May 1, 1991
TO: PENSION COMMITTEE NO. 10-91
RE: INSTITUTE RECOMMENDATIONS REGARDING PRIME ACCOUNTS
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Attached are the Institute's recommendations regarding the
PRIME Retirement Account Act of 1991. (See Institute Memorandum
to Pension Committee No. 2-91, dated February 4, 1991.)
The Institute recommended several revisions to the
operation of a PRIME account program. The bill as introduced
does not distinguish between the initial, depository PRIME
account, which is selected by the employer and may not charge any
direct fees to the participant, and a "rollover PRIME account",
which is selected by the participant and has no fee restrictions.
The Institute provided recommendations so that the depository
PRIME account could be distinguished from a "rollover PRIME
account". Rollover PRIME account trustees and custodians would
not be responsible for providing summary descriptions of the
employer's PRIME account program or filing quarterly statements.
Since Senator Packwood's staff was not receptive to the idea of
eliminating the depository PRIME account concept, the Institute
did not recommend that the PRIME account program be revised to
mirror SEP-IRA arrangements.
As the bill is now drafted, PRIME account assets could not
be commingled with IRA assets at any time. The Institute noted
that an individual should be able to commingle his PRIME account
assets with his other IRA assets after the special PRIME account
penalty for early withdrawal expires after three years. However,
because Senator Packwood's staff indicated that this result was
unlikely, but that commingling at age 59-1/2 in preparation for
retirement was a possibility, the Institute recommended the
latter concept as an alternative.
We will keep you informed of developments.
W. Richard Mason
Assistant Counsel - Pension
Attachment