1 For a discussion on the tax provisions, see Institute Memorandum to Accounting/Treasurers Committee No. 9-99,
International Committee No. 11-99, Tax Committee No. 5-99 and Transfer Agent Advisory Committee No. 22-99, dated
March 24, 1999.
[10835]
March 26, 1999
TO: PENSION COMMITTEE No. 21-99
RE: INSTITUTE SUBMITS TESTIMONY ON PRESIDENT'S FISCAL YEAR 2000
BUDGET PROPOSALS
______________________________________________________________________________
The Institute recently submitted written testimony on the President’s fiscal year 2000 budget
proposals. This written statement, summarized below, sets forth the Institute’s position on several
retirement security provisions as well as tax issues of interest to regulated investment companies and
their shareholders.1 With regard to retirement security issues, the testimony focused on three areas as
follows: (1) retirement account portability; (2) small employer retirement plan coverage; and (3)
increased contribution limits.
I. Retirement Account Portability. Under the current Administration proposal on
retirement account portability, rollovers to and from 457 plans would be prohibited. In its
testimony, the Institute urged the Administration to consider a broader approach to enable
individuals in any type of individual account program (including 401(k), 403(b), 457 and IRAs)
to move assets among these programs as they move from employer to employer over the course
of their career. In addition, the Institute recommended that the Administration revise its
portability proposal to eliminate unnecessary administrative burdens on IRA custodians and
trustees. Specifically, the Institute opposed the Administration’s proposal to require IRA
trustees and custodians to track basis related to after-tax rollovers.
II. Small Employer Retirement Plan Coverage. As Administration proposals recognize, the low rate
of small employer retirement plan coverage is a matter of serious public concern. The Institute
recommended the following initiatives:
1. Improve the Savings Incentive Match Plan for Employees (SIMPLE) program
for small employers by permitting employees to defer annually up to the $10,000 limit
applied to 401(k) plans.
2. Reduce the cost of maintaining retirement plans by eliminating or modifying the top-
heavy rule, which inhibits small employer plan formation and, as the Administration
proposes, consider a tax incentive to induce small employer to establish plans.
3. Assure that any new programs for small employers provide effective incentives for
employers and do not undermine currently successful programs, such as the SIMPLE
program.
III. Increased Contribution Limits. The Institute recommended that the Administration consider
raising plan contribution limits that inhibit adequate retirement savings, including the $2,000
IRA limit, which has not increased since 1981. In addition, the Institute indicated its support for
“catch-up” contributions, to enable individuals age 50 and older to increase their annual
contributions to employer-sponsored plans and IRAs.
A copy of the testimony is attached.
Kathryn A. Ricard
Assistant Counsel
Attachment