The Reagan administration yesterday came out for restricting the amount of money that can be set aside for retirement tax free by business executives and professionals, including professional athletes, who incorporate.

The administration did not specifically endorse pending pension-restriction legislation sponsored by Rep. Charles B. Rangel (D-N.Y.), but at a House Ways and Means Committee hearing did support key elements of the measure.

Its action sharply increases the likelihood that the complex and highly controversial pension revisions will be part of the tax increase that Congress is expected to try to pass later this summer.

In testimony to the panel, and in a subsequent interview, John E. Chapoton, assistant Treasury secretary for tax policy, made the following points:

* Current ceilings on contributions to pension plans, under which an individual can avoid taxation on $150,000 of income or more a year, are "overly generous" and "should be reduced."

* Provisions in current law allowing wide variations in pension benefits for ranking executives and rank-and-file workers are "abusive" and should be corrected. He agreed with figures presented by Rangel showing that a company can structure a pension plan so that a $200,000-a-year executive can retire at 55 with an annual benefit of $136,425, but a $12,000-a-year subordinate will have only $975 a year.

* Challenging a key claim of proponents of the existing system, Chapoton said the Treasury has "no empirical evidence" that cutting back the tax benefits for top executives will "cause a significant number of existing plans to be terminated."

If it were true, Chapoton added, that pensions for rank-and-file workers will be cut back or eliminated if the benefits to the top officials are reduced--as corporate pension administrators, actuaries and others contend--then "new approaches to tax incentives for retirement savings should be considered."

* The ability of participants in corporate pension plans to borrow money from the funds--a practice prohibited in the case of individual retirement accounts (IRAs) and Keough plans--"creates a serious potential for abuse."

A participant in a corporate plan can now get a tax deduction on money contributed to a pension plan, immediately borrow it back and use the money to buy a boat or take a vacation.

In fact, Chapoton said it is possible to "recycle" the original contribution to a plan by borrowing it back every year and then using it to pay the succeeding year's contribution, "thus the original contribution may be deducted from taxable income many times over."

* Chapoton said the Treasury "strongly supports" a provision in the Rangel bill that would place a $500,000 ceiling on the amount of a pension fund that can be excluded from estate tax liability. Current law exempts all such funds from estate taxation.

Chapoton indicated he was willing to go one step farther than Rangel and eliminate the exemption.

At the hearing, a phalanx of pension groups opposed the Rangel bill.

An organization representing 100 large corporations, the ERISA Industry Committee, contended that the bill would not just reduce pension benefits for the top executives, but for 60 percent or more of all company employes.

Gerald D. Facciani, president of the American Society of Pension Actuaries, argued that the bill would not effectively cut back on the tax breaks of top executives, who will just shift their money to other tax shelters, but that it would force terminations and reductions in corporate plans that will hurt the rank and file workers.

The bill was supported by Daniel I. Halperin, a Georgetown University law professor and pension specialist. Karen Ferguson, director of the Pension Rights Center, called the Rangel bill an "extremely important first step," but advocated much broader reform of the pension system. PHOTO: John E. Chapoton...variations in benefits are "abusive."