It took a long time to get it together, but the staff of Pennsylvania Congressman William Coyne finished right before the holiday break. Last week, Coyne introduced The Retirement Opportunity Expansion Act of 2001 (H.R. 3488), a bill to expand pension incentives to low- and middle- income employees without some kind of retirement plan.

"Most of the work that’s been done on pensions in the last few years is for people that already have pensions," said Matt Dinkel, press secretary for Coyne. "This is the first bill focuses primarily on those that don’t have pensions."

Specifically, the bill proposal includes:

  • A tax credit to low- and middle-income workers of up to 50% of annual contributions made to IRAs or an employer-sponsored pension plan. Eligible taxpayers who are married and filing joint returns would receive the maximum credit on their adjusted gross income of $30,000 and phased out at $50,000. Single filers would receive the maximum credit on an adjusted gross income of $22,500 and phased out at $37,500. Those who are married but filing single returns would get a maximum credit of $15,000 on their adjusted gross income and phased out at $25,000;
  • IRA contributions made through payroll deduction would be excluded from an employee’s income for W-2 purposes;
  • A tax credit incentive for small businesses -- those with less than 100 employees -- of up to 50% of employer contributions made to a pension plan for the first three years;
  • The establishment of Secure Money or Annuity Retirement Trust plans as another option for small businesses looking to implement a retirement plan, which combine features of both defined benefit and defined contribution plans and provide participants with guaranteed benefit at retirement.

The bill also proposes several initiatives to help women save for retirement. The legislation would require pension plans to provide the option of a "joint and 3/4" survivor annuity to allow widowed spouses to receive 75% of the pension benefit received during the life of the spouse. It would also require spousal consent on 401(k) distributions of more than 10% of the account’s value, as well as prohibit plans from making changes in 401(k) investments during the 90-day period from the date the plan is notified of a separation or divorce.

However, she said, Congress might be deterred from passing the bill because the retiree (the husband in this case) would get fewer monthly payments out of the annuity while still alive.

Advisers said the legislation is greatly needed for both women and their financial planners. "It’s long overdue," said Deborah Voso of Voso Financial Advisers in Frederick, Md. "What we need with this is that women need to get the message, so that they know what to ask for and expect."

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