[Congressional Record Volume 144, Number 124 (Thursday, September 17, 1998)]
[Senate]
[Pages S10508-S10509]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                 CONSUMER BANKRUPTCY REFORM ACT OF 1998

  The PRESIDING OFFICER. The clerk will report the pending business.
  The assistant legislative clerk read as follows:

       A bill (S. 1301) to amend title II, United States Code, to 
     provide for consumer bankruptcy protection, and for other 
     purposes.

  The Senate resumed consideration of the bill.


                Amendment No. 3600 to amendment no. 3559

       (Purpose: To provide for protection of retirement savings)

  Mr. HATCH. Mr. President, I send an amendment to the desk and ask for 
its immediate consideration.
  The PRESIDING OFFICER. Without objection, the pending amendment is 
set aside. The clerk will report.
  The assistant legislative clerk read as follows:

       The Senator from Utah [Mr. Hatch], for himself, Mr. Graham, 
     Mr. Durbin, and Mr. Grassley, proposes an amendment numbered 
     3600 to amendment No. 3559.

  Mr. HATCH. Mr. President, I ask unanimous consent that reading of the 
amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:
  [The amendment was not available for printing. It will appear in a 
future edition of the Record.]
  Mr. HATCH. Mr. President, I am pleased to offer this amendment 
cosponsored by Senator Charles Grassley of Iowa on our side and Senator 
Bob Graham of Florida and Senator Dick Durbin on the Democrat side, all 
of whom I would like to thank for their hard work on this important 
matter.
  The Hatch-Graham-Grassley-Durbin pension amendment, among other 
things, is designed to do the following: Provide a uniform exemption 
for all types of tax-favored qualified pension plan assets in 
bankruptcy including Roth IRAs whose status under current bankruptcy 
law is uncertain, protect retirement assets that are in the process of 
being rolled over into a new qualified plan, and protect loans from 
pension funds in bankruptcy.
  Under present law, retirement plans which have received a 
determination letter from the IRS pursuant to section 7805 of the 
Internal Revenue Code of 1986, as amended, which have not been revoked 
by a court or by the IRS have, in many instances, been held by the 
bankruptcy courts not to be qualified plans. This holding allows the 
trustee for the bankruptcy estate to seize the interest of the bankrupt 
participant in the plan.
  Similarly, if a retirement plan that is not eligible to receive a 
favorable determination letter but has in all other respects operated 
under the ERISA provisions and has not had its status revoked by a 
court or by the IRS, such a plan has been found by the bankruptcy court 
not to be a qualified plan.
  This amendment addresses this problem by providing, 1, that if a plan 
has received a favorable determination letter that is in effect, the 
plan is presumed to be exempt from the bankruptcy estate; and, 2, if a 
plan is not eligible for a determination letter, the plan may be exempt 
from the bankruptcy estate if there has been no prior determination by 
a court or the IRS to the contrary and the plan is in substantial 
compliance with the applicable requirements of the Internal Revenue 
Code of 1986, as amended.
  Further, Mr. President, under present law, if there is a direct 
transfer of an individual's retirement funds by the trustee of a plan 
exempt from the bankruptcy estate to the trustee of another retirement 
plan that is exempt from the bankruptcy estate, there is a question as 
to whether these retirement funds are exempt while in transit. It is 
possible that a bankruptcy court may hold that such funds are in a 
``pay status'' and thus subject to attachment by the bankruptcy 
trustee. If there is a distribution of a plan's assets to a distributee 
and the latter within 60 days transfers them to another qualified plan, 
ERISA rules do not treat that as a distribution.
  There is some question whether these funds in transit are protected 
from the bankruptcy estate. If a participant is in bankruptcy when 
either of these types of transit occur, the bankruptcy trustee may be 
authorized by the bankruptcy court to seize the funds. The result would 
be to severely reduce or wipe out the participant's retirement funds. 
This is contrary to sound public policy.
  The proposed amendment provides that a direct transfer of retirement 
funds from one qualified retirement plan to another shall be exempt 
from the bankruptcy estate. In addition, it provides that eligible 
``rollover'' funds from a qualified retirement plan shall be exempt 
from the estate if rolled over to another qualified plan within the 
allowed 60 days of the initial distribution.
  Finally, on the issue of qualified plan loans, the amendment provides 
that qualified plan loans outstanding when the participant is in 
bankruptcy are not dischargeable, and that payroll deductions used to 
repay plan loans are not stayed by the court.
  The retirement savings of hundreds of thousands of elderly Americans 
are at risk in bankruptcy proceedings. In 1997, an estimated 280,000 
Americans age 50 and older filed bankruptcy. Almost one in five 
bankruptcy cases involve one or both petitioners who are 50 or older. 
This amendment has the full support of the AARP, which has stated that:

       The accumulation and preservation of retirement funds 
     represents an important national goal.

