WASHINGTON -- Secretary of Labor Lynn Martin proposed changing the nation's pension laws yesterday to encourage the creation of retirement programs for about 42 million workers who are currently not covered.
In general, the administration proposes simplifying the rules and reducing the administrative burden for employers, particularly small businesses.
But critics, including groups representing retirees, say the changes would do little to encourage employers to make more generous pension contributions and would mainly benefit highly paid employees who rely on their own savings.
"They are purporting to increase pension coverage, but they're not," said Karen Ferguson, director of Pension Rights Center, a public interest group in Washington. "What they're doing is increasing the availability of tax-sheltered savings plans. Tax-sheltered savings plans are great for yuppies, but they don't work for most American workers."
Ms. Martin said she was not proposing a specific bill to Congress but was instead trying to start a dialogue on the basic features of a plan.
The proposals come after recent efforts in Congress to deal with growing concern that 45 percent of all full-time employees in the United States have no pension plan, according to Department of Labor statistics.
Many proposals are similar to proposals made last year by Sen. Lloyd Bentsen, D-Texas, chairman of the Senate Finance Committee, and Sen. David Pryor, D-Ark., and consequently Ms. Martin's overall plan is thought to have a good chance of gaining the bipartisan support needed for enactment.
Business groups generally support the proposals, saying that they would eliminate paperwork that now discourages many small companies from offering workers' retirement programs. But business lobbyists also noted that the biggest obstacle for many employers was the cost.
"Generally speaking, this is a very positive step, but I'm not sure how much change it will create in the marketplace," said John Satagaj, president of the Small Business Legislative Council, which represents dozens of trade associations that lobby for small companies. "In the end, the biggest issue is whether a small business has the money."
The central proposal is a new, simplified retirement plan for small businesses.
The National Federation of Independent Business, a trade association, estimates that as many as three-quarters of all small companies currently provide no retirement benefits for their employees.
Under the administration plan, small employers would not have to follow complex rules that prevent companies from discriminating in favor of highly compensated employees -- often including the owners -- when they offer a qualified plan, or one that receives favorable tax treatment. Often small companies find it less expensive to provide a non-qualified plan for the owners, foregoing the tax benefits, than to offer a qualified plan for everyone. Another proposal would expand the availability of the retirement savings plans known as 401(k) plans to employees of non-profit organizations and state and local governments.