[Congressional Record Volume 144, Number 86 (Friday, June 26, 1998)]
[Extensions of Remarks]
[Pages E1253-E1255]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




   THE RETIREMENT ACCESSIBILITY, SECURITY AND PORTABILITY ACT OF 1998

                                 ______
                                 

                           HON. SAM GEJDENSON

                             of connecticut

                    in the house of representatives

                        Thursday, June 25, 1998

  Mr. GEJDENSON. Mr. Speaker, today, joined by dozens of our 
colleagues, I am proud to introduce the Retirement Accessibility, 
Security and Portability Act of 1998, comprehensive pension legislation 
which will increase access to our nation's private pension system, 
enhance the protection and security of our nation's retirement funds, 
boost options for portability within the system and restore a degree of 
gender equity to the system.
  I have been working on this issue for a number of years now, and have 
been dedicated to it because of a number of factors. First, we are in a 
new world today. Today's worker does not go through life with one job. 
They move around a lot. They go from job to job, taking advantage of 
new training and opportunities. While this is great for economy, it 
also means that today's workers are not getting the kind of retirement 
benefits our parents had. Gone are the days when a person would work 
for one company, retire and collect one check a month.
  I have also been concerned because 51 million Americans, half the 
American workforce, have no pension coverage. Of that, 32 million work 
in small businesses. This is a staggering fact, and we must do 
something to help people save more, particularly our nation's women and 
small business employees.
  Women are particularly disadvantaged by our pension system. 12 
million women in this country work in firms that do not offer pensions. 
Two thirds of today's working women are concentrated in industries that 
have the lowest pension coverage. Something must be done to improve 
this.
  Once our nation's families are saving, it is essential that we 
protect those savings. Mr. Speaker, as many of our colleagues know, in 
the town of Westbrook in my eastern Connecticut district, about 80 
employees working for a firm called Emergi-Lite began 1998 by finding 
out that their pension money was gone. They had been defrauded out of 
their money by a swindler. That swindler recently pleaded guilty and 
will be spending a few years in jail. Our pension system needs to 
tighten up so that tragedies like this do not happen again.
  As I said earlier, the Retirement Accessibility, Security and 
Portability Act of 1998 is comprehensive pension reform legislation 
that seeks to solve some of these problems.
  Since accessibility is a problem, particularly in small businesses, I 
propose a tax credit to cover a portion of the start-up and 
administrative costs of starting a pension plan. Many small employers 
at home in Connecticut have told me that the costs of starting a plan 
keep them from doing so. Since savings are a national priority, we 
should make it easier for small employers to help their employees to 
save.
  In this legislation I also propose to establish a simple pension plan 
that guarantees monthly payments for life. The gentleman from 
Massachusetts, Mr. Neal, working with the President, brought this idea 
to my attention. In this bill we establish the SMART, or Secure Money 
Annuity or Retirement Trust. This is a new, simple kind of annuity plan 
that will bring people into the retirement savings system in a way that 
guarantees benefits for as long as a retiree lives. This is something 
that will benefit millions of Americans.
  We also are introducing in this bill new security protections. When 
this bill becomes law, participants in a plan, either defined benefit 
or defined contribution, will begin receiving statements of how their 
investments are doing. If the employees can see their money grow, they 
will be more in tune to when there are problems.
  Finally Mr. Speaker, we make a number of changes in this bill to 
restore a sense of gender equity to our retirement savings system. 
While the changes outlined above will benefit all workers, they will 
benefit women in particular, since they are more likely to lack 
retirement coverage. We have in this bill a series of improvements, 
however, for women in particular. For example, we have new safeguards 
to ensure that pension benefits are not overlooked when a couple 
divorces. We add a new option for federal workers to increase benefits 
for women who outlive their husbands. We add a new hotline targeted at 
women so they have somewhere to turn when pension questions arise.
  Mr. Speaker, I want to thank so many of my colleagues and their 
staffs for the work they have done in putting this bill together. In 
particular, I would like to thank Leader Gephardt, Mr. Neal, Mr. 
Rangel, Senator Daschle, Mr. Pomeroy, Mrs. Kennelly, Senator Moseley-
Braun, Mr. Andrews, Mr. Jefferson, Mr. Payne, Ms. Stabenow, Mr. Price, 
Mr. McNulty, and Mr. McDermott. Their work, and the work of their 
staff, has been of enormous help in bringing this legislation forward.
  It is my hope, Mr. Speaker, that the Leadership of this House, and 
the Chairmen of the Committees of jurisdiction bring this bill forward 
for consideration. The issue of Retirement Security is an incredibly 
important one to our nation's working families. There is no more 
important effort our leaders can make.
  Mr. Speaker, I submit a detailed, section by section summary of the 
bill for the Record.

