June 9, 2005

Washington, DC – In an effort to provide more Americans a secure retirement, Senators Gordon H. Smith and Kent Conrad unveiled legislation today that would boost worker participation in retirement accounts, expand tax credits for workers who save, and give workers greater control over their retirement money.

The bipartisan Smith-Conrad Retirement Savings and Security Act of 2005 broadens the ability of Americans to save for retirement and make their savings last for their lifetime. Both Smith (R-Ore.) and Conrad (D-N.D.) serve on the Senate tax-writing Finance Committee.

“The face of retirement is changing and we have to keep up with it. People are living longer and traditional pension plans are becoming less common,” Senator Smith said. “We need to make it easier for people to save money, and give them better options for guaranteeing a steady source of income in their golden years.”

The Smith-Conrad bill includes several provisions, such as:

-Promotion of “automatic enrollment” by workers into company-sponsored 401(k) plans, a measure expected to produce 5.5 million new 401(k) participants over five years.

-Expansion of the Saver’s Credit, a tax credit for low and moderate-income individuals who contribute to workplace retirement plans and Individual Retirement Accounts. The original tax credit is scheduled to expire next year; the Smith-Conrad bill would extend it to 2010.

-Allow transfers from Flexible Spending Accounts (FSA). This provision would allow workers who set aside salary in FSAs for qualified costs, such as health care, to transfer up to $500-a-year in unused health FSA amounts to a defined contribution plan or IRA. Current law bars Americans from tapping any money left over in FSAs by 2 ½ months after the end of the year.

-Give taxpayers the ability to electronically direct tax refunds into IRAs. More than 100 million households claim tax refunds each year, and the ability to direct a portion to IRAs could boost overall retirement savings.

-Encourage retirees to invest in life annuities by making a portion of certain annuity payments free from taxation. Annuities allow retired workers to manage their savings over their lifetime, providing a steady income through retirement.

###