House Republicans’ bill would increase limits on retirement savings accounts

House Republicans on Wednesday introduced legislation that would lift the ceiling on retirement savings account contributions. The Savings Recovery Act, introduced by House Education and Labor Committee ranking minority member Howard McKeon, R-Calif., and other Republicans, would increase limits on individual retirement account and employer-sponsored plan contributions to $33,000 for three years. Currently, annual individual retirement account contribution limits are $5,000, and the annual employee contribution cap for employer-sponsored plans, such as 401(k)s, is $16,500. The bill would permanently increase IRA contribution limits to match the employee-contribution limit in employer-sponsored plans. The combined employer-employee contribution cap for employer-sponsored plans would be raised to $65,500 for three years under the bill, from $49,000. Existing SAVERs credits would be extended to Section 529 college savings accounts under the bill, which would cut in half the cost of a family’s contributions to the plan, according to a release from House Republicans. Social Security earnings limits would be doubled, to $28,320, under the legislation so that older Americans could earn more without losing Social Security benefits. The capital gains tax on assets invested over the next two years would be suspended. The amount of capital losses that could be deducted against income would increase to $10,000 and be indexed for inflation. Taxes on dividend income would be suspended through 2011. “This legislation will give families the freedom and flexibility to save more and rebuild their nest eggs,” Mr. McKeon said in a statement.