before the Finance Committee.
Grassley-Graham Pension Provisions in the Chairman's Mark
Tax Credit
Helps small businesses defray the administrative costs of starting a retirement plan by offering a partial tax credit. Provides an additional credit for small employers who make employer contributions into pension plans for the benefit of their employees.
Vesting Earlier
Under current law, employers may require up to five years of service or seven years graded before a worker is entitled to employer contributions to a defined contribution plan. This bill shortens the maximum vesting period to three years or six years graded.
Portability
Breaks down barriers to allow 401(k)s and similar retirement savings plans to move with employees to new jobs even if the new employer offers a different type of qualified retirement plan.
Larger Limits
Increases the employer and participant contribution and compensation limits to retirement plans.
Red Tape Reduction
Repeals or modifies a number of unnecessary steps in creating and administering private pensions.