Group wants to simplify pension plans McGeady says current process is too tricky for most small businesses.


WASHINGTON -- There are 42 million hard-working Americans who can expect no pension benefits despite a lifetime of full-time employment. Baltimore business owner Eamonn McGeady, who tried to create such a plan for his 60 employees, says he knows why.

Speaking yesterday before the Senate Small BusinesCommittee, McGeady recalled how his efforts to create a retirement plan for his employees -- many with more than 20 years of service and half there a decade or longer -- ran up against excessive costs and complex requirements that proved too much for a small businessman to overcome.

"Current pension plans are much too complex and the cost ocompliance is much too high -- so the best business decision is very easy: no decision and no pension plan," said McGeady, president of Martin G. Imbach Inc., a marine and heavy construction firm on Pennington Avenue.

However, he said, an appropriate change in current pensioofferings would lead many more business owners to offer retirement benefits to their employees.

"If you can produce legislation to fix the complexity and thdifficulty of compliance, the costs will take care of themselves," said McGeady, who spoke on behalf of the 500,000-member National Federation of Independent Business at the hearing. "I think a large percentage of my peers would like to offer some sort of a plan to their employees. I know I would."

The Senate hearing examined the question of simplifying anexpanding the nation's pension offerings and looked into two new proposals -- one Senate-sponsored and one backed by the Bush administration -- that seek to reform the system.

Of the estimated 42 million full-time employees not covered bpensions, most of these work for small businesses that cannot afford or lack the manpower to devise a suitable plan, said U.S. Secretary of Labor Lynn Martin.

Martin, the first witness at the hearing, called for enactment othe Bush administration's new Pension Opportunities for Workers' Expanded Retirement (POWER) proposal.

"If we are want to expand pension coverage, we must make ieasier and less costly for small businesses to establish retirement plans," said Martin. "I strongly believe that the POWER proposal will help millions of American have a more comfortable and secure retirement."

Proposed in the spring, the POWER plan specifically is geared tcompanies that employ 100 or fewer workers and roughly parallels the workings of an Individual Retirement Account, according to Martin.

Under the plan, employers would contribute up to 2 percent of worker's salary into a pension account up to a maximum outlay of $2,000 a year. Employees also would be able to contribute to the account, which could be opened at any financial institution, up to a maximum of $4,238. Employers could match up to 50 percent of the worker's contribution to further fatten the pot.

The POWER plan also would be completely portable, meaninan employee would be able to take the account with them when they left their current job. Similar to an IRA, the retirement savings would not be taxed until withdrawn.

"Some critics contend that the 2 percent contribution we woulrequire of employers sponsoring the new small-business plan is not enough," said Martin. "Others have said that requiring any minimum contribution would make the small-business plan too expensive. In developing the POWER proposal, we tried to strike a balance between these concerns."

Also discussed at the hearing was a similar bill by Sen. BoPackwood, R-Ore. His plan is called Private Retirement Incentives Matched by Employers, or PRIME.

Under the PRIME plan, the employee must decide the amount hshe would contribute to the plan -- up to $3,000 a year. That amount would then be matched dollar-for-dollar by the employer, up to a maximum of 3 percent.

"PRIME lets small businesses set up pension plans without thred tape and filing requirements that have made offering pensions too expensive," said Sen. Barbara A. Mi

kulski, D-Md., Small Business Committee member and a co-sponsor of the PRIME proposal.

Businesses owners, including the NFIB which McGeadrepresented at the hearing, oppose parts of these proposals.

But McGeady told the panel the legislative proposals definitelwere moving in the right direction.

"The benefits [of such pension plans] I think are obviousincreased savings rates, decreased reliance on Social Security payments, increased capital bases, better employee relations," he said. "All of these and more will more than offset the current tax costs."

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