June 27, 2014
- Senate Finance Committee Begins Work on Highway Measure that Includes Stretch IRA Provision
- House Energy and Commerce Committee Explores Health Care Technology and Innovation Policy Options
Senate Finance Committee Begins Work on Highway Measure that Includes Stretch IRA Provision
On June 26, the Senate Finance Committee began consideration of the Preserving America’s Transit and Highways (PATH) Act to provide an extension of funding for highway and transportation projects through the end of 2014. The committee began its “mark up” of the legislation using a modified version of the original mark introduced by Chairman Ron Wyden (D-OR).
The revised measure, like the original mark released on June 24, includes a so-called “stretch-IRA” proposal as a partial federal revenue offset. Even though it is known as “stretch-IRA,” it actually applies to all types of qualified plans, as well as IRAs.
Under the revised mark, generally, after the death of an IRA owner or plan participant, IRA and plan beneficiaries would be required to draw down all assets in the IRA or plan within five years, subject to exceptions for eligible beneficiaries, i.e., beneficiaries who are (1) the surviving spouse of the IRA owner or plan participant, (2) a child who has not attained the age of majority, (3) disabled, (4) chronically ill, or (5) not more than 10 years younger than the IRA owner or plan participant. In the case of a child who has not attained the age of majority, the five-year rule would apply as of the date the child attains the age of majority. The proposal would generally be applicable to deaths after 2015, subject to delayed effective dates for governmental plans and collectively bargained plans. Certain annuities that have been irrevocably elected as of the date of enactment of the legislation would not be affected.
The Finance Committee’s work was not completed on the revised measure and additional action is expected regarding the highway bill after the Fourth of July recess.
Concerns were raised by some Finance Committee members prior to the mark-up regarding the “stretch-IRA” proposal. The Council has previously provided technical input regarding the workability of the proposal and additional complications for employer-sponsored retirement plans, affected participants and beneficiaries. In a November 2013 Benefits Blueprint, the Council explained how such provisions create costly problems with annuities payable under defined benefit plans. Efforts were made in the revised measure to address some of the concerns raised in the Council Blueprint, such as the need for anti-cutback relief. However, there continue to be concerns and additional complexities for plan sponsors and participants with respect to currently available distribution options for certain non-spouse beneficiaries, such as joint and survivor annuities and single life annuities with a term certain of more than five years.
Similar “stretch-IRA” provisions were included in recent Obama Administration budget proposals, in Representative Dave Camp’s (R-MI) Tax Reform Act, and in other recent measures. The PATH Act does not include revenue-raising provisions related to defined benefit plan funding or premium increases at this point. The House is expected to have its own version of the highway-extension bill, which may well include alternative revenue raisers.
House Energy and Commerce Committee Explores Health Care Technology and Innovation Policy Options
The House Energy and Commerce Committee held an exploratory discussion on June 24 on the topic of health care technology and innovation. The committee intends to delve deeper into this issue in the next Congress and is examining various policy options. Speakers included: Seth Hogan (IBM), who emphasized the need for a continued focus on investment and innovation, and Mark Blatt (Intel), who highlighted the need to create a business model that allows a certain level of risk to promote innovation.
The committee is not expected to take formal action at this time. The Council, however, is examining ways to increase employee engagement and reduce plan sponsor burdens through increased use of technology.
For more information, contact Katy Spangler, senior vice president, health policy, at (202) 289-6700.