September 27, 1991
TO: BOARD OF GOVERNORS NO. 75-91
PENSION COMMITTEE NO. 27-91
RE: INSTITUTE TESTIFIES IN SUPPORT OF EMPLOYEE BENEFITS
SIMPLIFICATION ACT
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The Institute testified today before the Senate Finance
Committee, Subcommittee on Private Retirement Plans and Oversight
of the IRS, in support of S. 1364, the Employee Benefits
Simplification Act. The legislation was introduced by Senators
Pryor and Bentsen earlier this year. (See Institute Memorandum
to Pension Committee No. 19-91, dated June 27, 1991.)
The Institute endorsed the bill's provisions which would
expand the availability of salary reduction SEP arrangements from
businesses with 25 or fewer employees to those with 100 or fewer
employees and simplify the non-discrimination rules applicable to
salary reduction SEPs by allowing an employer to use a design-
based "safe harbor". The safe-harbor would allow employers to
avoid any discrimination testing if the employer makes matching
contributions to the SEP for employees who make salary reduction
contributions.
According to the testimony, financial institutions, such as
mutual funds, would be encouraged to actively market the salary
reduction SEP, if modified as provided by the proposed
legislation. The impact of such marketing activity should not be
underestimated.
The Institute also expressed its support for the provisions
in the bill which would repeal most restrictions on rollovers of
pension plan distributions to IRAs and which would require direct
transfer of pre-retirement pension plan distributions to an IRA
or another qualified plan.
A copy of the Institute's testimony is attached. We will
keep you informed of further developments.
W. Richard Mason
Assistant Counsel - Pension
Attachments