The House overwhelmingly passed a bill last week that will raise the contribution limits on Individual Retirement Accounts and 401(k) plans. The bill easily passed Wednesday with a margin of 401-25, with 182 Democrats joining a complete Republican support for the proposal.
The bill, sponsored by Rep. Rob Portman, R-Ohio, increases the maximum yearly IRA contribution from $2,000 to $5,000, while maximum 401(k) plan contributions would rise from $10,500 to $15,000. The maximum levels would also adjust yearly for inflation.
The proposal allows more flexibility by reducing the vesting time of employees from five to three years and carrying pensions from different jobs. As it currently stands, most workers do not contribute the maximum; the bill accounts for this gap by allowing older workers to contribute $5,000 as a "catch-up" measure.
Portman remarked, ``We are committed to helping all Americans have more peace of mind and more financial security in their retirement years."
As many as 75 million workers do not have an employer sponsored retirement plan, as the U.S. savings rate has plummeted to zero as a percentage of after-tax income. With a failing Social Security system, the bill is designed to help baby boomers with inadequate savings to enter retirement.
Under the new legislation, government revenue will shrink by $52.2 billion over the next 10 years if enacted.
