[Congressional Record Volume 142, Number 55 (Thursday, April 25, 1996)]
[Extensions of Remarks]
[Pages E629-E630]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




  INTRODUCTION OF THE PUBLIC EMPLOYEE RETIREMENT SECURITY ACT OF 1996

                                 ______


                          HON. BRUCE F. VENTO

                              of minnesota

                    in the house of representatives

                       Wednesday, April 24, 1996

  Mr. VENTO. Mr. Speaker, workers in all sectors of the economy are 
feeling the pressure of economic changes and the concerns associated 
with planning for retirement. I am introducing legislation, The Public 
Employee Retirement Security Act of 1996, to update the retirement 
plans for public sector workers, giving them improved options and more 
security for their pensions.
  Private sector 401(k) plans have benefited from improvements and 
updates over the years. The equivalent public sector plans, called 457 
plans, have not kept pace with the necessary changes to such 
retirement-savings vehicles. My bill improves the public-sector plans 
and the rules that govern them.
  Currently these 457 plans cap annual employee contributions to a set 
maximum limit of $7,500. My legislation would index this limit to 
inflation, as it is for 401(k) plans, increasing the ability of these 
workers to meet their retirement needs.
  The bill also increases the flexibility of these governmental plans 
by allowing accounts that are inactive for at least 2 years and contain 
less than $3,500 to be cashed-out by the employee. Such a distribution 
would allow the employee with a changed life situation to access the 
funds, subject to normal taxation, and reduce the employer's costs of 
maintaining these dormant accounts. An employee could also alter the 
time when retirement benefits should begin. This provision recognizes 
that some public-sector employees, like firefighters and police 
officers, may retire early and move on to different careers. Altering 
the date when benefit distributions must occur gives these workers 
flexibility in their retirement.
  The safety of governmental plans is also strengthened by this 
legislation. Currently employee accounts under 457 plans are the 
property of the employer and therefore subject to claims by creditors. 
The financial crisis in Orange County, CA highlighted this risk to 
governmental pensions. My bill would rectify this situation by placing 
457 accounts into trusts, like 401(k) plans, maintaining them for the 
benefit of the employees. The accounts would be shielded from claims by 
an employer's creditors and others.
  The bill improves the operation of government plans by enhancing 
their ability to maintain tax-exempt status. The rules governing 
pension plans limit the amounts paid out to prevent taxpayer subsidy of 
overly generous benefits. While geared toward benefits paid to top 
corporate executives, these limitations are

[[Page E630]]

also applied to governmental plans. Unfortunately, these limitations do 
not take into account the design and operation differences between 
public and private pensions. Some governmental pensions are designed to 
offer higher compensation to long-tenured, but low paid workers, or 
include special accounting of disability and survivor benefits, leading 
to violation of the pension limitations and endangering the plan's tax-
exempt status. If this status is revoked, the benefits paid by such 
plans would be much smaller than otherwise. To prevent this, my bill 
lifts such restrictions on governmental pensions, allowing continuation 
of the special nature of these pensions without threatening their tax 
status.
  This measure is key for public sector employees. Like those in the 
private sector, they need a reliable, safe retirement system and the 
flexibility to plan for retirement. My legislation provides the 
necessary changes to provide this security and flexibility. I urge my 
colleagues to join me by cosponsoring this legislation.

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