Daschle, (D-South Dakota,) who lost his post as Majority Leader when the newly Republican-controlled Congress opened its new session Tuesday, also announced he was introducing a pension reform bill, Washington-based legal publisher BNA reported. The bill, S.9, includes areas supported by lawmakers from both parties and others backed only by Democrats.
Daschle told reporters that Democrats would seek to “protect private pensions and crack down on rogue corporations,” according to the BNA. Aside from provisions inspired by the Enron Corp. bankruptcy and others, S. 9 newly targets cash balance plans, which got a show of support from the Bush administration in regulations proposed in December (See Treasury, IRS Cash Balance Regs ).
A post-Enron bill approved unanimously by the Finance Committee was the framework for a bipartisan consensus on pension reform that remained fluid as tax and labor committee staffs worked to compromise on additional provisions approved by Health, Education, Labor, and Pensions (HELP) Committee Democrats. The issue never reached the floor during the previous Congress, BNA said.
The Finance bill would have provided defined contribution pension plan participants with new diversification rights after three years of employment, more frequent and detailed account statements, and increased access to investment advice by exempting employers from liability under certain conditions.
The BNA said that Daschle’s bill includes provisions from the HELP Committee bill that would require:
- fiduciary insurance, a major sticking point in the 107th Congress
- plan participant representation on boards of trustees
- whistleblower protections
- increased liability for breaches of fiduciary liability.
New Bill Includes Finance Committee Bill Provisions
The Finance bill would have untied the Treasury Department’s hands in regulating deferred compensation, taxed deferred compensation in offshore trusts, and newly taxed some executive loans while making others subject to higher repayment rates. S. 9 encompasses those provisions, as well as a measure that would prevent corporations from reincorporating in tax haven countries to avoid taxes in the United States, according to the BNA.
The cash balance provision in the bill would require companies that convert from a traditional defined benefit pension plan to a cash balance plan to give employees the option of continuing to accrue benefits under the traditional plan (See Fuller Disclosure ). Converting from a traditional plan to a cash balance plan frequently stalls benefit accruals for older employees as the new hypothetical balance calculated under the conversion catches up to the benefits accrued under the traditional plan.
This “wearaway” aspect has resulted in age discrimination claims and frequent criticism of cash balance plans. The new Treasury regulations condone conversions that do not result in a wearaway period, or those that establish opening account balances based on reasonable actuarial assumptions that do not vary with age.
S. 9 also encompasses separate measures introduced last year that would protect pensions for women and help establish them for low-income workers. It includes provisions of a women’s pension protection bill, sponsored by Senators Edward Kennedy (D-Massachusetts) and Olympia Snowe (R-Maine) in the 107th Congress, that would require spousal consent for distributions from defined contribution pension plans, an annuity covering surviving spouses be included in a lifetime annuity option, and protect women’s rights under government retirement programs.
Also on Tuesday, two prominent House Republicans announced that they would reintroduce a Republican version of pension reform(See Reps. Boehner, Johnson Try Pension Reform Bill Again ).