WASHINGTON - Corporate plan sponsors might not be happy with all pension provisions contained in House and Senate tax packages, but public fund executives got some eagerly sought goodies.
Among the proposals that survived votes in the House Ways and Means Committee or the Senate Finance Committee:
Individual retirement accounts would be liberally expanded in both tax bills, including doubling the current income limits for tax-deductible IRAs and allowing non-working spouses to set aside $2,000 a year.
The Senate Finance Committee tax bill contains a provision requiring employees to get permission from spouses before cashing out their 401(k) plans. Corporate employers were against that proposal.
Also in the Senate version is an increase - to 15% from 10% - in the excise tax employers pay on transactions banned by federal pension law.
Public pension plans would be exempt from conducting onerous non-discrimination tests; both the House and Senate tax bills contain the provision.
The House version would allow municipal irrigation and ditch organizations to offer 401(k) plans for the first time.
Also in the House bill, public school teachers would be able to transfer their work experience or service credit to other school districts without having to worry about bumping up contribution limits.
The 15% excise tax retirees must pay on pension and IRA benefit pay-outs exceeding $155,000 in 1996 would be eliminated.
The Senate version would ease limits on employer contributions to pay for promised future benefits. Currently, employer contributions are restricted to 150% of their pension liability or sound actuarial limits as defined by federal pension law, whichever is lower.
The Senate version would let employers fund up to 170% of current liability by 2005, rather than eliminate the cap completely.
Another smaller goody from the Senate would let employers offer only lump-sum distributions and no annuity option to workers who earned less than $5,000 in retirement benefits, instead of the current $3,500 ceiling.
The cap on employer contributions and benefits in multiemployer pension plans would be eliminated by the Senate bill. Now, sponsors of multiemployer pension plans cannot contribute more than 100% of pay for workers, but because that hits workers in cyclical industries or seasonal jobs whose paycheck can vary greatly from year to year, eliminating the cap lets employers set aside up to $125,000 a year, indexed to inflation.
The Senate tax package also would let employers use new technologies such as voice-response systems, computers and e-mail to satisfy their disclosure requirements under federal pension law.
It is no surprise the biggest retirement provision in the Senate Finance Committee version of the tax package is the expansion of IRAs, estimated to cost the U.S. Treasury $3.3 billion over five years and nearly $24 billion over 10 years.
Senate Finance Committee Chairman William V. Roth Jr., R-Del., has been an outspoken supporter of IRAs for years.
The package also would create a new back-loaded IRA that would allow a non-deductible annual contribution of $2,000. After-tax IRA contributions would grow tax-free, and workers would pay no taxes on the withdrawals if the IRA had been open for at least five years and the participant is at least 591/2 years old.
Participants could withdraw assets from the deductible and back-loaded IRAs without penalty if the withdrawal is used for a first-time home purchase or long-term unemployment.
The spousal permission requirement for 401(k) withdrawals was slipped in at the behest of Sen. Carol Moseley Braun, D-Ill. It is only justifiable in situations where the working husband lost his job and the woman fears he might walk out after using up their retirement savings, said Randolf H. Hardock, partner in the Washington law firm of Davis & Harman.
The tax bills containing the pension-related provisions now will go to the full House and Senate. Votes there could come this week.
Pension lobbyists say there's a good chance many of the provisions will be included in the final tax package.
"It's a real mixed bag," said James A. Klein, president of the Association of Private Pension and Welfare Plans, a Washington trade association representing large corporations.
The pension provisions in Mr. Roth's package are a bit thin, sources said, because members of Congress are intent on delivering a budget to the White House that can be signed.
"Neither side wants to be seen as holding up the works, because last year's fiasco backfired," said Lynn Dudley, director of retirement policy at the APPWP.
Already, Treasury Secretary Robert Rubin has snubbed the package, saying it doesn't come close to balancing the benefits for middle-income and working Americans.