September 20, 1995
TO: BOARD OF GOVERNORS No. 64-95
FEDERAL LEGISLATION COMMITTEE No. 23-95
FEDERAL LEGISLATION MEMBERS No. 21-95
30% REPEAL WORKING GROUP
TAX ISSUES WORKING GROUP
PENSION SIMPLIFICATION WORKING GROUP
RE: WAYS AND MEANS COMMITTEE APPROVES TAX PROVISIONS
_____________________________________________________________________________
The House Ways and Means Committee on September 19, 1995 approved tax provisions
to be part of the budget reconciliation bill designed to meet the Congresss deficit reduction and
tax cut goals.
We are pleased to report that the tax simplification provisions include five items on the
Institutes legislative agenda:
1. The 30% limitation (the "short-short rule") would be repealed.
2. Simplified nondiscrimination rules would be provided for 401(k) plans.
3. The same simplified nondiscrimination rules would be provided for salary reduction
Simplified Employee Pensions (SARSEPs).
4. The number of employees an employer could have and still be eligible to establish
a Salary Reduction Simplified Employee Pension would be increased from 25 to 100.
5. The Committee bill does not include a provision requiring mutual funds to report the
basis of shares redeemed by shareholders (though such a provision has been included in tax
simplification legislation in the past).
The Institute has advocated enacting the first four of these items and dropping mandated
shareholder basis reporting.
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We regret to report that the bill does not include a provision permitting the tax-free
conversion of bank common trust funds into mutual funds. However Senator Bill Roth (R-DE), the
Chairman of the Senate Finance Committee, has introduced a bank common trust fund conversion
bill, which is expected to be considered by the Senate Finance Committee.
We will keep you informed as this matter develops. For additional information, please
contact the Legislative Affairs Department at (202) 326-5890. This memo can be found on FUNDs,
the Institute’s Fund User Network and Delivery System, under "Legislative Affairs; Washington
Update."
Julie Domenick
Senior Vice President
Legislative Affairs