Clinton Proposes Simpler, Safer Pension Plan Rules

President Clinton proposed new steps Thursday to make pensions more widely available and portable, recycling broadly popular ideas in an election-year appeal.

“We have to create an environment where ordinary working Americans can look forward to a future with excitement,” Clinton declared, believing that their families would “be all right in this new world.”

Citing a need to give workers “peace of mind,” Clinton for the first time called for legislation that would:

* Make it easier for employees to move money in the 401(k) salary set-aside plans from job to job.

* Enable employees to move into such plans as soon as they begin work with an employer, instead of having to wait six months to a year.

* Increase federal protection for “multiemployer plans,” used in the construction industry and other businesses where workers shift frequently between jobs. If the fund goes broke, the federal pension guarantee would be increased to $12,870 from $5,850 each year.

* Protect public employee pension funds from being at risk in the event of a government bankruptcy.

The proposal also repackaged several earlier Clinton administration ideas, such as the simplification of 401(k) retirement plans so that more small businesses might adopt them. The proposals also would permit borrowing from individual retirement accounts for first-home purchases, college bills, major medical expenses and spending during periods of unemployment.

Another proposal previously offered would double the eligibility ceiling for IRAs for those without company pension plans so that couples with adjusted gross incomes of $100,000 and individuals with incomes of $70,000 could receive the tax benefit.

Though most of the ideas already have had strong Republican backing, the legislative outlook is not good for them in this election year because of GOP reluctance to help enact any measure for which Clinton could claim credit, analysts said. Neither Democrats nor Republicans want to share the credit for popular ideas. Yet the presidential announcement makes the pension changes a highly visible issue.

Clinton’s Rose Garden appearance drew a quick rejoinder from his likely November opponent, Senate Majority Leader Bob Dole (R-Kan.), who said that “these ‘new’ reforms are nothing more than repackaged Republican ideas.”

“It’s a shame that President Clinton today is trying to take credit for true pension reform by putting forth the same proposals that he has ‘unveiled’ at least twice before.”

The proposals are “largely old wines in new bottles,” agreed Dallas Salisbury, president of the Employee Benefit Research Institute, a nonpartisan organization that does research on pension, health and other benefits issues.

“The important thing, however, is that the president is bringing national attention to these issues,” he said.

Most of the ideas have significant bipartisan support, Salisbury said.

About 90% of the president’s proposals were included in the Republican balanced-budget bill vetoed by the president, said Virginia Koops, press secretary for the Senate Finance Committee. Committee Chairman William V. Roth Jr. (R-Del.) has been pushing for an expanded individual retirement account for more than a decade, she said.

Roth is out of the country now and “I am sure when he gets back, he will want to take a good look” at the president’s plan, Koops said.

The proposals won praise Thursday from two powerful constituency groups, the labor movement and the American Assn. of Retired Persons.

AFL-CIO President John Sweeney said that the White House plan is “a positive step toward making the promise of retirement income security a reality for all Americans.” If Congress enacts the president’s plan, Sweeney said, it would “help stop the erosion of private pension coverage in America and would improve the retirement prospects of millions of working families.”

The AARP praised Clinton for vowing to keep strict controls on the ability of corporations to use surplus pension funds for other purposes. “Skimming off pension assets in good economic times only puts pension funds at risk in bad times,” the AARP said. Clinton has opposed GOP efforts to make it easier for companies to take surplus funds from pension plans for other uses.

The provision that would allow workers to enroll immediately in a company’s 401(k) plan is likely to be opposed by businesses with a high turnover because it would require the expense and complexity of opening new accounts for many workers who may not stay with the firm.

Despite these and other concerns, business welcomed the president’s endorsement of pension simplification.

The plan “is in the right ballpark, and the president’s heart is in the right place,” said Peter Kelly, a Chicago attorney who is chairman of the pension subcommittee for the U.S. Chamber of Commerce.

“Nobody is against simplification” of the process or relaxation of the burdensome rules, Kelly noted, but partisan politics have previously blocked any reform efforts.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Pension Plans

Highlights of President Clinton’s pension proposals:

* Workers would be allowed to withdraw money from individual retirement accounts without penalty for such uses as buying a first home, paying for college or major medical expenses.

* The income limit for tax-deductible IRAs would increase from $35,000 to $70,000 for single taxpayers and from $50,000 to $100,000 for married couples.

* Workers could carry their 401(k) savings plans from job to job, and start 401(k) plans immediately, rather than waiting a year. New Treasury Department rules would make it easier for companies to accept an employee’s “rollover” 401(k) from a previous job.

* Complicated 401(k) regulations would be simplified, making it easier for small businesses to offer the savings plans to their employees.

* Pensions of state and local government employees would be held in trust.

* Companies found misusing pension funds would be subject to fines of up to $100,000.