April 1, 2004
In this issue:
- Pension Bill Negotiators Approve Conference Agreement
- Council Submits Comment Letter to DOL
- More Congressmen Write to SEC Opposing Hard 4 p.m. Close
Pension Bill Negotiators Approve Conference Agreement
On April 1, Conferees for the Pension Funding Equity Act (H.R. 3108) reached agreement on a conference report reconciling the House of Representatives and Senate bills. After rejecting an amendment by Senate negotiators to expand multiemployer plan relief, the agreement was finally approved by a party-line vote. The bill will now proceed to the House floor for approval by the full chamber as early as the morning of April 2. A vote on the Senate floor is less certain, however, since the lack of Democratic support for the conference report suggests the possibility of a filibuster. The Bush Administration has not voiced opposition to the compromise.
The House and Senate versions of H.R. 3108 both contain a two-year replacement of the defunct 30-year Treasury bond rate with a composite rate based on long-term corporate bonds for purposes of calculating plan liabilities and any Pension Benefit Guaranty Corporation variable rate premiums. The final bill will include deficit reduction contribution relief for airlines and steel and a modest multiemployer relief provision. The agreement will also permit the use of the 30-year Treasury rate for purposes of maximizing the limit on deductible contributions, so that employers that want to make larger contributions may do so. The Council will alert you once more details become available.
Council members are urged to focus their attention on the Senate, since approval by the Senate is less certain. For more information, contact Diann Howland, Council vice president, retirement policy, at (202) 289-6700.
Council Submits Comment Letter to DOL
On April 1, the Council provided written comments to the Department of Labor (DOL) on the agency's proposed rule on automatic rollover safe harbors. The DOL published the proposed rule at the direction of Congress under the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA). EGTRRA amended Internal Revenue Code Section 401(a)(31) to require that absent an affirmative election from the participant, distributions of amounts between $1,000 and $5,000 from tax-qualified retirement plans must be rolled over into an IRA â€“ a change from the previous law which required such distribution to be made in cash absent an election to roll it over. Under EGTRRA, plans were not required to comply with this new rule until regulations were promulgated by the DOL. The regulations are expected to be effective six months after publication of the final regulation even though EGTRRA provided an outside limit of three years from passage of EGTRRA.
The Council's comment letter expressed concern that the income limitations in the proposed regulations will limit the number of financial institutions willing to accept the IRA accounts in today's low interest rate environment. Under the proposed regulations, fees and expenses charged to the account can be no more than the income earned by the IRA and investment products are limited to one's designed to preserve principal such as money market funds, savings accounts, CDs and stable value products.
The Council also requested clarification concerning default beneficiaries, calculation of the amount of the distribution (to determine eligibility for the automatic rollover), plan document and disclosure requirements and various miscellaneous issues. For more information, contact Jan Jacobson, Council director, retirement policy, at 202-289-6700.
More Congressmen Write to SEC Opposing Hard 4 p.m. Close
As we reported in the March 25 Benefits Byte, Representatives Rob Portman (R-OH) and Ben Cardin (D-MD) recently led a bipartisan group of nine other representatives in writing a letter to Securities and Exchange Commission (SEC) Chairman William Donaldson expressing their concern that the SEC's proposed hard 4 p.m. close rule would cause problems for retirement plan participants. On March 29, Senate Finance Committee Chairman Charles Grassley (R-IA) and Ranking Member Max Baucus (D-MT) followed suit with their own letter to Donaldson. On March 31, House of Representatives Financial Services Committee Chairman Michael Oxley (R-OH) and Capital Markets, Insurance and Government Sponsored Enterprises Subcommittee Chairman Richard Baker (R-LA) weighed in with a similar letter.
These letters all recommend the consideration of other alternatives to prevent lade trading abuses without limiting the investment decisions of mutual fund shareholders. The Council, several individual member companies and other business groups were instrumental in encouraging these communications to the SEC.
For more information, contact Jan Jacobson, Council director, retirement policy, at 202-289-6700.
The American Benefits Council is the national trade association for companies concerned about federal legislation and regulations affecting all aspects of the employee benefits system. The Council's members represent the entire spectrum of the private employee benefits community and either sponsor directly or administer retirement and health plans covering more than 100 million Americans.