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July 31, 1990
TO: PENSION COMMITTEE NO. 18-90
RE: PRYOR INTRODUCES PENSION SIMPLIFICATION BILL
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Senator David Pryor recently introduced S. 2901, the
Employee Benefits Simplification Act, a bill to simplify several
provisions of the Internal Revenue Code regarding qualified
retirement plans and IRAs. A copy of the bill and the
accompanying Record statement are attached. An identical
companion bill was introduced in the House of Representatives by
Ron Chandler.
The bill addresses various provisions of the Code including
the definitions of "highly compensated employee", "leased
employee" and "compensation", the manner of calculating cost of
living adjustments, the minimum participation rules of section
401(a)(26), and the discrimination rules under section 401(k).
Half-year requirements (age 59-1/2 and 70-1/2) would be
eliminated and all references would be to ages 59 and 70.
Section 201 of the bill would substantially revise the
distribution provisions under section 402 of the Code to
generally allow rollovers in all circumstances, except for after
tax employee contributions and required minimum distributions
under section 401(a)(9). The bill would repeal 5 and 10 year
averaging provisions, but would not repeal the grandfather
provisions contained in the Tax Reform Act of 1986 for
participants who attained age 50 before 1986.
Section 202 of the bill would require IRA rollovers or
plan-to-plan transfers of pre-retirement distributions. A new
section 417A of the Code would be enacted to provide that any
plan distribution in excess of $500 must be transferred to an
"eligible transferee plan" which is "an individual retirement
plan designated by the employee in such form, and at such time,
as the transferor plan may prescribe" or a successor employer's
defined contribution plan.
The bill also would increase the availability of salary
reduction SEPs to employers with 100 employees and modify SEP
participation requirements.
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The Institute intends to submit written testimony regarding
this proposed legislation. Therefore, please contact the
undersigned at (202) 955-3516 no later than August 10, 1990 with
any comments you may have. In particular, I would appreciate
receiving your views on section 202 of the bill regarding the
method by which an "eligible transferee plan" is selected,
including any restrictions or limitations which should be
contained in the legislation regarding the selection of an
eligible transferee plan, and whether the $500 threshold for
required transfers is an appropriate amount.
We will keep you informed of further developments.
W. Richard Mason
Assistant General Counsel
Attachment