News Release

ACLI Cites Portman-Cardin's H.R. 10 As Critical Pension Reform Legislation; Urges Its Inclusion In Individual Tax Cut Package

American Workers' Retirement Security Safeguarded by Incentives for Boomers, Women, Small Business

Washington, D.C. (March 14, 2001) - The American Council of Life Insurers (ACLI), whose members manage $1.7 trillion in pension fund assets, today praised Reps. Rob Portman (R-OH) and Ben Cardin (D-MD) for reintroducing pension reform and retirement savings legislation and urged its inclusion in any package of individual tax cut legislation that moves through Congress.

"Congressmen Portman and Cardin's 'Comprehensive Retirement Security and Pension Reform Act' is critical to promoting American workers' retirement security. It's targeted to individuals, and would be a perfect fit for any tax measure aimed at helping individual Americans," said Carroll A. Campbell, Jr., ACLI President & CEO.

H.R. 10, a bipartisan measure introduced with 260 cosponsors, is not new. Both chambers passed the measure in the 106^th Congress - most recently last year, in the House of Representatives, by a vote of 401 to 25. And it was part of the 1999 federal tax bill vetoed by then-President Clinton for unrelated reasons.

The strong bipartisan support reflects ACLI research, which found widespread, popular support for the Portman-Cardin reforms. In a survey of voters in May 2000, 86 percent agreed that helping people achieve financial security in retirement is an important national issue. A similar number - 82 percent - said Congress should pass a law allowing employees to increase the amount they can contribute to 401(k)-type plans; 88 percent believed Congress should pass laws to encourage small businesses to offer pension and retirement plans.

"The data tells the story about the need for this legislation," Campbell said. "Fewer than half of U.S. workers have pension plan coverage, and about 25 percent of workers have failed to even begin saving for retirement. Moreover, our savings rate has dropped to below zero for the first time since 1932. We will have a retirement security crisis very soon if Congress fails to promote individual savings and encourage employers to start up, maintain and expand their plans

Key provisions of the bill would:

• raise the limits on the amount workers can contribute to 401(k)-style retirement plans to $15,000 by 2005 from the present $10,500.

• allow individuals age 50 and older to make additional annual contributions up to $5,000 in 401(k)-style plans to "catch up" for years when they weren't able to contribute. Those "catch up" provisions would be especially helpful for baby boomers who are trying to prepare financially for their rapidly approaching retirements, and for working women who are the most likely to be in and out of the work force during their younger working lives.

• raise the limit on IRA contributions from $2,000, a level established in 1981, to $5,000 -- and indexed for inflation after that. Beginning this year, taxpayers 50-and-over would be permitted to contribute $5,000 to an IRA under the bill. shorten the time when a worker would be eligible for pension benefits. Workers would become vested in employer matching contributions in 3 years, instead of 5.

• ease the rules on rolling over retirement savings among private-sector, public sector and non-profits' plans.

The bill also encourages plan formation through a variety of means.

"One of the main reasons pension plan growth has stunted is because of the rules governing pension plan management are overly complex, discouraging small businesses in particular -- where the nation's greatest job growth is taking place -- from starting them up, or maintaining or expanding a plan. The bill wisely addresses this problem," Campbell said.

At the same time, the bill partially restores the previous higher limits on retirement contributions workers can make and on retirement benefits they can accrue.

"Previous Congresses curtailed limits not to further sound pension policy, but simply to raise revenue for unrelated measures during a time of deficit constraints. We believe that restoring, at least partially, the higher limits will send a powerful message to the business community that Congress is committed to pension reform and expansion," Campbell said.

"Time is running out," he said. "The fact is, every eight seconds, another baby boomer turns 50. Holding up these crucial incentives isn't going to stop the clock. Every delay robs working Americans of the time they need to save and accumulate assets for retirement - and especially for baby boomers, that time is too precious to waste. Over the next 30 years, retiring baby boomers will double the number of Americans age 65 and over to 70 million - and because of increasing life spans, nearly half of them will live to age 90."

Another important theme of the legislation is that it builds on the success of spreading private pension plan coverage to middle- and lower-income Americans. Presently, they comprise the vast majority of participants in employment-based retirement plans. Of plan participants, 45 percent earn less than $30,000 annually, and 77 percent earn less than $50,000 annually.

"In all, the Portman-Cardin bill represents sound public policy. The smartest step Congress and the administration can take right now is to reward individuals and employers willing to take responsibility today for providing greater retirement security for tomorrow's retirees," Campbell concluded.

The American Council of Life Insurers is a Washington, D.C.-based trade association. Its more than 400 member companies offer life insurance, annuities, pensions, long-term care insurance, disability income insurance and other retirement and financial protection products. ACLI member companies have 87 percent of the long-term care insurance in force in the United States.