Democrats Offer Pension Plan of Their Own

WASHINGTON —  A day after the House overwhelmingly approved Republican legislation aimed at expanding Americans’ access to pensions, Democrats on Thursday introduced President Clinton’s plan, which they say is broader and better.

The Republicans’ plan, House Minority Leader Richard A. Gephardt (D-Mo.) said, is “a handful of weak and watered-down proposals.”

“We’re offering a much stronger program, to dramatically expand pension security nationwide,” he said. Gephardt and Senate Minority Leader Tom Daschle (D-S.D.) introduced the legislation proposed by Clinton last month.

Reflecting the importance of the issue in Democrats’ election campaigns, they conducted a news conference with two Cabinet members--Treasury Secretary Robert Rubin and Labor Secretary Robert Reich--and more than a dozen House and Senate Democrats.

The GOP plan was included in a House tax bill approved 414 to 10 on Wednesday. It’s pending in the Senate as part of a package that also would increase the minimum wage.

The centerpiece of both the Democratic and GOP plans are simplified pension accounts intended to appeal to small businesses. While roughly three-quarters of employees at large companies are covered by pensions, only about one in four are covered at small firms.

Clinton’s plan, called NEST--National Employee Savings Trust--would allow workers to save as much as $5,000 a year in a tax-free and portable 401(k) account, through automatic payroll deductions.

Employers who participate would have two options. Under one, they would contribute 3% of salary, regardless of whether the employee contributes. Under the second, employers would contribute 1% of salary, plus a match of up to 5% of the employee’s pay.

The Republican plan, called Simple for Savings Incentive Match Plan for Employees, for companies with 100 or fewer employees, would require an employer contribution only if the employee also contributes.

Employees could contribute as much as 3% of salary or $6,000 a year, whichever is less. Employers would match the contribution but could temporarily drop their match to as low as 1% in years when cash flow is a problem.

Democrats said their plan offers greater portability of pension accounts from job to job. They also would require pension plan administrators and auditors to more promptly report misuses of funds.

Both plans expand eligibility for 401(k)s to employees of tax-exempt organizations and protect state and local government employee pensions when a government declares bankruptcy, as Orange County did.

The Democratic bill offers greatly expanded eligibility for individual retirement accounts as well as liberalized withdrawal rules for first-time home purchases, tuition payments, major medical expenses and in the event of long-term unemployment.

Congress passed a similar GOP plan in December as part of the balanced budget vetoed by Clinton. They plan to pass it again in the 1997 budget.