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Clinton announces pension reform plan

WASHINGTON: Saying he wanted to ease the fears of millions of working Americans without pension plans, President Clinton proposed on Thursday to encourage small firms to set up such plans and to make pensions more portable.

Kansas Sen. Bob Dole, the expected Republican nominee for president, already has made a similar pension proposal.

The Republican-controlled Congress passed Dole's version last year as part of legislation to balance the budget. But Clinton vetoed the measure because he did not agree with the budget plan.

Americans' growing concern about job security in an era of global competition is expected to figure prominently in the upcoming presidential election campaign, despite the fact that the unemployment rate, at 5.6 percent, is relatively low.

"We have to create an environment where ordinary working Americans can look forward to the future with excitement," Clinton told reporters in announcing his proposal.

The president said 51 million Americans are not now covered by an employer-provided retirement plan.

He said his Retirement Savings and Security Act would help as many as 10 million people get coverage by offering a new type of 401(k) pension plan designed to cut back on the administrative overhead that keeps many small companies from participating in such plans now.

Under Clinton's plan, workers would be able to save up to $5,000 a year tax-free through automatic payroll deductions, and employers could contribute 3 percent of salary or 1 percent plus a match of up to 5 percent of salary.

All contributions would be "portable," that is, workers could take contributions with them when they change jobs.

Dole outlined his proposal last September. Under his plan, employees could contribute up to $6,000 annually, with employers matching the employee contribution dollar-for-dollar up to 3 percent of compensation, for a total annual maximum contribution of $12,000.

The main incentive for employers under both plans is that they would not have to follow current rules that require extra administrative paperwork. Employees would be immediately vested under both plans.

Clinton made several other proposals, including making Individual Retirement Accounts more attractive. Right now, only families making under $50,000 can deduct their contributions to IRAs from their taxes.

Clinton proposed doubling the income limit to $100,000 for couples, and from $35,000 to $70,000 for single people, saying this would expand eligibility to 20 million more families.

Clinton said the Treasury would issue new rules making it easier to make all pensions portable when workers change jobs.

He also proposed to change a law that encourages private employers to impose a one-year waiting requirement before workers can enter their new employer's pension plan.

The Labour Department has been trying to keep employers from abusing existing pension plans. Labour Secretary Robert Reich said the department had opened over 600 investigations into possible diversion of the 401(k) funds by employers.

"In fact, there are not only civil investigations, but there are also some criminal investigations," he said but did not elaborate.-Reuter