WASHINGTON -- The Bush administration took the first step yesterday to close major gaps in the nation's pension system by seeking to expand the availability of retirement funds to the 42 million uncovered American workers who make up nearly half the work force.
The proposal unveiled by Secretary of Labor Lynn Martin also would make it easier to move from job to job without losing retirement benefits in the increasingly mobile U.S. work environment.
"When you talk about the 'golden years,' will they indeed be golden?" Ms. Martin asked. "Not unless pension coverage can be expanded."
Pension experts in Congress, the business community and worker advocacy groups reacted cautiously to the proposal. None felt it responded comprehensively to the risks to pension plans that developed in the 1980s, but they applauded the fact that the administration was addressing some of the problems.
"The remarkable thing about a dog walking on its hind legs is not how well he does it, but the fact that he does it at all," said Howard C. Weizmann, executive director of the Association of Private Pension and Welfare Plans.
In Congress, there was concern that the plan would increase tax deductions and therefore have the potential of depriving the Treasury of billions of dollars and increasing the huge federal deficit. Other analysts said it doesn't go far enough in reforming a retirement system that has become increasingly dependent on riskier savings plans instead of the traditional investment funds managed by businesses and unions.
But parts of the plan from the Republican administration are similar to ideas being discussed in the Democratic-controlled Congress; they could form the foundation for legislation to be passed in the current term.
The heart of the administration plan would make it easier for small businesses to help workers save for retirement by expanding the use of individual retirement accounts.
Businesses with 100 or fewer workers -- 98 percent of U.S. firms -- would be exempt from administrative chores associated with other retirement plans if they make a base contribution of 2 percent of pay for all employees. Workers would be able to contribute up to $4,200 of their income and not have it subject to income tax, and employers could match up to half of their employees' contributions.
Unlike other retirement plans, firms would not have to prove non-discrimination between high-paid and low-paid workers. The need for legal fees for starting a plan would be eliminated, the Labor Department contended, and no annual reports to the department or the Internal Revenue Service would be required.
"We think we made it easier, a lot more attractive" for businesses, said David George Ball, deputy labor secretary for the pension and welfare benefits administration.
But Anne Moss, director of the women's pension project at the Pension Rights Center, said that because an individual worker's contributions to an individual retirement account also are voluntary, it is more of a "do-it-yourself type of plan" than a traditional pension, in which a company promises to pay a worker a set annual benefit in old age.
She said the 2 percent employer contribution would provide little pension cushion for low-paid workers. For example, a company paying an employee $20,000 a year would contribute $400 annually to the IRA.
Other features of the administration plan would:
* Extend 401(k) retirement savings plans, now available to federal employees and most of the U.S. work force, to 12 million workers in state and local governments and tax-exempt organizations, 3.1 million of whom have no pension benefits. But this also could be costly in terms of lost tax revenue.
* Improve incentives for "portability" for people who move from job to job, especially women who enter and leave the work force, by eliminating the 5- and 10-year income averaging of lump-sum payouts and encouraging a direct rollover of retirement funds from the former employer to a new pension or IRA.
* Allow all workers to qualify for full pension benefits after five years. Some workers in multiemployer and trade union plans have 10-year qualifying, or vesting.