As the Retirement Savings and Security Act of 2000 draws closer to becoming law, banks and other financial institutions are looking forward to the investment incentives it will likely provide to their customers. The legislation is up for a Senate vote this week.

What the banks are most excited about is the possibility that the law will enable retirement investors to save at higher levels than are currently permitted. Specifically, banks see the increased savings levels the bill will allow as an opportunity to reintroduce depositors to their 401(k) plan and IRA offerings.

“This will be a good time for us to educate,” said Joseph F. Ready, a senior vice president at First Union who runs the Charlotte, N.C., bank’s benefit services group. “There are great alternatives available out there in terms of retirement savings, and if the act passes there will be fewer restrictions.”

The bill proposes an increase in the annual pretax contribution limits on 401(k) and 403(b) accounts from $10,500 to $15,000 a year. The bill would allow these limit changes to go into effect immediately upon the new law’s effective date, which would be the end of 2001.

In addition, the new legislation would increase the total annual pretax contribution across all of an individual’s defined contribution plans to $40,000, regardless of income level. Currently, the limit is $30,000 or 25% of the individual’s annual salary.

The Retirement Act also proposes that IRA contribution limits be increased from $2,000 to $5,000 per year. In addition, the act would provide income credit for contributions to any retirement plans by individuals earning $35,000 or less who are saving for retirement for the first time.

“I don’t think it is any secret that we, along with everyone in this business, support this legislation. Anything that adds flexibility and encourages retirement savings is a real plus,” said Peter Torvik, the executive vice president of U.S. Bancorp’s First American Funds.

The bill also includes a catch-up provision that would allow employees over 50 to contribute an additional $5,000 annually, on top of increased limits, to their employer-sponsored savings plans, and to consolidate retirement assets in plans governed by different system when they change jobs.

Ann Mahrdt, a senior consultant with Spectrem Group, a retirement consulting firm in Hartford, Conn., said the legislation would be a victory for the industry and for individuals as well.

“The benefit to individuals is obvious: it allows for greater savings. But for the industry, it will give providers an opportunity to communicate to participants again and reinforce the benefits of retirement savings,” Ms. Mahrdt said. “It gives them the chance to plant a seed about investing.”

She added: “I don’t think providers are doing a good job once they get an account or get a participant enrolled. They need to take this opportunity build some brand loyalty and do some cross-selling.”

Mr. Torvik agreed. He said, if the new bill passes, it would go into effect at the end of next year, giving his team at First American a year to ramp up into a more aggressive retirement and financial planning mode.

“This gives our managers a great excuse to talk to their clients or to have a meeting,” Mr. Torvik said. “We have a full product line to offer our customers, and this is a great opportunity to get them to reevaluate their total investment portfolio.”

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