  I could not agree more. With this national goal in mind, I urge my 
colleagues to support this amendment.
  Mr. President, I ask for the yeas and nays.
  The PRESIDING OFFICER. Is there a sufficient second?
  There is a sufficient second.
  The yeas and nays were ordered.
  The PRESIDING OFFICER. The Senator from Colorado?
  Mr. DURBIN. Mr. President, let me say I am happy to support this 
amendment. I am happy to be a cosponsor with my friend from Utah, 
Senator Hatch. I had prepared an amendment on this subject and I am 
happy to join him in making this a bipartisan effort.
  I will not take any time because I know a number of Members have to 
return to their families this evening, but I concur with him, with the 
increased number of Americans over the age of 50 filing for bankruptcy, 
this is a problem which we should address and address directly. It is 
not only to the benefit of senior citizens who are saving for their own 
retirement, it is certainly to the benefit of their families who are 
concerned that they be allowed to live in independence and security in 
their retirement years. We have traditionally given special 
consideration to 401(k) plans. This amendment will extend that 
consideration to IRAs and other vehicles that allow people to put 
savings away for their future retirement.
  I am happy to support this and I am happy to say that the amendment 
which I offered, and I am sure this one as well, had the support of the 
American Association of Retired Persons and virtually every major 
senior citizens group in the country.
  I yield the floor.
  Mr. LEAHY addressed the Chair.
  The PRESIDING OFFICER (Mr. Hutchinson). The Senator from Vermont.
  Mr. LEAHY. Mr. President, when the distinguished Senator from 
Illinois first talked about this amendment, I was telling him I thought 
he had a winner on his hands. I could not imagine anybody opposing it. 
I was delighted to see the distinguished senior Senator from Utah has 
also adopted the same idea of the Senator from Illinois. I think it is 
an excellent piece of legislation.

[[Page S10509]]

  I suspect it will pass unanimously. I realize that is one of the 
reasons why it is brought up as a bed-check vote at 8 o'clock at night 
tonight, because everyone knows the Senator from Illinois has a good 
idea and the Senator from Utah has a good idea. Those are the kind that 
we use for bed-check votes.
  I should tell the American people, though, notwithstanding that, it 
is a very valuable piece of legislation and I am delighted to see it 
and I am going to be very happy to vote for it.
  The PRESIDING OFFICER. The question is on agreeing to the amendment.
  The yeas and nays have been ordered.
  The clerk will call the roll.
  The legislative clerk called the roll.
  Mr. NICKLES. I announce that the Senator from Indiana (Mr. Coats), 
the Senator from Wyoming (Mr. Enzi), the Senator from North Carolina 
(Mr. Helms), the Senator from Alabama (Mr. Sessions), and the Senator 
from Alabama (Mr. Shelby) are necessarily absent.
  Mr. FORD. I announce that the Senator from South Carolina (Mr. 
Hollings), the Senator from Hawaii (Mr. Inouye), the Senator from 
Massachusetts (Mr. Kennedy), the Senator from Massachusetts (Mr. 
Kerry), the Senator from Michigan (Mr. Levin), and the Senator from New 
York (Mr. Moynihan) are necessarily absent.
  I further announce that, if present and voting, the Senator from New 
York (Mr. Moynihan) would vote ``aye.''
  The result was announced--yeas 89, nays 0, as follows:

                      [Rollcall Vote No. 276 Leg.]

                                YEAS--89

     Abraham
     Akaka
     Allard
     Ashcroft
     Baucus
     Bennett
     Biden
     Bingaman
     Bond
     Boxer
     Breaux
     Brownback
     Bryan
     Bumpers
     Burns
     Byrd
     Campbell
     Chafee
     Cleland
     Cochran
     Collins
     Conrad
     Coverdell
     Craig
     D'Amato
     Daschle
     DeWine
     Dodd
     Domenici
     Dorgan
     Durbin
     Faircloth
     Feingold
     Feinstein
     Ford
     Frist
     Glenn
     Gorton
     Graham
     Gramm
     Grams
     Grassley
     Gregg
     Hagel
     Harkin
     Hatch
     Hutchinson
     Hutchison
     Inhofe
     Jeffords
     Johnson
     Kempthorne
     Kerrey
     Kohl
     Kyl
     Landrieu
     Lautenberg
     Leahy
     Lieberman
     Lott
     Lugar
     Mack
     McCain
     McConnell
     Mikulski
     Moseley-Braun
     Murkowski
     Murray
     Nickles
     Reed
     Reid
     Robb
     Roberts
     Rockefeller
     Roth
     Santorum
     Sarbanes
     Smith (NH)
     Smith (OR)
     Snowe
     Specter
     Stevens
     Thomas
     Thompson
     Thurmond
     Torricelli
     Warner
     Wellstone
     Wyden

                             NOT VOTING--11

     Coats
     Enzi
     Helms
     Hollings
     Inouye
     Kennedy
     Kerry
     Levin
     Moynihan
     Sessions
     Shelby
  The amendment (No. 3600) was agreed to.


            Modification of Amendment No. 3595, as modified

  Mr. SANTORUM. Mr. President, I ask unanimous consent that amendment 
No. 3595, previously agreed to, be modified with the change that I now 
send to the desk.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The modification follows:

       Strike pages 33 through 42.


                           Amendment No. 3595

  Mr. GRASSLEY. Mr. President, I ask unanimous consent that amendment 
No. 3595 be agreed to and the motion to reconsider be laid upon the 
table.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment (No. 3595) was agreed to.
  The PRESIDING OFFICER. The Senator from New Mexico.

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