[Congressional Record Volume 141, Number 157 (Wednesday, October 11, 1995)]
[Senate]
[Pages S15040-S15041]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. CAMPBELL:
  S. 1313. A bill to amend the Internal Revenue Code of 1986 to permit 
India tribal governments to maintain section 401(k) plans for their 
employees; to the Committee on Finance.


                       401(k) PROGRAM LEGISLATION

 Mr. CAMPBELL. Mr. President, today, I introduce a bill that 
will statutorily permit tribal governments, and enterprises owned by 
tribal governments, to offer salary reduction pension plans to their 
employees under section 401(k) of the Internal Revenue Code.
  Under current law, tribal governments are not allowed to offer tax 
deferred, salary reduction pension plans because tax exempt 
organization are generally prohibited from doing so. Further 
exacerbating the dilemma confronting tribal governments is the fact 
that they are not eligible to participate in other tax deferred, salary 
reduction pension plans.
  For example, since 1982 a dozen or more Indian tribal governments 
have adopted section 403(b) salary reduction pension arrangements only 
to have the Internal Revenue Service determine these arrangements are 
not properly qualified. In addition, Indian tribal governments are not 
eligible to offer section 457 salary reduction pension arrangements 
because they are not ``eligible employers'', as defined in section 457.
  It is apparent that Indian tribal governments seem to be one of only 
a few categories of employers who do not have these kinds of pension 
arrangements available to them. I believe that Indian tribal 
governments, like most all employers, should have opportunity to offer 
competitive salary reduction pension arrangements, such as a 401(k).
  Mr. President, the 401(k) plan was formally authorized in 1978 as a 
salary reduction arrangement for employees of profit making firms. The 
authority was subsequently expanded to tax exempt organization and 
State and local government. In 1986, however, State and local 
governments and nonprofit organizations, including Indian tribes, were 
prohibited from offering 401(k)'s. At this time, only rural electric 
cooperatives are exempted from the prohibition.
  Mr. President, this bill simply adds Indian tribal governments to the 
list of qualified offerors.
  A 401(k) plan permits employees to elect a contribution of part of 
their wages on a tax-deferred basis to a plan that may offer several 
investment options. Employers usually make contributions, which are 
also tax-deferred. In the same way, investment earnings are also tax 
deferred. This means that taxes aren't paid on the amount saved until 
it is withdrawn, thereby earning greater interest. Essentially, this 
expands the amount of money invested, and allows participants to put 
more money to work for them.
  Without question, Indian tribal governments should be allowed to 
offer some kind of tax deferred salary reduction plan. Almost all 
sectors of society, including the Federal Government, Congress, State 
and local governments, and private employees are allowed to enroll in 
salary reduction pension plans. In 1990, according to Department of 
Labor statistics, about 19.5 million Americans were enrolled in 401(k) 
plans.
  Tribal governments should be allowed to offer 401(k) pension plans 
because they will give tribal employees an incentive to save money for 
retirement. It's no secret that Indian tribes have a history of 
economic hardship. Under this plan, workers who otherwise might not 
save money, and workers who otherwise might not be offered a pension 
plan, will be allowed to participate. In addition, the portability of 
benefits will encourage tribal employees to enroll in pension plans. If 
an employee terminates employment with the tribe, that person is 
allowed to put the accumulated savings into an individual retirement 
account [IRA]. A 401(k) plan also must be offered to all employees on a 
nondiscriminatory basis, ensuring that both higher and lower wage 
employees must be able to access pension benefits.
  As tribal governments are successful in their business ventures, it 
is critically important that tribal employees are encouraged to save 
money for retirement. In the past, only a few tribal governments had 
the resources to offer employees salary reduction pension plans. Today, 
however, with the growth of tribal enterprises, there is more money to 
invest in the future and there are more tribal employees. In my home 
State, the largest employer in Montezuma County is now the Ute Mountain 
Ute Tribe. It's time that Congress recognize the economic gains being 
made by tribes and to allow them to offer 

[[Page S 15041]]
these broad based, elective deferral arrangements for their employees.
  There is danger that if Congress fails to act now, tribes will 
mistakenly offer their employees 401(k) pension plans. Current law is 
confusing, leading some tribes to think that they are already qualified 
to offer 401(k) plans. Investment companies are trying to sell 401(k) 
pension plans to tribes, even though it's not legal. Unfortunately, we 
know from the past that this can lead to the loss of tribal funds. This 
proposal explicitly allows tribal governments to offer these plans, 
thereby clearing up any confusion.
  Recognizing the advantages of section 401(k) salary reduction pension 
arrangements, the House Ways and Means Committee included in its budget 
reconciliation mark a provision to again expand the authority to a 
broader range of organizations that include nonprofit organizations and 
State and local governments.
  Mr. President, it is my hope that in the coming days this proposal 
will be favorably considered by my colleagues on the Finance Committee. 
In closing I would ask unanimous consent that a revenue estimate from 
the Joint Tax Committee also be included in the Record to accompany the 
text of the bill.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                S. 1313

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

     SECTION 1. ELIGIBILITY OF INDIAN TRIBAL GOVERNMENTS TO 
                   MAINTAIN SECTION 401(k) PLANS.

       (a) In General.--The last sentence of section 401(k)(4)(B) 
     of the Internal Revenue Code of 1986 (relating to 
     ineligibility of certain governments and exempt 
     organizations) is amended to read as follows: ``This 
     subparagraph shall not apply to a rural cooperative plan or a 
     plan maintained by an Indian tribal government (within the 
     meaning of section 7871).''
       (b) Effective Date.--The amendment made by this section 
     shall apply to plans established after December 31, 1994.
                                                                    ____

                                    Congress of the United States,


                                  Joint Committee on Taxation,

                                  Washington, DC, October 9, 1995.
     Hon. Ben Nighthorse Campbell,
     U.S. Senate,
     Washington, DC.
       Dear Senator Campbell: This is in response to your request 
     dated July 17, 1995, for a revenue estimate of a proposal 
     that would modify present law to permit Indian tribal 
     governments to maintain qualified cash or deferred 
     arrangements (sec. 401(k) plans).
       For the purpose of the revenue estimate, we have assumed 
     that employees of tribal governments would include employees 
     of gambling casinos owned and operated by Indian tribal 
     governments.
       The proposal would be effective with respect to plans 
     established after December 31, 1994. We estimated that this 
     proposal would reduce Federal fiscal year budget receipts as 
     follows:

                        [In millions of dollars]

Fiscal years:
  1996...............................................................-1
  1997...............................................................-2
  1998...............................................................-2
  1999...............................................................-2
  2000...............................................................-3
  2001...............................................................-3
  2002...............................................................-3
                                                               ________