The Senate will begin to work on a pension bill that the House has already passed as soon as the Congress returns from its recess in August. The Senate Finance Committee will prepare the paperwork for this legislation that promises to include many reforms, especially an increase on the limit of contributions made to IRAs and 401(k) plans. It promises to make pensions more portable for individuals between jobs and ease the burden of offering pension plans for small businesses. This Senate bill will mirror the one passed by the House on July 19th, 2000.
The bill passed by the House increased the contribution limit for an Individual Retirement Arrangement from $2000 in the year 2000 to $3000 in the year 2001 up to $5000 by the year 2003. Then after that it would be indexed in $500 increments each year. The proposal also accelerates the increase for the contribution limit of a person who reaches 50 years of age before the end of the tax year. For the year 2001, 2002, 2003 it would be $5000, after that every year it would be indexed in $500 increments each year.
The other part of the bill was to increase the contribution limits on all 401(k) plans plus lower the early retirement age to 62 and normal retirement age to 65. Beginning in 2001, the 401(k) plans dollar limit on annual elective deferrals would increase in $1000 increments until it reaches $15,000 in 2005. Other pension plans would get similar sharp raises in contribution limits.