February 4, 1991
TO: PENSION COMMITTEE NO. 2-91
RE: PACKWOOD INTRODUCES PRIME RETIREMENT ACCOUNT ACT
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As we anticipated at the last pension committee meeting,
Senator Packwood introduced S. 318, the PRIME Retirement Account
Act of 1991, on January 31, 1991.
The PRIME account is intended to be a savings program for
employers who normally employ fewer than 100 employees. All
employees who are reasonably expected to work at least 1,000
hours annually will be permitted to contribute up to $3,000
annually to their PRIME account through salary reduction and
their employer will be required to match the employee’s
contribution up to the lesser of $3,000 or 3 percent of
compensation. The PRIME account program has no discrimination
rules and is specifically exempted from ERISA.
Although a form of IRA, PRIME accounts could not be
commingled with regular IRA funds. All PRIME account funds
initially would be deposited into an individual’s PRIME account
as selected by the individual’s employer. The trustee or
custodian of the PRIME account would be required to provide each
employee with quarterly statements disclosing account activity
and a summary description containing the name and address of the
employer and trustee, the requirements for eligibility and
participation, the benefits provided with respect to the
arrangement, the time and method of making elections, and the
procedures for and effects of withdrawals from the PRIME account.
The bill contains a penalty of $100 per day for each day that the
trustee fails to provide such statements.
Individuals will be able to transfer PRIME account funds to
other PRIME accounts of their own selection by rollover or
trustee-to-trustee transfer. Any amounts withdrawn from a PRIME
account within the first 3 years after the employee first made
salary reduction contributions under a PRIME program would be
subject to a 25 percent penalty rather than the otherwise
applicable 10 percent penalty under Section 72(t) of the Code.
An advance copy of S. 318 and the Congressional Record
statement regarding the bill is attached. Note that the bill as
introduced differs from the advance copy by the additional first
section which reads, "This Act may be cited as the "PRIME
Retirement Account Act of 1991".
We will keep you informed of further developments.
W. Richard Mason
Assistant General Counsel
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