[Congressional Record Volume 141, Number 145 (Monday, September 18, 1995)]
[Senate]
[Pages S13742-S13743]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. KYL:
  S. 1258. A bill to amend the Internal Revenue Code of 1986 to allow a 
one-time election of the interest rate to be used to determine present 
value for purposes of pension cash-out restrictions, and for other 
purposes; to the Committee on Finance.


         uruguay round agreements act modification legislation

 Mr. KYL. Mr. President, I introduce legislation to make two 
modifications 

[[Page S 13743]]
to the pension-related provisions of the 1994 Uruguay Round Agreements 
Act.
  Mr. President, one of the greatest challenges facing Americans today 
is to save and invest for retirement. It is a challenge that is made 
difficult by all of the important matters that compete for a share of 
the American family's limited income day in and day out. Parents 
routinely ask themselves, for example, if they can afford to make a 
contribution to an individual retirement account when they still need 
to save for their child's college education.
  Sometimes, the choices people face are even more stark: Whether to 
set aside money for retirement, repair the family car so a mother or 
father can get to work, or just put food on the table or clothes on the 
kids' backs.
  Employers, too, must make similar choices. To attract and retain 
qualified employees, they want to be able to offer good pension 
benefits. But, they have to decide whether they can put more money into 
a pension plan for their employees when the business needs new 
equipment just to stay competitive.
  It's easy to relegate retirement to second place behind any of these 
other pressing needs--especially when retirement is 5, 10, 20, or 30 
years away. But, adequate planning for retirement is no less important 
or urgent. When the time comes, we will all need to draw upon the 
resources we have been able to set aside during our working years.

  Because there are so many competing demands placed on people's 
incomes--because it is so difficult to save for retirement even under 
the best of circumstances--the Federal Government should be sure to do 
what it can to encourage people to save and invest for their retirement 
years.
  One thing Congress could do in that regard is provide new incentives 
to save. The new chairman of the Finance Committee, Senator Bill Roth, 
has a plan to enhance and overhaul the Individual Retirement Account 
[IRA]. I am pleased to have cosponsored that proposal, S. 12, with him.
  Another thing we could do is simplify current law to make it easier 
for people and their employers to participate in retirement plans. 
Senator Pryor has an excellent proposal, S. 1006, the Pension 
Simplification Act, that I hope the Finance Committee will also 
consider when it acts on reconciliation in the near future.
  The bill that I am introducing today takes two additional steps in 
the direction of pension simplification, correcting two problems that 
were created by the Uruguay Round Agreements Act, last year's GATT 
bill.
  The first change in my bill relates to the interest rate used to 
calculate lump sum distributions from defined benefit pension plans. 
The GATT bill required use of the interest rate on 30-year Treasury 
securities, a rate that is proving too volatile for many retirement 
plans, particularly small plans. As Bruce Tempkin, an actuary and small 
business pension specialist at Louis Kravitz & Associates, put it 
recently, ``it is similar to taking out a varible-rate mortgage with no 
cap.'' You could find yourself getting ready to retire and expecting a 
lump sum distribution of a given amount, but being told that you will 
actually get a third less because the interest rate just changed.
  My bill would give plans a one-time option to choose a fixed interest 
rate between 5 and 8 percent instead of the floating 30-year Treasury 
rate. That will make it easier for employers to plan for the required 
contributions, and for employers and employees alike to understand what 
their lump sum benefits will ultimately be.
  The second change included in my bill would correct an anomaly that 
was created under section 415(b)(2)(E) of the code. As a result of the 
change made in last year's GATT bill, lump-sum distributions are 
calculated differently from--and thereby bear no relationship to--the 
actuarial equivalent of a monthly life annuity for early retirees. It 
is a result that, from all indications was unintended. My bill includes 
a technical correction to ensure that the two options--the monthly life 
annuity and the lump sum distribution--are indeed actuarially 
equivalent for early retirees.
  Mr. President, I invite my colleagues to join me as a cosponsor of 
this important initiative. I also ask unanimous consent that the text 
of the bill be printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1258

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. INTEREST RATE FOR DETERMINATION OF PRESENT VALUE 
                   FOR PURPOSES OF PENSION CASH-OUT RESTRICTIONS.

       (a) In General.--Subclause (II) of section 417(e)(3)(A)(ii) 
     of the Internal Revenue Code of 1986 (relating to 
     determination of present value) is amended by inserting ``, 
     or, at the irrevocable election of the plan, an annual 
     interest rate specified in the plan, which may not be less 
     than 5 percent nor more than 8 percent'' after ``prescribe''.
       (b) Conforming Amendment.--Subclause (II) of section 
     205(g)(3)(A)(ii) of the Employee Retirement Income Security 
     Act of 1974 (29 U.S.C. 1055(g)(3)(A)(ii)) is amended by 
     inserting ``, or, at the irrevocable election of the plan, an 
     annual interest rate specified in the plan, which may not be 
     less than 5 percent nor more than 8 percent'' after 
     ``prescribe''.
       (c) Effective Date.--The amendments made by this section 
     shall take effect as if included in the enactment of the 
     amendments made by section 767 of the Uruguay Round 
     Agreements Act.

     SEC. 2. MODIFICATION OF CERTAIN ASSUMPTIONS FOR ADJUSTING 
                   BENEFITS OF DEFINED BENEFIT PLANS FOR EARLY 
                   RETIREES.

       (a) In General.--Subparagraph (E) of section 415(b)(2) of 
     the Internal Revenue Code of 1968 (relating to limitation on 
     certain assumptions) is amended--
       (1) by striking ``Except as provided in clause (ii), for 
     purposes of adjusting any benefit or limitation under 
     subparagraph (B) or (C),'' in clause (i) and inserting ``For 
     purposes of adjusting any limitation under subparagraph (C) 
     and, except as provided in clause (ii), for purposes of 
     adjusting any benefit under subparagraph (B),'', and
       (2) by striking ``For purposes of adjusting the benefit or 
     limitation of any form of benefit subject to section 
     417(e)(3),'' in clause (ii) and inserting ``For purposes of 
     adjusting any benefit under subparagraph (B) for any form of 
     benefit subject to section 417(e)(3),''.
       (b) Effective Date.--The amendments made by this section 
     shall take effect as if included in the enactment of the 
     amendments made by section 767 of the Uruguay Round 
     Agreements Act.

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