By: Susan J. White and Jonah Mainzer, Susan J. White and Associates, Inc.
Legislative Update: U.S. Senate and House of Representatives Introduce Companion National Save for Retirement Resolutions!
As Washington settles into the heat of summer, the 110th Congress moved forward on the NAGDCA supported National Save for Retirement Week by passing companion resolutions on June 20, 2007.
In follow up to the successful passage of the Resolution in the fall of 2006, Senator Smith (R-OR), once again took the lead, and Senator Conrad (D-ND) joined him in crafting the Resolution (S. Res. 240) and introducing it in the Senate. S. Res. 240 establishes the week of October 21, 2007 as National Save for Retirement Week. Both Smith and Conrad are members of the Senate Committee on Finance and are active members on retirement and pension related matters. Smith is also the top Republican member of the Senate Special Committee on Aging and Conrad chairs the Senate Committee on the Budget.
The House joined this effort with Representative Schwartz, (D-PA) and Representative Sam Johnson (R-TX) introducing a companion resolution, drafted and supported by the House Committee on Ways and Means-the House tax-writing committee. Both Schwartz and Johnson are members of Ways and Means which has jurisdiction over governmental defined contribution plans. The Committee has worked closely with Senators Smith and Conrad in drafting the Resolution and in working out the many legislative process issues in order to move forward jointly. A goal of both Ways and Means and the Senators has been to pass the Resolution this summer in order to give the public and private sectors plenty of time to plan events for National Save for Retirement Week.
Building on the positive nationwide response in October 2006 to National Save for Retirement Week, NAGDCA has worked closely with the Senate and House in order to ensure passage this year of the Resolution and further the goal of educating and urging employees-both public and private-to increase their savings for retirement. In addition to seeking this critical recognition from Congress, NAGDCA has also been working with both chambers to begin an effort that would create legislation authorizing a permanent Savings for Retirement Month.
The Committee on Ways and Means, working closely with Senators Smith and Conrad, plans to begin the process of drafting a bill this summer. Once passed by the House and Senate, the legislation would go to the President for a Savings for Retirement Month proclamation.
Washington has Full Agenda
In the meantime, Congress and the White House remain embroiled in the debates surrounding the Iraq war, executive privilege, the continuing investigation of the Department of Justice activities, immigration and energy legislation. In addition to these pressing matters, Washington must also address the budget and how to finance the government for the coming year.
Over the last few weeks the House and Senate Committees on Appropriations have begun the process of resolving the budget for fiscal year 2008 and these bills are sure to be as contentious as they have been in previous years-with the President issuing another warning that he will veto spending bills that are not to his liking. Last year most of the appropriations bills funding the federal departments, except for Defense and Homeland Security were never even passed. Subsequently, the government has been funded this year under a Continuing Resolution, maintaining all funding at last year's levels.
In addition to struggling with these broader based issues, Congress has continued its interest in a number of pension related matters, including the administrative fees and other fees charged by defined contribution plans. Numerous bills have been introduced in this Congress-many focused on automatic IRAs and generally aimed at expanding defined contribution options.
Congress Continues Oversight of Defined Contribution Administrative Fees
The first hearing held by the House Committee on Education and Labor-the Committee charged with oversight of ERISA-focused predominantly on private 401(k) plans and disclosure. Education and Labor is also crafting legislation, due to be introduced sometime this summer, that aims to address disclosure and conflicts of interest. The measure is due to be introduced sometime this summer.
In addition to Education and Labor, the House Committee on Ways and Means Oversight Subcommittee is planning a yet-to-be announced hearing for the end of June. In this first hearing, the Committee plans to focus on views from the federal agencies, including the Department of Treasury (DOT), the General Accounting Office (GAO) and the Securities and Exchange Commission (SEC). The SEC announced this spring that it plans to work with the Department of Labor to develop guidelines related to disclosure of fees.
Both the Senate Committee on Finance and the Senate Committee on Health Education, Labor and Pensions (HELP) have indicated their interest in fees, however nothing specific, at this time has been pursued. Once the Senate dispenses with some of the other broad-based issues facing it, such as immigration, energy legislation and reauthorization of health coverage for children, there could be movement on this front.
Older Workers Legislation: NAGDCA to Participate on Kitchen Cabinet Advising Senator Smith on Bill
In addition to the numerous bills introduced in both the Senate and House this year addressing various aspects of the retirement funding puzzle, Senator Smith is working on legislation focused on women and older workers.
Senator Gordon Smith (R-OR)-Senate sponsor of Savings for Retirement Week and member of the Senate Finance Committee and the Senate Special Committee on Aging is in the process of crafting legislation to address older workers and phased retirement issues. He has formed an advisory kitchen cabinet that includes representatives from both the public and private sectors, including NAGDCA. The first meeting is scheduled for the end of June.
Smith is interested in expanding the eligibility of the Work Opportunity Tax Credit (WOTC) to allow the credit for employers hiring older workers; improving the Workforce Investment Act for older workers; updating the minimum required distribution rules in a number of ways, including raising or indexing the age at which minimum distributions must begin; removing the penalty under the Civil Service Retirement System for part time services.
The Senator is considering a number proposals to address long term care insurance needs, including allowing tax-free distributions to participants from defined contribution plans to purchase qualified long-term care insurance. He is also proposing to create a National Resource Center on Aging and the Workforce to serve as a national clearinghouse on older workers and workforce issues that include solutions affecting planning for older workers that would serve employers, community and government organizations and public and private agencies.
Women's Retirement Security Act of 2007 (S. 1288)
On May 3, Senator Smith reintroduced the Women's Retirement Security Act. This bill had originally been introduced at the end of the 109th Congress, but as no action was taken it had to be reintroduced this year. The bill would increase retirement savings through automatic IRAs, expansion of access to IRAs expanding the Saver's Credit, and Flexible Savings Account transfers for public and private employees.
There are also provisions to preserve income, including incentives for lifetime payments, study of spousal consent for distributions from defined contribution plans and longevity insurance.
The Department Treasury Issues Letter Clarifying Guidance on Pension Protection Act Public Safety Worker Provision
In response to congressional inquiries, the Department of Treasury (DOT) sent a letter to Congress on May 15, 2007 stating its intention to include self-insured plans in the definition of qualified health insurance premiums under ยง 845 of the Pension Protection Act of 2006. The administrative position will soon be included in a formal announcement. Until then, DOT clarified that funds can begin using the May 15 letter to implement the Health and Long Term Care Insurance for Public Safety Officers (HELPS) benefit.
NAGDCA, along with numerous other pubic interest groups, had sought clarification of the provision after DOT issued original guidance which did not include self-insured plans in the definition of qualified health insurance premiums. NAGDCA's Executive Board met with Treasury officials and with congressional committees and offices in February where the issues were discussed.
Technical Corrections
The Congressional tax-writing Committees-House Ways and Means and Senate Finance-have indicated that a technical corrections bill on the Pension Protection Act of 2006 (Public Law 109-280) would be introduced this year. Originally, both the House and Senate discussed the possibility of introducing technical corrections legislation in the spring or early summer. Although the Committees have been working with the Department of Treasury and the Joint Committee on Taxation, legislation has not yet been introduced.
The key task facing lawmakers is keeping the bill narrow and technical in nature under pressure to expand the legislation to address broader policy issues, including the defined benefit provisions of the 2006 Pension Protection Act. With the public safety workers health insurance provision now addressed by Treasury, there is no longer a push for a technical correction, removing some momentum for the measure.
Congress Pursues Interest in Roth 457
In late March, as Congress debated supplemental funding for the Iraq War, the Senate added tax legislation to the first of such bills that included a provision creating a Roth 457. The Senate Committee on Finance crafted the provision, however, the tax provisions were dropped from the overall legislation. It is unclear, at this time, whether the provision will move forward this year.
During the February 2007 Executive Board meeting in Washington, the Board added support for a Roth 457 to NAGDCA's federal legislative agenda and discussed the issue during the Board's annual congressional and DOT visits.
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