Administration officials said Monday that private investment managers would be selected for President Clinton's proposed retirement savings accounts if Congress approves the plan.
Banks, securities firms, and others would be invited to make competitive bids to manage investments of the so-called USA Accounts, they said.
No decisions have been made on other administrative details, such as whether these accounts could be marketed by banks. But the White House is "open to proposals for private administration," said Joshua Gotbaum, executive associate director of the Office of Management and Budget.
Officials have promised to consult with the private sector about participation in the program.
The President's plan would offer at least $40 billion a year in tax credits to encourage savings. For instance, a low-income married couple could receive $600 a year in tax credits in their USA Accounts that could be invested in stocks, bonds, or a universal retirement plan similar to the Federal Thrift Retirement Plan.
Most taxpayers could voluntarily add to these accounts and receive matching funds from the government. Low-income taxpayers would receive a 100% match for every dollar they contribute. The government would kick in 50 cents for every dollar deposited by married couples earning $40,000 to $100,000 and by single filers earning $20,000 to $50,000.
The accounts, which would not be taxed until withdrawal, could not be tapped until the taxpayer turns 65 or dies.
During a conference call with reporters, the administration officials denied criticisms that the President's plan would undercut 401(k) and other private retirement plans.
"The employee pension system is terrific," said Joseph Minarik, the OMB's associate director of economic policy, but "we don't believe there are enough people at this point who have an opportunity to participate (in them)."
The officials argued that President Clinton's proposal would not discourage employers from offering retirement plans. For one, the government would match contributions to private plans as well. The also argued that a tight labor market would prevent companies from eliminating their current retirement plans or scaling back their current matching contributions.