   The Retirement Accessibility, Security and Portability Act of 1998


             TITLE I--Expanding Pension Coverage and Access

       Increases Coverage through Access to Payroll Deduction for 
     Retirement Savings.--An employee would be allowed to make 
     contributions of up to $2,000 tax-free to his or her IRA 
     through automatic payroll deductions from wages. This would 
     be in lieu of taking the deduction at the end of the year on 
     the individual's tax return. The immediate tax benefit 
     received by the individual is more beneficial than the 
     deduction taken many months later. In addition, contributions 
     of small amounts would be more appealing to low-income 
     workers than a one-time contribution of $2,000.
       Increases Coverage through a Nonrefundable Tax Credit For 
     IRA Contributions made by Low-Income Workers.--The maximum 
     credit of $450 per year would be more beneficial to low-
     income workers than the $2,000 deduction because many of 
     these workers are in the 15-percent tax bracket. The benefit 
     would be delivered to taxpayers on a sliding scale basis. 
     Thus, the lowest income workers, who need to save some 
     minimum amount for their retirement, would be provided with 
     the greatest tax benefit under the credit.
       Creates Flexibility by Allowing Penalty-Free IRA 
     Withdrawals in Cases of Long-Term Unemployment. An employee 
     would be permitted to make penalty-free (but not tax-free) 
     withdrawals from an employer sponsored plan such as 401(k) 
     or 403(b), as well as an IRA, in cases of unemployment 
     that exceeds the receipt of benefits for 12 consecutive 
     weeks. (Sec. 132, HR 1130)
       Enhances Accountability by Requiring that Pension Plan 
     Participants be Given Periodic Benefit Statements. Pension 
     plans would be required to provide plan participants and 
     beneficiaries with benefit statements reflecting the balance 
     and activity of the participants' or beneficiaries' accounts 
     at least annually for defined contribution plans (such as 
     401(k)) and at least once every three (3) years for defined 
     benefit plans. This is in lieu of providing benefit 
     statements only upon request.

[[Page E1254]]

