Proposed laws to boost incentives for saving for retirement and to pare fees on securities transactions top the wish list of the financial services industry for the current Congress.

The savings incentive bill nearly won passage last year but was derailed in the late stages of its journey into law by being incorporated into an omnibus tax bill.

"It passed the House but never made it to a Senate vote because of the political weather," said John Collins, a spokesperon for the Investment Company Institute in Washington, D.C.

There is optimism that the measure will win passage this year because the quarrels between the Clinton administration and the Republican-dominated Senate will no longer be a factor, Collins said.

"But I don't know if all the issues have been resolved," he said.

The legislation calls for the annual contribution for IRAs to be hiked from $2000 to $5000 and for 401(k) programs from $10,500 to $15,000; for income limits on tax-deductible IRAs and Roth IRAs to be eliminated; for "catch-up" contributions to be permitted for periods when workers could not fully contribute to self-investment retirement plans; and for measures that would make it easier for small businesses to create pension plans for their employees.

When President Bush submitted his tax plan to Congress earlier this year, the Securities Industry Association of Washington, D.C., with more than 740 securities firms as members, criticized the plan for omitting savings incentives from the package. When the tax plan was filed, the association cited studies showing that 41 percent of Americans have put away less than $50,000 for retirement and that the average American has saved only one-third of what he will need for retirement.

"The cost for retirement security for all Americans is roughly $63 billion over the next 10 years," said Steve Judge, senior vice president for government affairs for the association, in a statement. "Given the mounting budget surpluses, there is room in the budget to accommodate improvements in retirement savings accounts while helping small businesses to offer pension programs. If we don't take this opportunity to do something now, while we have the fiscal resources, we face serious challenges down the road."

The bill to reduce securities fees has already been declared a top priority of Phil Gramm (R-Texas) the chairman of the Senate banking committee. Gramm has said the current rate of fee collection - which is supposed to support the operations of the Securities and Exchange Commission - is too high. The budget for the agency is just over $400 million yet it is projected to collect $2 billion this year, he said in a statement issued Jan. 22. At that time, Gramm announced his legislative agenda but the bill had not yet been introduced.

"It was never our intention, in any law that we have ever passed on this subject, to create a situation where we could collect substantially more revenues than we used to fund the Securities and Exchange Commission," he said in the statement.

"This is a tax on every small business issuing stock and therefore is a tax on the seed corn of society," he said. "It is a tax on every teacher retirement program, every mutual fund. It is a tax on 50 million people who are doing what we want them to do, and that is saving and investing for their future, for their retirement. This is an unfair tax, and it is one that we intend to reduce."

The fee issue is a perennial one, said Collins.

"Fees collected from mutual funds should not be higher than what's needed to regulate the industry," he said. "We think it's appropriate to cut fees, but it doesn't have the same legislative priority for us as savings incentives."

Estimates from the Congressional Budget Office peg savings for investors from the proposed fee reduction law at $8 billion over five years and $14 billion over 10 years.

The legislation would reduce all user fees on securities transactions. It does that by setting targets for amounts to be collected. The fee rates needed to hit the targets would be set by Congress.

To ensure that collections will not exceed the targets, the measure requires that fees be lowered temporarily when collections exceed the targets by five percent. On the other hand, if collections fall below target levels or below what is needed to run the SEC, temporary fee increases could be made.

In addition, the bill would put the pay structure at the SEC on a par with other financial regulators such as the Federal Reserve Board, Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency. The 13 percent attrition rate at the SEC last year was nearly twice that of the federal government as a whole, according to information posted at the banking committee's website.

The bill appears to be on the fast track for approval this year, according to Jim Hamilton, a senior writer-analyst with CCH, a provider of tax and business information in Riverwoods, Ill..

"Senator Gramm is pushing this pretty hard so it's going to have a good chance of passage," he said.

Gramm is also calling for an overhaul of the nation's securities law, which could have implications for the mutual fund industry.

"Over the years, the markets have changed dramatically, and we need to go back and look at our laws and our regulations," Gramm said. "We need to pose the following question: Are the benefits we get from this regulation or this law greater than, equal to, or less than the cost they impose on the market? And if they're less, we ought to look at changing them or getting rid of them.'"

"That sounds pretty open-ended to me," Hamilton said. "It could be a big law, but a review of all the securities laws will take a long time so my guess is that it will not happen this year."

While Gramm has been quick to get his agenda for the securities industry before Congress, the House has yet to reveal its priorities for the legislative session.

"The new financial services committee in the House is just getting organized so they don't have anything they're pushing right now," Hamilton said. "But they have a new chairman, and they'll be setting their own agenda, so that will be something to watch."

Subscribe Now

Access to premium content including in-depth coverage of mutual funds, hedge funds, 401(K)s, 529 plans, and more.

3-Week Free Trial

Insight and analysis into the management, marketing, operations and technology of the asset management industry.