BENEFITS BYTE

June 10, 2004
BB 04—65

In this issue:

  • House Ways and Means Committee Scheduled to Consider Nonqualified Deferred Compensation Legislation
  • IRS Expected to Issue Automatic Rollover Guidance

House Ways and Means Committee Scheduled to Consider Nonqualified Deferred Compensation Legislation

The House of Representatives Ways and Means Committee is scheduled to consider the international tax bill sponsored by Ways and Means Chairman Bill Thomas (R-CA) on Monday, June 14th. This legislation, the American Jobs Creation Act (H.R 4520), contains extensive deferred compensation provisions that will affect common nonqualified arrangements including those that are used to make up benefits lost due to the qualified plan limits. It is anticipated that the legislation will be approved by the committee, opening the way for a vote by the full House in the near future. The Senate has already passed a comparable international tax bill containing deferred compensation provisions, the Jumpstart Our Business Strength Act (S. 1637). The proposal raises numerous concerns and your efforts are critically needed to ensure that these issues are addressed before this legislation becomes effective. The key concerns raised by the nonqualified deferred compensation provisions in the H.R. 4520 include:

  • The effective date, which generally applies to amounts deferred after June 3, 2004.
  • The definition of "deferred compensation arrangement," which, in the bill, is excessively broad in a wide range of common programs including defined benefit supplemental pension arrangements, mirror 401(k) plans, annual bonuses, stock options, restricted stock units, short-term-deferrals and severance pay plans.
  • The requirement that elections to defer be made in the calendar year prior to the calendar year in which the services giving rise to the compensation are first performed, affecting annual bonus programs and long-term incentive arrangements.

There are two additional proposals included in the Senate bill that are not included in the House bill that the Council has advocated be dropped from any final legislation:

  • A limitation on the ability of the participant to select how earnings will be credited to a bookkeeping account, and
  • Elimination of the ability of the participant to defer the gains attributable to stock options, vesting of restricted stock, employer securities, or any other property based on employer securities transferred to the taxpayer.

The House Ways and Means Republican members are listed below along with their contact information.

William M. Thomas, CA, (202) 225-2915
Philip M. Crane, IL, (202) 225-3711
E. Clay Shaw Jr. , FL, (202) 225-3026
Nancy L. Johnson, CT, (202) 225-4476
Amo Houghton, NY, (202) 225-3161
Wally Herger, CA, (202) 225-3076
Jim McCrery, LA, (202) 225-2777
Dave Camp, MI, (202) 225-3561
Jim Ramstad, MN, (202) 225-2871
Jim Nussle, IA, (202) 225-2911
Sam Johnson, TX, (202) 225-4201
Jennifer Dunn, WA, (202) 225-7761
Mac Collins, GA, (202) 225-5901
Rob Portman, OH, (202) 225-3164
Phil English, PA, (202) 225-5406
J.D. Hayworth, AZ, (202) 225-2190
Jerry Weller, IL, (202) 225-3635
Kenny C. Hulshof, MO, (202) 225-2956
Scott McInnis, CO, (202) 225-4761
Ron Lewis, KY, (202) 225-3501
Mark Foley, FL, (202) 225-5792
Kevin Brady, TX, (202) 225-4901
Paul Ryan, WI, (202) 225-3031
Eric Cantor, VA, (202) 225-2815

We believe these members can be the most helpful in ensuring that the issues noted above are addressed either during the committee's review of the legislation or when the House and Senate versions of the international tax bill are reconciled. A set of talking points, prepared for the Council by Groom Law Group, are now available on the Council Web site. For more information, contact Lynn Dudley, Council vice president and senior counsel, at (202) 289-6700.

IRS Expected to Issue Automatic Rollover Guidance

The Council has learned that the Internal Revenue Service (IRS) is discussing issues related to automatic rollovers and plans to issue guidance sometime later this summer. The IRS has informally indicated the guidance will likely address changes to the required 402(f) (disclosure) notice and the timing of plan amendments, and will provide model amendment language. As indicated in Footnote 7 of the proposed guidance on automatic rollovers issued by the Department of Labor (DOL), the IRS is beginning to examine whether the automatic rollover rule should be applied to non-ERISA plans, including salary-reduction only 403(b) plans, governmental defined benefit plans and 457 plans. The IRS guidance will likely be effective at the same time as the DOL guidance. The DOL is expected to issue its final guidance by the end of June, which suggests a likely effective date of January 1, 2005. For more information, contact Jan Jacobson, Council director, retirement policy, at (202) 289-6700.

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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.