June 26, 1991
TO: PENSION COMMITTEE NO. 17-91
RE: ROSTENKOWSKI INTRODUCES PENSION SIMPLIFICATION BILL
__________________________________________________________
House Ways and Means Committee Chairman Rostenkowski
recently introduced H.R. 2730, the Pension Access and
Simplification Act of 1991. A copy of the bill and the Record
statement is attached.
The bill addresses many of the same matters contained in
the Chandler simplification bill (see Institute Memorandum to
Pension Committee No. 15-91, dated June 24, 1991), and would
repeal rollover restrictions, modify 401(k) discrimination rules
and improve the SARSEP.
In addition to allowing rollover of all plan distributions
except after-tax contribution and required minimum distributions,
the bill requires all qualified plans to allow participants to
elect to have their eligible rollover distributions transferred
directly to an IRA or other eligible retirement plan. The bill
repeals 5 and 10 year forward averaging.
With regard to 401(k) discrimination rules, the bill would
allow discrimination testing for each plan year to be based on
non-highly compensated employee deferrals from the previous plan
year. A similar rule would apply to matching contributions under
section 401(m) of the Code. The bill would make 401(k) plans
available to tax-exempt employers in 1992, and to state and local
governments beginning in 1995.
The bill would revise the SARSEP rules so that employers
with not more than 100 eligible employees in the preceding year
could sponsor the program. Employees could contribute up to
$5,000 per year (adjusted for cost of living) on a salary
deferral basis. The employer could match employees contributions
up to 50 percent. Employers would be required to contribute 3
percent of compensation (limited to $100,000, adjusted for cost
of living) on behalf of each eligible employee without regard to
whether the employee makes an elective contribution. This "base"
contribution is increased to 5 percent if the employer maintained
a qualified plan other than a SEP during either of the 2 years
preceding the year in which the SARSEP is established.
The bill contains provisions regarding the responsibilities
of sponsors of prototype plans which were referenced, but not
explained, in the Administration's POWER proposal. (See
Institute Memorandum to Pension Members No. 17-91, dated May 1,
1991.) Specifically, the bill creates a system of sponsor
accountability, subject to IRS monitoring, for the protection of
master and prototype plan adopters. The bill authorizes the IRS
to prescribe duties including, but not limited to, maintaining
current lists of adopting employers and filing annual notices to
such employers and the IRS.
The bill would also impose administrative service duties on
the prototype plan sponsor. The Congressional Record states that
the bill is not intended to obligate sponsors to undertake the
complete day-to-day administration of the plans they sponsor, but
to protect employers against loss of qualification because of
ignorance of the need to arrange for such services. The Record
also states that the bill should not be construed as creating
fiduciary relationships or responsibilities under Title I of
ERISA that would not exist in the absence of the provision.
Finally, the Treasury Secretary is authorized to issue
regulations that permit the relaxation of the anti-cutback rules
contained in section 411(d)(6) of the Code to facilitate an
employer's replacement of an individually designed plan with a
prototype plan.
We will keep you informed of further developments.
W. Richard Mason
Assistant Counsel - Pension
Attachments