October 22, 2004
BB 04—110

With President's Signature, Treasury Has 60 Days to Release Deferred Compensation Regulations

Following President George Bush's October 22 signing of the American Jobs Creation Act of 2004 (H.R. 4520/S. 1637, deferred compensation provisions beginning on page 510) the Internal Revenue Service now has 60 days to issue guidance relating to the deferred compensation provisions included in the bill. These provisions were included in the legislation to generate approximately $1 billion. The Council remains actively involved in addressing issues raised by the deferred compensation language in the bill. We will soon be submitting comments regarding areas of interest that must be addressed during the transition period to the new law.

A side-by-side chart comparing the bill's deferred compensation provisions to prior law, prepared for the Council by the Benefits Group of Davis and Harman, is available on the Council's web site in addition to a summary of the bill and an employer action plan, both prepared for the Council by Groom Law Group. A CD recording of the October 12 conference call on this issue is also available for $50.

The new law also eliminates the ability of the Internal Revenue Service 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. An exception is also contained in the legislation to the "maintenance of cost" requirement applicable when an employer makes a transfer of surplus pension assets (under Code Section 420). This will allow employers to more equitably reduce benefits for all employees covered, rather than significantly reduce or eliminate costs for a portion of those covered.

For more information on these issues, contact Lynn Dudley, Council vice president and senior counsel. To purchase a copy of the conference call CD, contact Jason Hammersla, Council communications associate. Both can be reached by phone at (202) 289-6700.

IRS Announces Pension Plan Limits for 2005

On October 20, the Internal Revenue Service (IRS) released dollar limitations for pension plans for Tax Year 2005, reflecting cost-of-living adjustments. These limitations apply to benefits and contributions to qualified retirement plans. In most cases, cost-of-living hikes and scheduled increases (through the EGTRRA tax relief act of 2001) have triggered increased limits.

For a list of new limits, see the IRS news release 2004-127. 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.