       Expands and Increases Coverage through a New Simplified 
     Tax- Favored Defined Benefit Pension Plan. The new simplified 
     defined benefit plan, known as Secure Money Annuity or 
     Retirement Trust (SMART), would provide small employers with 
     the option of offering retirement benefits through a defined 
     benefit plan while at the same time providing employees with 
     the attractive feature of full portability. SMART would 
     provide each participant with a minimum guaranteed benefit 
     upon retirement. The participant would be poised to receive a 
     larger retirement benefit than the guaranteed amount if the 
     investment on the plan assets out-perform the presumed rate 
     of return. Benefits would be guaranteed by the Pension 
     Benefit Guaranty Corporation (PBGC).
       Expands Coverage for Non-highly Compensated Employees 
     through Modification to 401(k) Safeharbors. An employer who 
     chooses to offer a 401(k) plan under certain safe harbors 
     that are provided for these types of plans would be required 
     to a make an employer minimum contribution of one percent of 
     compensation for each eligible employee. This ensures a 
     minimum benefit for each eligible plan participant. The 
     minimum employer contribution would be made without any 
     reference to whether the employee made an elective deferral 
     and would be in addition to any employer matching 
     contribution.
       Improves the Nondiscrimination Rules for 401(k) Plans (See 
     above)
       Increases Benefits by Requiring Sponsors of the SIMPLE Plan 
     to Make a Minimum Contribution. Employers who offer the new 
     simplified 401(k) plan (SIMPLE) would be required to make a 
     minimum contribution of one percent of each eligible 
     employee's compensation on behalf of each eligibel 
     participant without reference to whether such participant 
     makes an elective deferral.
       Enhances Benefits through Simplifying the Definition of 
     Highly Compensated Employee. The definition of a highly 
     compensated employee would be determined under a two-pronged 
     test rather than the current three-pronged test. Thus, a 
     highly compensated employee would be determined either by 
     compensation or ownership.
       Increases Benefits by Waiving Certain Section 415 Limits 
     for Multiemployer Plans. Benefits accrued under a multi-
     employer plan would be paid to the plan participant (or 
     beneficiary) without reference to the 100-percent-of-
     compensation limit set forth under section 415. In addition, 
     certain survivor and disability benefits would be exempted 
     from adjustments for early commencement and for participation 
     and service of less than 10 years.
       Expands Access by Exempting Mirror Plans From Section 457 
     Limits. The amount of savings employees of state and local 
     governments and not-for-profits entities could save through 
     nonqualified deferred compensation plans would be increased.
       Expands Coverage through Immediate Participation in the 
     Thrift Savings Plan. Federal employees would be allowed to 
     choose whether they want to participate in the Thrift Savings 
     Plan immediately upon beginning employment. This will enable 
     these employees to get into the habit of saving for 
     retirement early in their employment and give them valuable 
     tax benefits that would otherwise be lost during the current 
     6- to 12-month required waiting period.
       Enhances the Stability of Funded Benefits by Simplifying 
     the Full Funding Limitation for Multiemployer Plans. The 
     current limit on deductible contributions, which is based on 
     a specified percentage of current liability, would be 
     repealed with respect to multiemployer plans. This will 
     permit deductible contributions in the amount by which the 
     accrued liability of the plan exceeds the value of the plan 
     assets.
       Simplifies Certain Vesting Requirements for Multi-employer 
     Plans. The current partial termination rules, which require 
     that participants become 100-percent vested in their accrued 
     benefits (to the extent funded) upon a partial termination of 
     a qualified retirement plan, would be repealed.
       Enhances the Stability of Funded Benefits by Repealing the 
     150-Percent-of-Current Liability Funding Limit. A defined 
     benefit plan is considered to be fully funded if the plan has 
     reached the following limitation--the lesser of (1) 150 
     percent of current liability or (2) the accrued liability 
     (including normal cost) under the plan. Contributions made to 
     a plan that has reached its full funding limit are not 
     deductible and the employer could be subject to an excise 
     tax. A plan at 150 percent of current liability may still 
     have excess accrued liabilities. The 150-percent-of-current 
     liability funding limit would be repealed. This also would 
     permit employers to fund-up their plans in good years in 
     planning for the bad years.
       Expands Coverage through a Tax Credit for Start-Up Expenses 
     of Newly Established Pension Plans. Small employers who 
     establish certain new pension plans would be allowed to claim 
     a credit for the first three years of maintaining the plan 
     with respect to administrative and educational expenses of 
     the plan. The credit would be up to 50 percent of permissible 
     expenses within certain limitations. The types of pension 
     plans that would be eligible for the credit would be any new 
     defined benefit or defined contribution plan, including 
     401(k), SIMPLE, or payroll deduction IRA arrangement.


