Worker Savings Account Act of 2009

Madam Speaker, on January 6, 2009, I introduced three measures that are designed to provide relief to millions of unemployed American workers. These proposals are H.R. 155, the Suspension of Federal Income Tax on Unemployment Benefits Act of 2009; H.R. 154, the Workers Severance Tax Reduction Act of 2009; and H.R. 153, the Worker Savings Account Act of 2009.

From December 2007 to December 2008, the national unemployment rate has risen from 4.9 percent to 7.2 percent and 2.6 million jobs have been lost. In fact, from November 2007 to November 2008, the number of those seeking work has risen in 49 States and the District of Columbia, including New York, which has seen its rate increase from 4.6 percent to 6.1 percent during that time. As of November 2008, in New York's 23rd Congressional District, which I have the privilege of representing, 9 of my 11 constituent counties had unemployment rates that significantly exceed the national rate. With my support, the 110th Congress enacted legislation (P.L. 110-252 and P.L. 110-449) to provide up to an additional 20 weeks of unemployment benefits to workers who have exhausted their 26 weeks of regular benefits. However, there is more we can and should do to help those without a job.

In the first instance, we should enact H.R. 155, the Suspension of Federal Income Tax on Unemployment Benefits Act of 2009. Many Americans are unaware that they must pay Federal income taxes on any unemployment compensation benefits they might receive. This has not always been the case; between 1979 and 1986, those payments were excluded from Federal income taxes. It is time to once more provide this relief to unemployed Americans, which could provide up to $117 in additional income to the average beneficiary. In this manner, Congress can both help those individuals who are most in need and inject billions of dollars into the economy through paid rents, mortgages, utilities, groceries, and other necessities.

We should also enact H.R. 154, the Workers Severance Tax Reduction Act of 2009, which would allow laid-off workers to exclude up to $40,000 from any severance pay, provided that it is less than $150,000 and is received between December 31, 2007, and December 31, 2010. Studies have indicated that roughly 60 percent of businesses offer their employees some kind of severance pay. While these totals can vary from business to business, in many cases it is remitted as a lump sum. Unfortunately for many workers, the IRS takes a substantial bite out of these benefits. Specifically, under current law, severance pay is treated as regular income, thus often driving people into higher tax brackets at the very time they are losing their jobs.

From the start of the current economic slump in December 2007 through November 2008, there have been 20,712 mass layoffs involving nearly a quarter of a million Americans. While not all of them received severance pay, those who did needed all those monies to better support their families, go back to school, or otherwise find a new job or career. Congress can and should help these citizens during this difficult time by allowing them to retain more of these much-needed monies.

Finally, to help Americans enhance their personal safety nets, Congress should enact H.R. 153, the Worker Savings Account Act of 2009. This measure would allow people to establish Worker Savings Accounts (WSAs) to supplement the benefits they might otherwise receive while unemployed.

Like traditional Individual Retirement Accounts (IRAs), WSAs would have an annual contribution limit of $5,000, indexed to inflation. However, employers would be able to provide matching contributions of up to $5,000 annually. Contributions to WSAs would be permitted until the account owner actually elects to take Social Security retirement benefits. At that time, WSA account holders could choose to rollover their WSA funds into a 401(k) or IRA; alternatively, the WSA funds could be withdrawn without penalty but subject to taxation. Prior to a WSA account owner's decision to take Social Security payments, WSA funds could be withdrawn without penalty and tax-free as long as employment was lost through no fault of the worker or they had become disabled.

To encourage lower-income Americans to take advantage of the opportunity to contribute to this benefit, the Worker Savings Account Act would provide a refundable tax credit of up to $1,000 for eligible individuals. This tax credit would be indexed to inflation and recipients could receive up to $5,000 over the course of their career.

Madam Speaker, by enacting the three bills described above, the 111th Congress can help millions of unemployed Americans. Accordingly, I ask my colleagues to work with me to enact these important measures.