Provisions for defined benefit plan funding relief and enhanced fee and compensation disclosure requirements for defined contribution plan providers are included in a tax and jobs bill before the House.
The bill, American Jobs and Closing Tax Loopholes Act of 2010, also increases taxes that investment partners pay on carried interest.
The measure was crafted by House Ways and Means Committee Chairman Sander Levin, D-Mich., and Senate Finance Committee Chairman Max Baucus, D-Mont.; the text of the legislation was released late Thursday. The bill is expected to go to a vote in the House as soon as May 25, and if approved, then go to the Senate floor as soon as May 28.
The DC disclosure provisions were based on House bills written by Reps. George Miller, D-Calif., and Richard Neal, D-Mass., according to pension industry officials. Both bills are still pending. Mr. Miller’s bill was approved by the House Education and Labor Committee; Mr. Neal’s bill is pending before the House Ways and Means Committee. Not included in the latest bill was a controversial provision supported by Mr. