>Topping the list of proposals is a replacement for the 30-year Treasury bond interest rate as a benchmark for defined benefit plan funding and lump-sum distribution calculations with a new rate based on long-term conservative corporate bond rates, according to Washington-based legal publisher BNA, citing a summary of the bill. The report said the bill is slated to be introduced soon in the House by Reps. Rob Portman (R-Ohio) and Ben Cardin (D-Maryland).
>The proposal reportedly contains “substantial transition assistance” for older workers who elect a lump sum distribution, who currently benefit from the low interest rate. That has been an oft-cited concern of retiree advocates who worried that a replacement rate that helped employers caught in the “perfect storm” of an unprecedented market slump and record low interest rates that exacerbated projected pension liabilities would disadvantage workers who chose lump sum distributions.
>The bill would also offer targeted funding relief for multiemployer pension plans, and reform defined benefit rules that make the plans more complicated to administer and less appealing to employers, according to the BNA report.
>Additionally, the bill would offer new tax incentives aimed at helping employers and employees finance retiree health coverage, permitting employers with defined contribution plans to fund a portion of retiree medical expenses on a pretax basis, and allowing employees to use pretax retirement plan payments to pay for retiree health costs.
>The bill would also make a number of improvements to existing SIMPLE and SEP retirement plans–simplified plans geared towards small employers–and remove a payroll tax penalty on retirement plan contributions for the self-employed.
>Also returning in the bill are a number of measures that were introduced last year (see House Extends EGTRRA Life ), as well as an acceleration of some of the 2001’s Economic Growth & Tax Relief Reconciliation Act (EGTRRA). For example, the pension provisions in EGTRRA would be made permanent, contribution limit increases would be accelerated, and the current low-income Saver’s Credit (see Credit Worthy ) would be expanded. Additionally, according to the BNA report, employees would be allowed to roll into retirement plans $500 of unused assets in flexible spending accounts, which currently require workers to use – or lose – those balances by year end.
The bill would also provide some relief from the current minimum required distribution rules, pushing back the start date till age 75 from age 70 ½ under current law. This provision was included in the Protecting America’s Savings Act, introduced by Portman and Cardin last fall (see Portman-Cardin Unveil Second Pension Reform Bill ). Also carried forward from that bill are provisions that would enhance 401(k) diversification rights on employer stock, require investment education notices, and allow employees to pay for retirement planning expenses on a pretax basis, as well as the imposition of a 50% excise tax on “golden parachute” payments to executives when a company goes bankrupt, and a number of expanded portability provisions dealing with IRAs.