[10887]
April 12, 1999
TO: PENSION COMMITTEE No. 24-99
RE: INSTITUTE SUBMITS TESTIMONY ON HEARING ON PENSION ISSUES
______________________________________________________________________________
The Institute recently submitted written testimony to the Committee of Ways and Means’
Subcommittee on Oversight for its hearing on pension issues. In this written statement, the Institute
indicated its support for several retirement security provisions, including those included in H.R. 1102,
the “Comprehensive Retirement Security and Pension Reform Act of 1999” introduced by
Representative Portman (R-OH) and Representative Cardin (D-MD). Specifically, the Institute urged
Congress to: (1) establish appropriate and effective retirement savings incentives; (2) enact savings
proposals that reflect workforce trends and savings patterns; (3) reduce unnecessary and cumbersome
regulatory burdens that deter employers - especially small employers - from offering retirement plans;
and (4) keep the rules simple and easy to understand.
I. Increased Contribution Limits. The Institute recommended that Congress update the rules governing
contribution limits to employer-sponsored plans and IRAs. With respect to contributions limits
applicable to 401(k), 403(b) and 457 plans, the Institute supported the provisions included in H.R. 1102,
which would raise those limits to $15,000. In addition, the Institute supported the repeal of the “25% of
compensation” limitation on contributions to defined contribution plans. The Institute also urged
Congress to raise the $2,000 IRA limit, which has not increased since 1981. Although H.R. 1102
includes a provision to increase the IRA contribution limit, it would apply only to deducible IRA
contributions.
II. Savings Proposals that Reflect Workforce Trends and Savings Patterns. The laws governing pension
plans must allow workers to consolidate their retirement accounts as they move from employer to
employer and be flexible enough to allow working Americans to make additional contributions when
they can afford to do so. With respect to these issues, the Institute recommended the following:
1. Facilitate retirement account portability by allowing 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.
2. Permit “catch-up” contributions, to enable individuals age 50 and older to increase their
annual contributions to employer-sponsored plans and IRAs.
III. Small Employer Retirement Plan Coverage. The Institute noted that the low rate of small employer
retirement plan coverage is a matter of serious public concern. The Institute recommended the
following initiatives:
1. Reduce the cost of maintaining retirement plans by eliminating or modifying the top-heavy
rule, which inhibits small employer plan formation.
2. Consider a tax incentive to induce small employer to establish plans, including a tax-credit for
start-up expenses.
3. 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. In addition, the Institute supported the provision in H.R. 1102 that would permit salary-
reduction-only SIMPLE plans.
IV. Simplify Unnecessarily Complicated Rules. The Institute indicated its support for those provisions
contained in H.R. 1102 that would simplify the rules applicable to IRAs and employer-sponsored plans
including the following:
1. Simplify the required minimum distribution rules for distributions from IRAs and employer-
sponsored plans by exempting the first $100,000 of assets accumulated in an individual’s IRAs
and the first $100,000 accumulated in an individual’s defined contribution plans from the rule.
2. Provide a new automatic contribution trust nondiscrimination safe harbor for 401(k) plans.
3. Modify the anticutback rules under section 411(d)(6) to permit plan sponsors to change the
forms of distributions offered in their retirement plans.
A copy of the testimony is attached.
Kathryn A. Ricard
Assistant Counsel
Attachment