[Congressional Record Volume 144, Number 1 (Tuesday, January 27, 1998)]
[Extensions of Remarks]
[Pages E10-E11]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




       INTRODUCTION OF LEGISLATION TO IMPROVE PENSION PORTABILITY

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                          HON. RICHARD E. NEAL

                            of massachusetts

                    in the house of representatives

                       Tuesday, January 27, 1998

  Mr. NEAL of Massachusetts. Mr. Speaker, today I am introducing 
legislation which addresses an extremely important issue--pension 
portability. Today, there are 51 million American workers with no 
pension plan and there are many others who lose their pensions when 
they change jobs. Our society is ever changing and one of these changes 
is job mobility. It is much more common for individuals to have several 
jobs than in the past.

[[Page E11]]

  Unfortunately, when individuals change jobs, they are not able to 
continue the same level of pension benefits. This fact is especially 
true if the individual's pension plan is a defined benefit plan. Today, 
I am introducing legislation which takes steps towards improving 
pension portability upon employment separation. The legislation 
improves pension portability for both defined benefit and defined 
contribution plans.
  For defined contribution plans, the legislation reduces the current 
vesting period of five years for employer contributions to three years. 
For both defined benefit plans and defined contribution plans, the 
legislation requires the employer to offer the employee the option of 
receiving a lump sum distribution to an individual retirement account 
(IRA). The employer has to make this offer to the employee within 90 
days of termination of employment. The employee does not have to take 
this option because in some situations this would not be the best 
option for the employee.
  The lump sum would be directly transferred to an IRA. These funds 
would be subject to a higher penalty than the current law penalty of 10 
percent for withdrawals made prior to the taxpayer reaching age 59\1/
2\. Withdrawals would be subject to a 25 percent penalty for the first 
two years and then it would be 10 percent. These penalties are the same 
penalties as for simple IRAs. The 10 percent penalty would be waived 
for the three allowable purposes under current law which are first time 
purchase of a home, costs of higher education, and medical expenses.
  The legislation waives the 10 percent penalty for withdrawals made 
before age 59\1/2\ for individuals who have received 12 weeks of 
unemployment compensation. This provision is to help those who have 
lost their job and need to use their retirement savings to make ends 
meet during difficult financial times.

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