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Rating:Clinton Unveils USA Details Not Rated 3.0 Email Routing List Email & Route  Print Print
Thursday, April 15, 1999

Clinton Unveils USA Details

Reported by Sean Hanna, Editor in Chief

Clinton outlined details of his proposed Universal Savings Account (USA) in a White House Rose Garden unveiling. Included in the details is a provision that would match some workers' contribution to their employer-sponsored 401(k) plan. The plan also calls for outright grants to lower-paid workers and a generous dollar-for-dollar match paid by the government. Altogether the administration expects USAs to cost the government $38 billion when the plan is fully implemented.

"By integrating USAs with 401(k)s to provide this incentive through a contribution to the USA account, based on contributions to the 401(k), we reinforce this rapidly growing and important feature of our national retirement security system," said Larry Summers, deputy secretary of the Treasury.

Clinton said that the plan is targeted specifically at working families. He claimed that "only seven percent of existing tax benefits for retirement go to families with incomes of $50,000 a year or less." He added that "more than 80 percent of the tax benefits of USA Accounts will go to people making incomes of $100,000 a year or less."

Implementation of the plan may take a couple years. Gene Sperling, director of the National Economic Council speculated that the USAs may be phased in with grants of $200 to $300 being provided in early years and the matching not brought in until the surplus has had time to accumulate.

The federal government will administer the accounts and provide a basic set of investment choices, said Summers. He added that the administration will also "explore with private providers the possibility of private providers providing accounts as well on a carefully regulated basis."

The administration outlined the example of a married couple with $40,000 in income. The plan provides a $300 grant to each member of the couple. Each could then also deposit $350 in a USA and receive a dollar-per-dollar match from the Government. Altogether they will have $2,000 in their account at the end of year one ($700 in contributions, $700 in matches and $600 in grant money). Meanwhile, a single taxpayer could sock away $1,000 in year one ($350 in contributions, $350 in matches and $300 in grant money).

The benefits will be phased out for couples with incomes in excess of $40,000 and for individuals with incomes above $20,000. In the case of a couple earning $60,000 and individuals earning $30,000 the grant would be cut in half to $150 each and the match would be reduced to 75%. Couples with incomes in excess of $80,000 receive no grant and a match of 50%. The match would be eliminated altogether at the $100,000 income level. To open a USA individuals would need an income of at least $5,000.

"This is a tax incentive, however, that is specifically designed to promote savings, to fill the holes in our retirement system, to give those families who struggle from paycheck to paycheck the greatest ability and incentive to save more and to be part of the wealth creation that others are enjoying, and have the additional savings that can lead to a truly dignified retirement security," said Sperling. 

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