        title ii--enhancing pension security and accountability

       Enhances Accountability of Benefits by Improving Disclosure 
     Requirements With Respect to Plan Participants and 
     Beneficiaries. Sponsors of small 401(k) plans (less than 100 
     participants) would be required to furnish to participants 
     and beneficiaries annual investment reports detailing 
     information the Secretary of Labor determines to be pertinent 
     to such individuals. Also, such reports would be required 
     to be provided to participants of a defined benefit plan 
     once every three (3) years. These changes also would apply 
     for purposes of multi-employer plans.
       Enhances Accountability of Benefits by Requiring Certain 
     Information to be given to Investment Managers of 401(k) 
     plans. If a sponsor of a 401(k) plan contracts the investment 
     and management of the plan to another person, the plan 
     sponsor is required to provide such person with sufficient 
     information that would permit the investment manager to 
     separately account for each participant's accrued benefits 
     even if the contract does not require such separate accounts.
       Requires a Study on Collectibles. The Secretary of Labor in 
     consultation with the Secretary of the Treasury is requested 
     to conduct a study on the extent of investment of pension 
     plans in collectibles and whether such investments present a 
     risk to the pension security of such plans. The report would 
     be due no later than twelve months (12) after the enactment 
     of the bill.
       Enhances the Security of Benefits by Prohibiting Credit 
     Card Loans From or Against Qualified Employer Plans. A 
     qualified plan would be prohibited from making any loan to a 
     plan participant or beneficiary through the use of a credit 
     card or any other intermediary.
       Expands Guaranteed Multi-employer Plan Benefits. The 
     maximum level of annual benefits guaranteed to each employee 
     under a multi-employer plan would be increased from $5,850 
     (set in 1980) to $12,870.
       Simplifies Certain Rules Governing the Department of 
     Labor's Authority to Assess Civil Monetary Penalties on 
     Prohibited Transactions. Certain conforming changes would be 
     made to parallel a similar excise tax that applies to certain 
     pension plans under the Internal Revenue Code.
       Simplifies Certain Rules Applicable to Substantial-Owner 
     Rules and Plan Terminations. The more complex rules currently 
     used to determine PBGC guaranteed benefits for 10-percent 
     owners of a business would be repealed. Such benefits would 
     be calculated under the same rules that apply to all other 
     plan participants.
       Enhances Benefit Security by Requiring a Report on Pension 
     Reversions. The Secretary of Labor, as Chair of the PBGC, 
     would be required to report annually to the President and 
     Congress regarding pension reversions.
       Enhances Benefits Security by Repealing the Limited Scope 
     Audit for Certain Pension Plans. Plan assets that are held by 
     certain regulated financial institutions would be required to 
     be included within the accountant's audit of the plan. This 
     provision is not meant to require that the plan's accountant 
     duplicate the work of the independent accountant who audits 
     the financial institution's books and records. It merely 
     requires the plan's accountant to use the Report on the 
     Processing of Transactions Service Organization under 
     American Institute of Certified Public Accountants Statement 
     on Auditing Standards No. 70.
       Enhances Benefits Security by Creating Reporting and 
     Enforcement Requirements for Employee Benefit Plans. The 
     plan administrator would be required to notify the 
     Secretary of Labor within five (5) business days whenever 
     the administrator has determined that there is evidence 
     that an irregularity may have occurred with respect to the 
     plan, or has received notice from the accountant that the 
     accountant has similarly determined that there is evidence 
     that an irregularity may have occurred. Also, the 
     administrator would also be required to furnish a copy of 
     such notification to the accountant engaged to audit the 
     plan's financial statements.
       Enhances Benefit Security through Additional Requirements 
     for Qualified Public Accountants. The ERISA definition of 
     ``qualified public accountant'' would be modified to include 
     regulatory requirements and qualifications that the Secretary 
     deems necessary to ensure the quality of plan audits.
       Requires Inspector General study to be conducted by 
     Department of Labor focusing on the need for regulatory 
     standards and procedures to authorize the Secretary of Labor 
     to prohibit persons from serving as qualified accountants.
       Enhances Benefit Security by Increasing the Excise Tax on 
     Plan Reversions. Under current law, corporations with defined 
     benefit plans that are actuarially over-funded may remove, 
     without a tax penalty, only certain excess assets needed to 
     fund retiree health benefits within prescribed limitations or 
     to establish an employee stock ownership plan. Termination of 
     a plan without establishing a new plan, or removal of assets 
     for any other reason, is subject to a maximum excise tax of 
     50-percent plus the normal corporate tax that would otherwise 
     apply. The maximum excise tax would be increased to 65-
     percent plus the normal corporate tax that would otherwise 
     apply.


