On February 7, PLANSPONSOR’s Editor-in-Chief and CEO Charlie Ruffel sat down with these standard-bearers of pension reform – Representatives Rob Portman (R-Oh) and Benjamin Cardin (D-Md) – to discuss the issues, questions and perspectives expressed by our readers. Today, part 2 of his report:
PLANSPONSOR : Let’s come at this bill from the other side, which is the contention that an increase in contribution limits is in many ways going to be made moot unless there are real specific changes to non-discrimination rules. How do you find a middle ground in this regard?
Cardin : We have to modify these non-discrimination rules, and we have done so. We have applied a common sense standard to these rules, and I think you’ll find we have dealt with the legitimate concerns that have been raised. And there were problems with non-discrimination rules, but what we haven’t been willing to do is repeal them – that’s not acceptable.
Portman : This is a balanced package, and I for one would love to take a harder look at non-discrimination testing and at the top-heavy rules. But in the interim I think we have done something very responsible here, which is to reduce the negative impact of this kind of rule complexity on small business. There are some business groups that want us to go further, and other groups that think we went too far. We’re probably about where we should be. We also did put in some language that allows IRS to look at specific situations where the mechanical rules just don’t work – this facts-in-circumstances test is really important in this whole business, and shouldn’t be underestimated. We also dealt with the liability question, which is equally important – many businesses are highly concerned about liability. The concern is straightforward – they’ll do what they think is right, but because the rules aren’t clear, the IRS could disqualify the plan because of failure to cross a ‘t’ or dot an i,’ and our bill will ensure that doesn’t happen, and that the IRS must instead come up with a proportional response by examining the facts and circumstances as opposed to applying a mechanical test. That will provide some flexibility for small businesses.
PLANSPONSOR : A key point underlying your bill in coverage. Clearly complicated and exacting regulatory demands have made companies reluctant to sponsor plans, but even before ERISA companies were beginning to drop pension plans. Do you think your bill is enough to get small employers to offer pension plans?
Portman : We may need to do more, but this is a first step, and it is a step we need to take to start this process. Ben and I have looked at things like tax credits to encourage small businesses to establish and maintain plans, but first things first. It’s true that even pre-ERISA there were small businesses that felt this was an added burden for the business owner, who was reluctant to get into the business of providing retirement or health care. On the other hand, there are lots of small businesses in America that are interested in attracting good workers, and retirement is obviously one of the key benefits to attracting good workers. We believe many think this way, and will do so if they can achieve it in a more simple manner. The “simple” plan that Ben and I got through 4 years ago added significantly to the pension coverage for very small businesses, but as you know that’s not a ver