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IRA, 401(k) limits bill OK'd
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September 7, 2000: 4:41 p.m. ET
Bill raising IRA, 401(k) contributions passes in Senate Finance committee
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NEW YORK (CNNfn) - A bill that would raise contribution limits for individual retirement accounts and 401(k) plans sailed through the Finance Committee of the U.S. Senate Thursday.
The measure, similar to one that passed the House of Representatives in July, would raise annual contribution limits to 401(k) plans to $15,000 from $10,500. For IRAs, the annual limits would rise to $5,000 from $2,000.
"This legislation will help small employers and make it easier to transfer funds between plans to better meet employee needs," said U.S. Sen. William V. Roth Jr. (R-Del.), the bill's sponsor. "And it has special provisions for a nonrefundable matching tax credit for low and moderate income savers."
Small biz lobbied for change
Small-business owners and advocates have lobbied for a change to the pension laws. Raising the limits, they say, will make it more cost effective for small-business owners to make 401(k) plans available to their workers.
 In many cases, small-business owners say they don't offer 401(k) plans to workers because the cost of administering a retirement plan outweighs the benefits to owners.
Under current law, small-business owners are allowed to deposit about $10,500, or 10 percent, of their own salary, into a 401(k) plan. The cost of administering a plan can run up to $5,000 a year, according to Midland, Mich.-based human resources consultant Sharon Miller.
Small-business groups have wanted a change in the pension law because they believe they will attract and retain better workers if they are able to offer more benefits. In addition to increasing the limits, the bill provides a tax credit for small-business owners to offset the cost of starting a retirement plan for its employees.
The bill also has a "catch-up" provision for people over age 50, which will allow them to contribute up to $7,500 a year to an IRA, which is aimed primarily at women who entered the work force after raising families and have not kept pace with their retirement savings.
A similar bill passed in the U.S. House of Representatives in July with broad bipartisan support. The final vote was 401 to 25, with 182 Democrats voting in favor of the measure. A full floor vote in the Senate has not yet been scheduled. 
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