[Congressional Record (Bound Edition), Volume 149 (2003), Part 2]
[Extensions of Remarks]
[Page 2295]
[From the U.S. Government Publishing Office, www.gpo.gov]




   INTRODUCTION OF THE RETIREMENT ACCOUNT PORTABILITY IMPROVEMENT ACT

                                 ______
                                 

                           HON. EARL POMEROY

                            of north dakota

                    in the house of representatives

                        Friday, January 31, 2003

  Mr. POMEROY. Mr. Speaker, I rise today to introduce the Retirement 
Account Portability Improvement Act (RAPI), legislation that will 
prevent money from being leaked from hard earned retirement savings by 
enhancing workers' retirement savings options.
  Workers were confronted with a complex series of obstacles that made 
it difficult for them to take their retirement benefits with them when 
they switched jobs. That is why in 1998, I introduced the Retirement 
Account Portability (RAP) Act, which made it possible for workers to 
move their retirement benefits between and among the different 
varieties of defined contribution plans. RAP was incorporated into the 
pension package set forth by Representatives Portman and Cardin, and 
became law upon passage of the Economic Growth and Tax Relief 
Reconciliation Act of 2001 (EGTRRA). However, when working with 
employees, employers and retirement plan providers, we identified more 
barriers to retirement savings portability and these barriers are 
removed in this ``next generation'' portability bill.
  First, RAPI will allow rollovers directly to a spouse's retirement 
plan. It is common for married couples to manage their finances as a 
single financial unit and to treat their assets as common property. 
Yet, in the context of one of a family's most important financial 
assets, retirement savings, spouses are prevented from transferring 
amounts to one another. Permitting spousal rollovers would allow 
couples to balance their savings and to act more as a single financial 
unit. This would be particularly helpful to couples where one family 
member has taken time out of the work force to raise a child or care 
for an elderly parent.
  Second, RAPI will allow rollovers to inherited individual retirement 
accounts (IRA) for non-spousal beneficiaries. If a retirement plan 
participant dies with a non-spousal beneficiary, that beneficiary is 
often forced to receive plan benefits immediately and incur immediate 
tax liability. Participants and beneficiaries should have options that 
meet their needs while making the process as simple, fair, and even-
handed as possible. Allowing the rollover to the inherited IRA will 
avoid the immediate tax hit and allow the funds to be drawn down 
gradually. By allowing plan beneficiaries to maintain an inherited IRA, 
the rules will be improved and retirement savings promoted.
  Third, RAPI expands the automatic rollover provisions of EGTRRA. When 
a terminating employee does not want to leave her benefit with her 
former employer, but has never established an IRA to receive a 
rollover, her retirement savings are at risk of being cashed out. That 
employees should have two more choices, that do not acquire additional 
work on her part, in which to stash her hard earned savings. By 
facilitating the offering by employers of a specified IRA or life 
annuity contract, separating employees can easily prevent money from 
being leaked from their retirement savings.
  Fourth, RAPI eases the administrative burden of rollovers to Roth 
IRAs. Retirement savings held in arrangements other than an IRA may not 
be converted directly to a Roth IRA. Therefore, workers who want to 
rollover their savings into a Roth IRA must first put it in a 
traditional IRA. By eliminating this unnecessary step of administrative 
complexity, workers no longer have to jump through the additional hoop 
in order to convert to a Roth IRA.
  Fifth, RAPI enhances rollovers to Savings Incentive Match Plans for 
Employees of Small Employers (SIMPLE) Plans. EGTRRA did not expand the 
portability rules with respect to rollovers from non-SIMPLE plans into 
SIMPLE plans. The positive trend of enhanced portability of retirement 
assets should be extended to SIMPLE plans. Not enacting this change 
would prevent certain individuals from consolidating their retirement 
savings.
  Sixth, RAPI increases retirement savings by accepting ``use it or 
lose it'' monies from flexible spending accounts (FSA). These accounts 
reimburse employees for qualified benefits, however, the ``use it or 
lose it'' requirement prevents amounts from being carried forward to 
future years or used for other purposes if amounts are not used by the 
end of the year. An employer's plan should permit up to $500 in amounts 
available, but not used for medical expenses, during the plan year to 
be contributed to a retirement savings account or medical savings 
account. This would encourage increased retirement savings by creating 
an additional avenue and source for contributions. At the same time, it 
would improve the operation of FSAs by removing incentives to use those 
benefits unnecessarily out of fear of losing them otherwise.
  Seventh, it reduces vesting for non-elective employer contributions. 
By reducing the period of time it takes for employees to take 
possession of employer contributions made to their 401(k) accounts, 
workers will be able to build meaningful retirement benefits more 
quickly in today's mobile economy. RAPI will reduce this so-called 
``vesting period'' from 5 years to 3 years.
  The final section corrects a provision in EGTRRA allowing the 
rollover of after-tax amounts in annuity contracts and makes 
improvements to the purchase of service credit regime used by state and 
local employees to build bigger pension benefits.
  I look forward to working with my colleagues to expand workers' 
portability options. We must continue to advance proposals that will 
prevent money from being leaked from workers' retirement savings, and I 
hope my colleagues will join me in passing this important legislation.

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