          Title III--Improving Portability of Pension Benefits

       Expands Coverage through Faster Vesting of Employer's 
     Matching Contributions to Defined Contribution Plans. The 
     plan participant would be fully vested after completing three 
     (3) years of service (cliff vesting) or six (6) years of 
     service (graded vesting). Under cliff vesting no part of the 
     benefit vests to the participant until the participant has 
     completed at least three years of service. Under graded 
     vesting, the benefit is vested to the

[[Page E1255]]

     participant in 20-percent increments beginning after the 
     participant has completed two (2) years of service. Current 
     law provides for five-year cliff vesting and seven-year 
     graded vesting.
       Enhances Portability of Benefits under 410 (k) plans. 
     Severance from employment would be a permissible event for 
     the plan to make a distribution of the account balance to 
     each plan participant who may exercise his or her option to 
     roll over the balance to another plan or an IRA.
       Enhances Portability of Benefits Between Defined 
     Contribution Plans. Transfers of account balances held in 
     defined contribution plans would be permitted to be 
     transferred to another defined contribution plan without 
     requiring complete replication of distribution options. Such 
     transfers would be permitted only where the participant 
     knowingly and voluntarily elects the transfer and any 
     applicable spousal consent rights were respected prior to the 
     transfer.
       Enhances Portability of Benefits by Expanding PBGC's 
     Missing Participants Program. The PBGC's missing participants 
     program would be extended to defined contribution plans 
     such as a 401(k). The PBGC would act as a clearing house 
     for terminated plans of employers who have moved, changed 
     names, or gone out of business. This would enable 
     participants of those plans to receive their pension 
     benefits under the plan.
       Enhances Portability of Benefits Held by Certain Employees 
     of Non-Profit Entities and Public School Systems. Employees 
     of certain employers who participate in a 403(b) plan would 
     be permitted to roll their account balance into the new for-
     profit employer-sponsored plan when they change employment.
       Enhances Portability of Benefits held by Participants of 
     457 Deferred Compensation Plans. Employees of certain non-
     profit entities and/or state/local governments who 
     participate in a section 457 plan would be permitted to roll 
     their account balance (to the extent funded) to and IRA upon 
     termination of employment.
       Enhances the Portability of Benefits through modifying the 
     60-Day Rollover Period in Certain Cases. In cases of natural 
     disaster and military service the 60-day rollover period 
     would be extended to provide relief against substantial tax 
     penalties that would otherwise result from missing the 60-day 
     rollover deadline.
       Expands Coverage and Enhances Portability through the 
     Purchase of Certain Service Credits. Employees of state and 
     local governments, especially teachers who often move between 
     states and school districts in the course of their careers, 
     would be permitted to use funds from their 403(b) or 457 
     defined contribution plans to purchase service credits for 
     qualification of full benefits under a defined benefit plan.


