Issue

Bill Number & Sponsor

Summary

Status

Bankruptcy Reform

H.R.2415 (new Number) incorporates text of S. 3186 by Sen. Charles Grassley (R-IA)

Makes numerous changes in bankruptcy code, including exemption of all retirement savings assets from bankruptcy estate.

House passed H.R. 2415 (final version) on 10/12/00.  Pocket-vetoed by former President Clinton.

“Pay to Play” Proposed Rules

Not Applicable - regulatory proposal

The Securities and Exchange Commission (SEC) issued proposed regulations on August 8, 1999 that would bar any investment advisor who makes a campaign contribution to a government official from doing business with the governmental entity that the official represents for 2 years.  The proposal is called "Pay to Play."  The deadline for comments was November 1.

SEC reviewing comments, but may re-think its approach, according to news accounts.

Pension Reform

Ø       Portability of Voluntary Savings Vehicles through Eliminating Barriers in Rollover Rules.

H.R. 2614 (new number) incorporates text of H.R. 5592 “Taxpayer Relief Act of 2000” by Rep. Dick Armey (R-TX) and several other bills.

Would allow portability of retirement assets between all plans when employees change jobs, including 403(b) and 457 plans, but note following limitations on 457s.  The bill would require the 457 plan administrator to separately account for amounts rolled into such plan from other eligible retirement plans (e.g., 403(b)s, 401(k)s).  If the administrator does not do so, the plan could not accept transfers or rollovers from such other plans.  A distribution from a state or local government 457 would be treated as a distribution from a qualified retirement plan described in IRC Section 4974 (c)(1) [i.e., a qualified plan under IRC Section 401(a)] to the extent that such distribution is attributable to an amount transferred to an eligible deferred compensation plan from a qualified retirement plan.  Early withdrawal tax would apply to distributions attributable to amounts rolled over to a 457 plan from a qualified plan.  Effective date:  Distributions after December 31, 2000. No penalty is imposed on a plan for failure to provide information in required notice with respect to any distribution made before January 1, 2002, if plan administrator makes a reasonable attempt to comply with requirement.

Passed House 10/26/00.  No further action before adjournment.

Issue

Bill Number & Sponsor

Summary

Status

Ø       Use of 403(b)/457 Assets for Purchase of Service Credits in Public Sector Defined Benefit Plans

H.R. 1102, Comprehensive Retirement Security and Pension Reform Act, by Rep. Rob Portman (R-OH) and Rep. Ben Cardin (D-MD)

Would permit funds from 403(b) and 457 plans to be used to purchase permissive service credits in public sector defined benefit plans.  Effective date:  Transfers after Dec. 31, 2000.

Passed House 10/26/00.  No further action before adjournment.

Ø       Liberalizing Defined Benefit Limits

H.R. 1102, Comprehensive Retirement Security and Pension Reform Act, by Rep. Rob Portman (R-OH) and Rep. Ben Cardin (D-MD)

Would set the annual benefit limit for defined benefit plans to $160,000 (indexed).  Would set the amount of compensation that may be taken into account under qualified retirement plans to $200,000 (indexed).  Effective date: Years beginning after Dec. 31, 2000.

Passed House 10/26/00.  No further action before adjournment.

Ø       Increasing Defined Contribution and Deferred Compensation Limits

H.R. 1102, Comprehensive Retirement Security and Pension Reform Act, by Rep. Rob Portman (R-OH) and Rep. Ben Cardin (D-MD)

Would increase the annual elective deferral limit for 401(k), 403(b), and 457 plans as follows:                                                                    Taxable year:              Applicable $ amt.:

2001                             $11,000

2002                             $12,000

2003                             $13,000

2004                                                    $14,000

2005  or thereafter        $15,000 

For taxable years beginning after December 31, 2005, the amount is generally indexed as under current law.  Would increase the annual contribution limit under 415(c) to $40,000 (indexed).  Effective date:  Years beginning after December 31, 2000.

Passed House 10/26/00. No further action before adjournment.

Ø       Repealing 457 Coordination   Requirements

H.R. 1102, Comprehensive Retirement Security and Pension Reform Act, by Rep. Rob Portman (R-OH) and Rep. Ben Cardin (D-MD)

Would repeal coordination requirements for 457 plans.  Effective for years beginning after December 31, 2000.

Passed House 10/26/00.  No further action before adjournment.

Ø       Eliminating Percent of Compensation Limit

H.R. 1102, Comprehensive Retirement Security and Pension Reform Act, by Rep. Rob Portman (R-OH) and Rep. Ben Cardin (D-MD)

Would increase the compensation-based limits on defined contribution plans from 25% to 100% of compensation; would eliminate the exclusion allowance applicable to 403(b)s and substitute the applicable 415 limit; and would increase the compensation-based amounts on 457 plans from 33% to 100% of "includable compensation."  Effective date:  Years beginning after Dec. 31, 2000.

Passed House 10/26/00.  No further action before adjournment.

Issue

Bill Number & Sponsor

Summary

Status

Ø       Clarifying Treatment of 457 Domestic Relation Orders

H.R. 1102, Comprehensive Retirement Security and Pension Reform Act, by Rep. Rob Portman (R-OH) and Rep. Ben Cardin (D-MD)

Provides equitable tax treatment to Section 457 domestic relations order distributions, clarifying that the recipient of the funds will bear the tax rather than the plan participant. Effective date: applies to amounts after Dec. 31, 2000.

