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House Votes to Raise 401(k), IRA Account Contribution Limits

Aired July 19, 2000 - 2:01 p.m. ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

NATALIE ALLEN, CNN ANCHOR: The baby boomers are ready to crunch the retirement rolls in the coming decades. And, today, Congress is getting ready, giving retirement plans a new look for the new century. The House just voted to raise the amount of money you can stash in a 401(k) or IRA.

CNNfn's Bob Beard joins us from the Capitol with more about it -- Bob.

BOB BEARD, CNNFN CORRESPONDENT: Yes, hi, Natalie. You don't get votes on tax cuts like this that often this year in Washington. The vote in the House was overwhelming, something like over 380 members of the House voting in favor of increasing contributions to IRAs and 401(k)s, a lot of Democrats going with it as well. The idea: get baby boomers really to start socking away more cash for their retirement.

Now, here is what this bill does. It increases annual tax-free contributions to IRAs from $2,000 to $5,000 by the year 2003. For 401(k)s, the House bill increases pre-tax contribution levels from $10,500 now to $15,000 by 2005. The bill also helps workers over 50 contribute extra money to IRAs and 401(k)s, and it increases the portability of 401(k)s from job to job and shortens the vesting period from five to three years.

Now, this bill costs some $17 billion over five years. Republicans and some Democrats -- a lot of Democrats today -- argued, with the lowest savings rate in 66 years, expanding tax-free IRAs and 401(k)s is really long overdue.

(BEGIN VIDEO CLIP)

REP. BILL ARCHER (R-TX), WAYS AND MEANS CHAIRMAN: One cloud on our economic horizon is a lack of personal savings, private savings in the private sector in this country, which is at an all-time low; in fact, negative. We as a people borrow more than we save.

(END VIDEO CLIP)

BEARD: The Democrats in the House today offered a substitute program called Retirement Savings Account. It's basically a government match for workers making less than $75,000 a year. That's a pet project of President Clinton. That was voted down. The Democrats -- some Democrats, the Democratic leadership, arguing the GOP plan just benefits the wealthy. (BEGIN VIDEO CLIP)

REP. RICHARD GEPHARDT (D-MO), MINORITY LEADER: The greatest failing of this bill is that it does little to encourage retirement saving by lower and middle income workers, those Americans who simply are not saving enough because they don't have enough to save.

(END VIDEO CLIP)

BEARD: Now, White House officials told CNN today that the president is threatening to veto this pension and retirement reform bill the White House strongly opposed because of fairness and cost. The legislation, by the way, now goes to the Senate, which is very embroiled right now in appropriation bills, and the fate of this legislation is now up in the air.

Back to you.

ALLEN: All right, Bob Beard on Capitol Hill, we'll continue to watch developments with that. Thanks.

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