CALL AGAIN - ONE OR TWO WEEKS REMAIN
(This includes suggestions on what to say)

It's important to continue contacting your Senators regarding the "Retirement Security and Savings Act 2000" or Roth bill.

Note the following statement: "Mr. Portman and advocates of the proposed legislation counter criticism by saying it is unlikely that businesses would start cutting workers' benefits in the midst of the current strong economy and tight labor market." If Mr. Portman is right, maybe we have all just imagined the cuts being made by IBM, AT&T, Onan, U.S.West, SBC, Verizon, etc...

This article provides a GOOD reason to call your senators' offices again today. (see below)

Ask for their reassurance that the bill either won't be taken forward, or will be amended with the Harkin amendment, first. Tell them how VERY disappointed you will be if it gets snuck into law without the benefit of a senate floor vote.

Btw, some callers have been told that the senators cannot possibly commit to supporting the Harkin amendment because it hasn't been circulated around the hill yet. Please counter that it is standard procedure for amendments not to be circulated in advance of a bill being scheduled to the floor. Senator Harkin cannot finalize his amendment because Senator Roth's staff is now saying that the bill will be introduced with a 'master' amendment that will address some of our concerns; this supposed 'master' amendment has also not been finalized or circulated, and yet Senator Harkin's amendment will most likely have to be adjusted because of it.

Again, Senator Harkin's stated goal for the amendment is to adjust the wearaway prohibition to match what was already introduced in S1300. Any definition of wearaway MUST protect earned early retirement subsidies, or it will do nothing more than protect what our employers are already doing...

Don't profess to be an expert on why the need for the Harkin amendment is so critical; tell them you trust the people you've been talking to, and that you'd be happy to have someone who is more expert give them a call. Let me know via e-mail or phone, and I'll get an expert on the phone with them VERY quickly...

Thanks for your support. I have it on good authority that our calls into Washington ARE making a difference. We only have one more week, or maybe two, to make sure they know we are still watching; once they adjourn to focus on elections, we can make that our number 1 priority as well!

Janet Krueger 507 529 8777 ext 110
IBM Employees Action Benefit Coalition,

October 2, 2000
Retirement-Savings Bill
Draws Fire for Proposals

By ELLEN E. SCHULTZ and JOHN D. MCKINNON  
Staff Reporters of  THE WALL STREET JOURNAL

WASHINGTON -- A giant package of  retirement-savings legislation is steaming closer to  final passage in Congress, powered by a handful of  politically popular measures such as increased  contribution limits for individual retirement accounts and 401(k)s.

But other provisions are attracting criticism from  activists and some administration officials, who say  the measures primarily will benefit employers while  potentially costing workers money.

The growing debate comes late in the show, which  so far has played to mostly cheering audiences, as  attention has focused on provisions to allow workers  to contribute more money to retirement plans. In the  House version, IRA limits would rise to $5,000 from  $2,000, and limits on 401(k) plans would increase to  $15,000 from $10,500, for example. As a result, the  bill has enjoyed broad bipartisan support, racking up  401 votes in the House in July, and unanimously  passing the Senate Finance Committee earlier this  month.

Surprise Package  Key provisions in the pension bill: (Note:  Not shown -- were scrambled when forwarded to Webmaster)

The increases are long overdue, proponents of the  legislation say, because the value of the contributions  has been eroded by inflation since the limits were set  years ago. They say the increases also give employers  more reason to set up plans.

Critics contend, however, that some of the other 40  little-understood measures in the bill won't do much  to improve retirement security for most workers.  Specifically, some key Treasury and Labor  Department officials are concerned that certain  provisions effectively would roll back laws enacted  in the 1980s to increase retirement-plan coverage,  and that the changes would allow companies to  exclude more moderate and low-income workers  from pension and retirement plans.

With Congress rushing toward adjournment on  Friday and facing a long list of must-do legislation,  passage of the bill isn't guaranteed. Still, the package  has a chance of winning approval because it is  appealing to members of Congress, who could point  to it as a rare accomplishment on retirement issues in  a year that has been largely devoid of progress on  Social Security and prescription-drug benefits.

Even the White House, while critical of some  provisions, is sounding a conciliatory note -- for the  time being. "Our approach is to be supportive of  pro-savings measures like these, while fighting to  make [the bill] more equitable for low-income savers and removing provisions that could reduce income  for average and low-income workers," Gene  Sperling, director of President Clinton's National  Economic Council, said last week. For example, Mr.  Clinton wants a tax credit to encourage lower-income  people to save more.

With more than 70 million Americans lacking any  employer-sponsored plan, retirement security is a  growing concern, and versions of the pension bill  have been building momentum for several years.

Advocates of the proposed legislation dismiss critics'  concerns. "Picking at some of the details of our plan  and coming up with what I think are unrealistic  scenarios as to how it could possibly be a problem is  not a good way to begin to address the problem,"  says Rep. Rob Portman (R., Ohio), the lead sponsor  of the House version of the package.

