PSCA Pushes for DC Provisions in House Pension Reform

December 9, 2005 ( - The Profit Sharing/401(k) Council of America (PSCA) is urging the House of Representatives to enact its Pension Protection Act (HR 2830) before it adjourns this year due to key defined contribution (DC) plan provisions in the bill.

Ed Ferrigno, Vice President of Washington Affairs for PSCA, told PLANSPONSOR, “There is nothing we don’t like in the House bill.”   Ferrigno said the two biggest positives in the House bill are the provision to make the Economic Growth & Tax Relief Reconciliation Act (EGTRRA) permanent, and automatic enrollment provisions.

He explained that after 2010, when EGTRRA is scheduled to expire, plans will have to apply for EGTRRA extensions a year at a time.   The extensions could be granted prior to the beginning of the new year, but could also not be granted until late into the year, creating administrative headaches for DC plan sponsors and recordkeepers, and confusing participants.   Assuming an extension will be granted and then finding out late in the year it was not, would mean amended tax filings and returned contributions.   Making EGTTRA permanent would also cut down on time and expense eaten up by the extension request process.

Ferrigno applauds the House bill for its auto enrollment provisions.   The bill includes provisions that would provide a safe harbor for plan designs that auto increase deferrals each year, include default investment options in Section 404(c) governing participant directed investments, and amend the Employee Retirement Income Security Act (ERISA) to say that ERISA overrides any state wage garnishment laws.

While Ferrigno did applaud certain provision in the Senate reform bill passed in November (See  Senate OKs Compromise Version of Pension Reform Measure), he said the Senate’s version does not make EGTRRA permanent, and the auto enrollment provisions of the Senate bill are less helpful than the House version.   Ferrigno said the Senate’s provisions for purchasing qualified retirement advice with pre-tax dollars, to allow rollovers by non-spouse beneficiaries, and lift the ban on state and local government 401(k) plans were all good measures.   However, PSCA questions the reasoning behind provisions that apply a matching vesting rate to all DC plans and increase bonding requirements under ERISA.

A summary of DC provisions of the Senate bill (S 1783) is posted on PSCA’s Web site, at .

More information about the House measure is  here . The House is expected to vote on the bill next week.