August 9, 1990
TO: PENSION COMMITTEE NO. 21-90
RE: ICI TESTIMONY ON EMPLOYEE BENEFITS SIMPLIFICATION ACT
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As we previously informed you, Senator Pryor recently
introduced S. 2901, the Employee Benefits Simplification Act.
(See Institute Memorandum to Pension Committee No. 18-90 dated
July 31, 1990.) If enacted, the bill would simplify
miscellaneous employee benefits provisions in the Internal
Revenue Code and require transfer of pre-retirement distributions
in excess of $500 to an IRA selected by the employee.
Recently, the Institute submitted the attached written
testimony on the Pryor bill expressing the industry's support for
employee benefits simplification legislation in general and
making several specific comments regarding the bill.
The Institute recommended that the legislation permit an
employee to rollover his or her after-tax distribution from a
retirement plan into an IRA. The Institute supported the use of
the existing IRA as the vehicle to achieve pension portability
and expressed the industry's disapproval of creating any new
portability vehicle such as an IRA with joint and survivor
annuity requirements. With regard to the bill's minimum amount
of pre-retirement distributions subject to mandatory transfer to
an IRA, the Institute recommended that the $500 threshold be
increased to $3,500. Finally, the Institute supported the
proposal to increase the availability of SEPs with salary
reduction arrangements to employers with 100 or fewer employees.
However, we noted that this type of SEP would be much more
popular if the "top-heavy" provisions of the Code were
simplified.
We will keep you informed of further developments.
W. Richard Mason
Assistant General Counsel
Attachment