Some government officials are worried by  provisions that would roll back the 1980s laws,  which were enacted to stop business owners from  using pension and retirement plans primarily as  personal tax shelters. These laws required companies  to cover at least a percentage of workers and provide  a minimum level of benefits in some cases.

Currently, "nondiscrimination" rules require a  pension or retirement plan to cover, in effect, about  70% of employees who earn less than $85,000. The  proposed legislation would allow employers to cover  only 20% to 50% of these workers, says Daniel  Halperin, professor of law at Harvard University Law  School and former deputy assistant secretary for tax  policy at the Treasury.

Meanwhile, "top-heavy" rules say that if more than  60% of the money in a plan is in the accounts of  owners and officers, the employer must contribute  3% of pay to the accounts of other employees and  vest it over three years. The proposed law would  eliminate top-heavy rules in some retirement plans  and dilute them in others.

Employer groups say the complexity and expense of  administering the rules discourage small-business  owners from setting up the plans. However, a draft  of a report that the General Accounting Office is  releasing Monday concluded there is "little evidence"  that the rules discourage small employers from  providing pension benefits. "Practitioners explained  that computer software makes running top-heavy  tests as routine as hitting a key on a computer," noted  the report, which concluded that the cost of the tests  are insignificant.

 Last week, Sen. Chuck Grassley (R., Iowa), whose  office received a copy of the study in August, sent  the GAO a letter rejecting its conclusions, saying the  "accuracy and thoroughness" of the report was  "unclear." A staff member for Mr. Grassley had no  comment about the senator's position on the bill's  top-heavy provisions.

 Mr. Portman and advocates of the proposed  legislation counter criticism by saying it is unlikely  that businesses would start cutting workers' benefits  in the midst of the current strong economy and tight  labor market. In the meantime, they say, the objections are slowing down a solution to the  problem of lack of pension coverage. Mr. Portman  points to the already steep decline in the number of  pension plans, to 45,000 in 1997 from 114,000 in  1987, as proof of the need to take action.

 Labor Department statistics show, however, that the  number of pension plans at medium and large  companies has remained steady since the 1980s,  while the majority of terminated plans covered only  one or a few people. Most of the "pension" plans  that terminated essentially tax shelters that lost their  luster when the pension reforms of the 1980s were  enacted, says Prof. Halperin.

 At the same time, some government officials say that  rolling back the nondiscrimination and other rules,  while simultaneously increasing contribution limits  for 401(k)s and IRAs, would invite small-business  owners to abandon other types of plans. That is  because a small-business owner then would be able  to save more money for himself in an IRA and a  401(k).

Economists are divided about the impact on overall  savings. Some say it would spark a big increase;  others argue that wealthier people would tend to shift  existing assets into retirement vehicles. In any case,  some officials say the expanded limits aren't likely to  increase most workers' savings, because fewer than  5% of 401(k) participants make the maximum  allowable contribution and only 4% of taxpayers  contribute the annual maximum of $2,000 to an IRA.

 eanwhile, a related provision would allow people  over age 50 to contribute an additional $5,000 a year  to an IRA. The Senate version would allow catch-up  contributions of $7,500. The provisions would be  phased in over time.

Sponsors say the measure "enhances fairness to  women," arguing that women who spent time out of  the work force to take care of children could use this  provision to make up for dollars that weren't put  away during those child-rearing days. Critics say the  measure is championed by financial-services firms  eager to attract more money into accounts they  manage, and that those most likely to take advantage  of this are those who have been contributing the  maximum amounts for years. "They wouldn't be  catching up, but bulking up," says a government  official.

If the intent was to help women returning to work,  the provision should be limited to people returning  to the work force, critics say, not to anyone over age  50. "They dress it up as a women's proposal, but it  wears pants," says Norman Stein, professor of  pensions at the University of Alabama at Tuscaloosa.  Women's groups including OWL (Older Women's League) also have criticized the provision.

Some unions, including the Communication Workers  of America and the AFL-CIO, are objecting to  certain cash-balance pension measures that appeared  in the Senate version several weeks ago. Those  provisions would help employers fight legal challenges to their cash-balance plans and continue  the practice of "wearing away" the early-retirement  subsidies of older workers, a practice to which the  Treasury objects.

 The cash-balance measures also are drawing the ire  of grass-roots groups, who are pelting elected  officials with complaints. "A number of them are up  for re-election in tight races, and they'll hear about it  at election time," says Janet Kruger, a spokeswoman  for an employee coalition. The AARP, the Pension  Rights Center, the National Senior Citizen's Law  Center, the National Urban League and the Center for  Budget and Policy Priority also oppose major  measures in the package.

An additional 30 or so provisions have received  almost no attention. They include measures that  would allow companies to put more money into  overfunded pension plans; permit owners of  businesses with no employees to shelter all of their  income in employee stock-ownership plans; and stop  requiring companies to provide detailed pension  documents automatically to employees.

Write to Ellen E. Schultz at ellen.schultz@wsj.com  and John D. Mckinnon at john.mckinnon@wsj.com