The newfound, fast-growing federal budget surplus adds fuel to the debate in Congress over saving Social Security and helping more Americans save for retirement.

But President Clinton's refrain should be broadened: "Let's save retirement security first."

Never before has Congress had such an opportunity to enact legislation that would boost nest-eggs in tax-deferred accounts, help more companies provide pensions for their employees, and prevent Social Security from going bankrupt.

Social Security must be reformed-without further delay. The solution should include some type of personal savings account to increase net savings and introduce more Americans to the fundamentals of saving and investing.

Basic guarantees, such as pension portability, must be preserved so Americans can change jobs without losing benefits. People must have a choice of financial investments that reflect their personal circumstances.

The new program should not impose additional burdens such as payroll taxes, reporting requirements, or paperwork demands on employers. Above all, administrative costs must be kept to a minimum.

Agreeing on an approach for putting Social Security on a sound fiscal foundation will take Congress some time. In the meantime, though, lawmakers can work on two other foundations of a national retirement policy- encouraging employer-sponsored retirement plans and expanding opportunities for individual retirement savings.

More and more employees are using the 401(k), 403(b), and 457 employer- sponsored retirement programs. But there is much room for improvement. While more than 70% of midsize and large businesses offer these programs to their employees, only one-third of companies with fewer than 100 workers do. And only 21% of workers in these small firms participate in the pension plan.

Congress took an important step a few years ago by creating a Savings Incentive Match Plan for Employees of Small Employers, known as the SIMPLE program, to address some of the small employers' concerns, but more needs to be done.

Legislators should make pensions more portable-in other words, let employees transfer their retirement assets more easily from old employers to new ones.

Other improvements should include: increasing contribution limits, simplifying pension administration rules, and encouraging employers without pension plans to start them.

Rep. Rob J. Portman, R-Ohio, and Rep. Benjamin L. Cardin, D-Md., recently introduced legislation with these provisions. Reforming pension laws to promote greater participation would go a long way toward more secure retirements for all Americans.

Enhancing the individual retirement account is also vital to retirement security. Congress took an important step in 1997 by creating the Roth IRA, which lets savings accumulate and be withdrawn tax-free.

Lawmakers also authorized a phased-in increase in the income limits that determine whether your IRA contribution is tax-deductible.

The next important step for Congress: increase the IRA contribution limit from $2,000 to $5,000 and then index that limit for inflation, as Sen. William V. Roth Jr., R-Del., recently proposed. This limit has not been increased since 1981. If adjusted for inflation, it would be just under $5,000.

With Social Security, the private pension system, and personal savings vehicles like IRAs, the appropriate building blocks exist to help individuals prepare for retirement.

The unexpected budget surplus has given the administration and Congress a unique opportunity to forge ahead on a comprehensive retirement policy for all Americans. Doing so would give them a legacy, and all Americans a financially more secure future. It is an urgent domestic priority. u Mr. Lackritz is president of the Securities Industry Association, which represents the interests of investors served by its 780-plus member firms.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.