BENEFITS BYTE

October 11, 2004
BB 04—107

In this issue:

  • American Benefits Council Web Site Unveils Easier Navigation, Updated Look
  • Senate Approves Conference Report of Tax Bill with Various Benefits Provisions; Briefing Call on Tuesday, Oct. 12 at 2 p.m.
  • Commerce Committee Holds Hearing on Airline Industry and Bankruptcy Policy
  • Senate Passes Reservists Bill

American Benefits Council Web Site Unveils Easier Navigation, Updated Look

October 12 marks the launch of the updated American Benefits Council Web site — still located at http://www.americanbenefitscouncil.org. We've made navigating the site easier by removing the separated "frames" and added eye-catching color and graphics for the Council's first Web site facelift in four years. We hope you enjoy the new americanbenefitscouncil.org.

From your perspective, the changes are simple; you'll still use the same navigation buttons to find the same quality content on the full range of employer-sponsored benefits issues. Each topic remains arranged by legislative, regulatory and judicial use and divided by original source materials and Council-authored documents.

We're always looking for improvements, however, and as we're fine-tuning and adding greater functionality to the site, we always welcome your comments and suggestions. Just as a reminder, for members-only materials, your user ID is your e-mail address and the password is "security" — both typed only in lower-case letters.

For more information on the Council's Web site, contact Jason Hammersla, Council communications associate, at (202) 289-6700.

Senate Approves Conference Report of Tax Bill with Various Benefits Provisions; Briefing Call on Tuesday, Oct. 12 at 2 p.m.

On October 11, the Senate approved the conference report (beginning on Page 510) of the tax bill (H.R. 4520/S. 1637) containing nonqualified deferred compensation provisions. The House of Representatives passed the measure on October 7, and the President is expected to sign the bill into law soon.

Besides the deferred compensation provisions, the bill would also eliminate the IRS's ability to impose payroll tax withholding obligations under the Federal Insurance Contributions Act (FICA) and Federal Unemployment Tax Act (FUTA) when employees exercise incentive stock options or purchase stock under employee stock purchase plans. The Council has consistently supported this action. The legislation also includes an exception to the "maintenance of cost" requirement applicable when an employer makes a transfer of surplus pension assets (under Code Section 420). This exception allows employers to more equitably reduce benefits for all employees covered, rather than significantly reduce or eliminate costs for a portion of those covered.

The Council will hold a Benefits Briefing conference call on Tuesday, October 12, at 2:00 p.m. (Eastern Time) to analyze and discuss the implications of the deferred compensation provisions contained in the conference report. A side-by-side chart comparing the bill's deferred compensation provisions to current law, prepared for the Council by the Benefits Group of Davis and Harman, is now available. Also available is a summary of the bill and an employer action plan, both prepared for the Council by Groom Law Group.

To participate in the call on Tuesday, October 12 at 2:00 p.m. (Eastern Time), dial (312) 461-9314 and ask the operator for the American Benefits Council's conference call on nonqualified deferred compensation legislation.

To RSVP for the Benefits Briefing, click here or paste the following into your Web browser.

http://64.78.6.90/abc/index.cfm?fuseaction=home.register&callID=247

Please note: we expect a large number of participants for this conference call; please dial in early to ensure that your participation is not delayed. (A CD recording of the call will be available for purchase for $50. Contact Jason Hammersla, Council communications associate, for details.)

For more information, contact Lynn Dudley, Council vice president and senior counsel, at (202) 289-6700.

Commerce Committee Holds Hearing on Airline Industry and Bankruptcy Policy

On October 7, the Senate Committee on Commerce, Science, and Transportation held a hearing on "The Impact of Federal Pensions and Bankruptcy Policy on the Financial Health of the Airline Industry." David Walker, Comptroller General and head of the Government Accountability Office (GAO), and Brad Belt, executive director of the Pension Benefit Guaranty Corporation (PBGC), testified before the committee, as did Robert Crandall, the former chief executive officer of American Airlines, Captain Duane Woerth, president of the Airline Pilots Association, and an unscheduled witness, Representative Rahm Emanuel (D-IL).

Witness testimony is available on the Committee Web page. A detailed summary of the hearing is available on the Council Web site.

Since Congress is now in recess, there is not expected to be any immediate legislative action from the hearing. Moreover, the Commerce Committee would not take the lead on pension funding reform. Rather, that would occur in one of the committees that have jurisdiction over pension issues (Finance or Health, Education, Labor and Pension (HELP) Committees in the Senate, and Ways & Means or Education and the Workforce in the House). Pension funding reform will likely be emphasized in the 2005 legislative session with Rep. John Boehner (R-OH), Chairman of the Education and the Workforce Committee, and Reps. Rob Portman (R-OH) and Ben Cardin (D-MD), members of the Ways & Means Committee, expected to make proposals to reform the pension funding rules. For more information, contact Jan Jacobson, Council director, retirement policy, at (202) 289-6700.

Senate Passes Reservists Bill

On October 11, the Senate approved the Guardsmen and Reservists Financial Relief Act, which addresses differential pay issues described by the Council in its July 21 Benefits Byte. The Senate bill, which is based on the House of Representatives-passed bill (H.R. 1779) allowing guardsmen and reservists to take penalty-free retirement plan withdrawals, also provides a tax credit to small employers that provide "differential pay." (When an employee volunteers or is called to active duty, some employers will pay the employee part or all of the difference between the employee's former pay and what the employee is paid for the military service; this difference is commonly known as "differential pay.")

The tax credit would provide small employers (50 employees or fewer) with a credit of 50 percent of up to $30,000 in compensation paid as differential pay to reservists and guardsmen on active duty for at least six months. The provision would not apply to amounts paid or incurred after December 31, 2005.

The Senate-passed bill would, also:

  • Provide, as the House-passed bill did, an exception for the usual 10 percent additional tax on early distributions from retirement plans for distributions to individuals called to active duty for six months or more.
  • Require income tax withholding on differential wage payments (if paid after December 31, 2004).
  • Clarify that the reservists or guardsmen can continue to participate in their former employer's retirement plans but such contributions are not required to be counted for nondiscrimination testing provided similarly situated employees are treated the same.
  • Allow distributions to reservists and guardsmen as if they were terminated. However, individuals taking advantage of this provision must not be allowed to make elective deferrals or employee contributions for six months from the date of the distribution.
  • Provide a similar exception to the 10 percent additional tax on early distributions from retirement plans for distributions to individuals who are victims of federally declared national disasters.

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.