July 25, 1995
TO: PENSION COMMITTEE No. 13-95
RE: PRYOR-HATCH PENSION SIMPLIFICATION BILL INTRODUCED
______________________________________________________________________________
Senators Pryor and Hatch have recently introduced the attached "Pension Simplification Act of
1995". This bill includes many of the simplification proposals included in a bill previously passed by the
Congress and vetoed by President Bush in 1992. (See Institute Memorandum to Pension Members No.
26-92, dated October 8, 1992.) It also includes several new provisions that target retirement plans for
small businesses.
Some of the major provisions of S. 1006 would:
1) permit the use of non-discrimination safe harbors for 401(k) plans providing either a
minimum three percent of compensation contribution for all participants or providing
matching contributions of 100 percent of the first three percent and 50 percent of the
next two percent of employee deferrals, if employer contributions are fully vested and
subject to withdrawal restrictions;
2) provide a maximum $1,000 tax credit for start-up expenses of businesses with 50 or
fewer employees that establish a retirement plan;
3) expand the availability of the SARSEP to employers with 100 or fewer employees;
4) permit SARSEPs to use the two design-based safe harbors provided under the bill for
401(k) plans;
5) eliminate the 50 percent participation requirement for SARSEPs;
6) exempt small businesses from the top heavy rules for any year following a year in which
no employee earned over $80,000; and
7) repeal the combined plan limit in Code section 415(e) for employees participating in
both a defined benefit and a defined contribution plan.
We will keep you informed of progress on this legislation.
Catherine L. Heron
Vice President and Senior Counsel
Attachment