           Title IV--Comprehensive Women's Pension Protection

       Enhances Certain Government Pension Benefits. Modifies 
     benefits offset for certain surviving spouses who are retired 
     government workers by reducing only two-thirds (2/3) of their 
     combined Social Security spousal benefit that exceeds $1,200 
     a month. This current offset is a two-thirds reduction of 
     their total monthly government pension benefit.
       Enhances Pension Benefits for Many Plan Participants 
     through Repeal of Social Security Integration by Year 2004. 
     Qualified pension plans which integrate the plan benefits 
     with Social Security benefits would be required to adopt the 
     limited integration rules included in the Tax Reform Act of 
     1986 with respect to benefits attributable to plan years 
     prior to 1988. In addition, integration would be repealed 
     completely for benefits accrued for plan years beginning in 
     the year 2004. Benefits under SEP (Simplified Employee 
     Pension) plans could not be integrated.
       Enhances Benefit Security for Benefits Under a Qualified 
     Benefit Plan Upon Divorce. The non-participating spouse would 
     be entitled to an automatic share of the pension benefits, 
     except where such benefits are protected by a valid and 
     enforceable agreement which constitutes a part of the 
     equitable division of property pursuant to the divorce. The 
     participating spouse would be required to notify the plan of 
     divorce proceedings that have been undertaken. The provision 
     would apply in cases of couples who have been married for 
     five years or more.
       Enhances Benefits of Certain Spouses With Respect to 
     Railroad Retirement. The requirement that a former husband 
     must have started collecting his own railroad retirement 
     benefits in order for the former spouse to receive his or her 
     benefits pursuant to an annuity would be repealed.
       Enhances Tier II Railroad Retirement Benefits to Surviving 
     Spouses After Divorce. Payment of benefits to a surviving 
     spouse pursuant to a divorce agreement, annulment, legal 
     separation, or any other Court approved termination of the 
     marriage would not be terminated upon the death of the 
     participating spouse.
       Enhances Benefits of Surviving Spouses of Certain Civil 
     Servants. Surviving spouses (and former spouses if awarded 
     pursuant to divorce) of employees who died while eligible for 
     a deferred annuity under the Civil Service Retirement System 
     (CSRS) would be allowed to elect to receive either (1) 55 
     percent of the former employee's deferred annuity, commencing 
     when the employee's deferred annuity would have commenced had 
     the employee lived; (2) the actuarial equivalent of the 
     amount determined under (1) above, but commencing at the time 
     of the former employee's death; or (3) a refund of the former 
     employee's retirement contributions.
       Enhances Benefits for Former Spouses of Federal Employees. 
     Courts would be authorized to require the ex-husband to name 
     his former wife as beneficiary under the pension plan of all 
     or a portion of any refunded contributions.
       Enhances the Security of Benefits of Certain Spouses of 
     Plan Participants. The participating spouse's plan would be 
     required to provided the participant's spouse with a copy of 
     the explanation of survivor benefits and options under the 
     plan in the same manner as provided to the plan participant.
       Enhances Certain Spousal Benefits with Respect to Joint and 
     Survivor Annuities. Modifies the current survivor annuity 
     requirements to provide that the plan participant may elect 
     to have the benefit paid in the form of a qualified joint and 
     two-thirds (2/3) survivor annuity.
       Enhances Security of Spousal benefits Under all Defined 
     Contribution Plans. All defined contribution plans would be 
     required to offer the option of a joint and survivor annuity.
       Enhances Spousal Benefits Under 401(k) Plans. The spousal 
     consent requirement that applies to defined benefit plans 
     would be extended to defined contribution plans to prevent 
     the participants from draining all the benefits from the plan 
     to the detriment of the non-participating spouse.
       Expands and Enhances the Benefits of Participants Who 
     Utilize Leave Under the Family and Medical Leave Act. Hours 
     for leave taken under the Family and Medical Leave Act would 
     be credited under the employee's pension plan for purposes of 
     participating in the plan and vesting of the participant's 
     benefits under the plan.
       Enhances Pension Benefits for Plan Participants With an 
     Emphasis on Serving Women. A toll-free hotline would be 
     established by the Department of Labor to serve as a resource 
     for women on pension issues; a source of referrals for the 
     caller to the appropriate agencies; and a source for 
     applicable printed materials.

     

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