March 27, 1990
TO: PENSION COMMITTEE NO. 6-90
RE: S. 2199, THE HEALTH CARE AND LONG-TERM CARE SECURITY ACT
OF 1990
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Attached is a copy of S. 2199, the proposed Health Care and
Long-Term Care Security Act of 1990. The accompanying Record
statement is also attached.
Section 202 of the bill would permit employers to prefund
retiree health benefit accounts within defined benefit plans
under certain circumstances. Amounts in a funded reserve account
would be required to be portable upon the employee's separation
from service or after termination of the plan, either to a
subsequent employer's health benefit account or to an IRA.
The bill states that if the employee's subsequent employer
does not maintain a similar plan, the assets must be transferred
to an IRA "established for the benefit of such employee," but
does not address whether the IRA would be chosen by the employer
or the employee. Under the proposal, the transfer would be
required to take place within 120 days of the separation from
service or termination of the plan.
In addition, the bill would amend section 408 of the Code
to require that the IRA trust instrument must provide that the
trust will accept such transfers. The trustee would also be
required to maintain separate accounting for such assets,
primarily because the penalty tax on distributions of such
amounts from an IRA would be increased from 10 to 50 percent.
We will discuss this proposed legislation at the Pension
Committee meeting on April 5.
Kathy D. Ireland
Associate General Counsel
Attachment