Passed House 10/26/00.  No further action before adjournment.

Social Security

Ø       Government Pension Offset (GPO)

H.R.1217 by Rep. William Jefferson (D-LA); S.717 by Sen. Barbara Mikluski (D-MD)

To lessen the effect of the GPO by making it applicable only if the spouse's or surviving spouse's Social Security and government pension combined exceeds $1,200 a month.  The offset reduces the amount of an individual's Social Security spouse's or widow's benefits by two-thirds of the amount of his/her government pension.  In other words, if an individual gets a monthly public pension of $600, two-thirds of that, or $400, must be used to offset the Social Security spouse's or widow's benefits.  If he/she is eligible for a $500 widow's benefit, he/she will receive $100 per month from Social Security ($500-$400=$100).

H.R.1217 pending before House Ways and Means Committee 3/23/99; S.717 pending before Senate Finance Committee 3/25/99. Hearings before Social Security Subcommittee of House Ways and Means Committee 6/27/2000.  No further action before adjournment.

Ø       Windfall Elimination Provision (WEP)

H.R.860 by Rep. Barney Frank (D-MA)

Restricts application of WEP to individual's whose combined monthly income from the individual's primary insurance amount (i.e., his/her Social Security benefit) and the portion of the monthly periodic payment attributable to noncovered service performed after 1956 exceeds $2000.  It also provides for graduated implementation of WEP by specified percentages with respect to incremental amounts above such threshold, up to 100% for combined amounts over $3000.  WEP primarily affects people who spent most of their careers working for a government agency, but who also worked at other jobs where they paid Social Security taxes long enough to qualify for retirement or disability benefits.

Pending before the House Ways and Means Committee 2/25/99.  No further action before adjournment.

Ø       Mandatory Social Security Coverage of State and Local Governments

S.21 by Sen. Daniel Patrick Moynihan (D-NY)*

Imposes mandatory coverage for newly hired state and local government employees as of Dec. 31, 2001

Pending before Senate Finance Committee - hearings held 3/16/99.  No further action before adjournment.

Issue

Issue

Bill Number & Sponsor

Summary

Status

H.R.249 by Rep. Mark Sanford (R-SC)*

Same except change is effective for service performed beginning after Dec. 31, 1997.

Pending before House Ways and Means Committee - Social Security subcommittee 2/12/99.  No further action before adjournment.

H.R.3206 by Rep. Nick Smith (R-MI)*

Same except change is effective for service performed beginning after Dec. 2000

Pending before House Ways and Means Committee - Social Security subcommittee 11/13/99.  No further action before adjournment.

Ø       Reform

S.21 by Sen. Daniel Patrick Moynihan (D-NY)

Provides for a normal retirement age of 65.  Creates a "Voluntary Investment Fund" in the Treasury.  Employees designate a "Voluntary Investment Account" (VIA) into which contributions will be deposited on their behalf.  Employees contribute 1% of wages and the employer matches that rate. Self-employed make a 2% contribution based on their wages.  The plan also provides for reduced FICA rates through 2029 and a reallocation of employment taxes through 2059 to keep trust funds in actuarial balance

Pending before Senate Finance Committee - hearings held 3/16/99.  No further action before adjournment.

H.R.1793 by Reps. Jim Kolbe (R-AZ) & Charles Stenholm (D-TX)

Creates individual retirement savings accounts in which employees can invest a portion of their FICA taxes to supplement their Social Security benefit.  Accounts would be owned by individuals and administered by the government.  Additionally, the retirement age would gradually be increased to 67 years by 2011.  (Under current law, retirement age increases to age 67 in 2027.)

Pending before the House Ways and Means Committee 5/13/99.  No further action before adjournment.

S.1383 by Sens. Judd Gregg (R-NH) & John Breaux (D-LA)

Similar, in some respects, to H.R 1793.

Pending before Senate Finance Committee 7/16/99.  No further action before adjournment.

Issue

Bill Number & Sponsor

Summary

Status

Proposal by Reps. Bill Archer (R-TX) & Clay Shaw (R-FL)

Does not increase the retirement age.  Reserves 100% of Social Security payroll taxes for Social Security.  Maintains current system including benefits with no privatization.  Creates a Social Security Guarantee Account (SSGA) in which employees would deposit money from the income tax credit equal to 2% of their wages.  Individuals will be given low-risk investment options in which to invest their funds.  No early withdrawals would be allowed.  Payroll taxes would be reduced in 2050 and 2060.

Not introduced before adjournment.

Ø       Repeal of Social Security Earnings Limit

H.R. 5 – Senior Citizens’ Freedom to Work Act, by Rep. Sam Johnson (R-TX)

Repeals earnings limit for those aged 65 through 69.  Under current law, individuals in that age bracket who are both drawing a Social Security benefit and continuing to work lose $1 in benefits for every $3 they earn in wages above a certain limit, which is $17,000 in 2000.  The repeal will not apply to individuals aged 62 through 64 who are drawing an early Social Security benefit and continuing to work.  The repeal is effective for taxable years beginning after Dec. 31, 1999, so it is retroactive.  Note:  the repeal will directly affect those states that use the earnings limit to cap the amount of salary a retired individual may work in post-retirement employment without losing his/her pension benefit.

The President signed the bill on 4/7/00.  It became public law # 106-182.