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The Comprehensive Retirement Security and Pension Reform Act (HR 10) would:
- Increase IRA Contributions from $2,000 to $5,000, phased in by 2003. A limited IRA catch-up provision would allow workers over age 50 to save the full $5,000 immediately.
- Increase maximum benefit payable from a pension plan to $160,000/year from $140,000 at present
- Increase maximum employer/employee contributions (415 limit) from the current (and recently increased) $35,000 to $40,000/year
- Increase the maximum amount of pay that can be considered in a pension formula from $170,000 at present to $200,000 (except for top-heavy plans)
- Increase employee pre-tax contributions to 401(k), 403(b) and 457 plans to $15,000/year by 2005
- Increase contribution limits to SIMPLE plans from $6,500 to $10,000 by 2004
- Provide for catch-up contributions of $5,000/year for workers aged 50 and over
- Create new “Roth” 401(k)s and 403(b)s, similar to the popular Roth IRAs
- Repeal the Same Desk Rule
- Accelerate vesting schedules for matching employer contributions to three years from the current five-year requirement
- Repeal the “full funding” limitation
- Eliminate the multiple use test
- Allow ESOP dividends to be retained in the plan without the loss of the dividend deduction.
The bill would also simplify the “top heavy” rules in a number of ways, including the elimination of collecting data from the prior five years to apply the rules.
Portman-Cardin would eliminate the IRS “user fee” associated with the request of a determination letter for new retirement plans established by small businesses. The bill would also reduce Pension Benefit Guarantee Corporation premiums for new defined benefit plans.
The bill would ensure that the higher contributions allowed under the bill could be deducted by the employer, of particular concern to small employers, similar to provisions in the Blunt/Bentsen bill. HR 10 also includes provisions from the Blunt/Bentsen bill that would provide relief for small employers with respect to the filing of Form 5500’s.
The bill includes “portability” provisions to allow workers who are changing jobs to roll over retirement savings between different types of plans, including qualified plans (such as 401(k) plans), section 403(b) arrangements, and section 457 plans.
It would also require improved disclosure when future
pension benefits are reduced, including conversion from a
traditional defined benefit pension plan to a cash balance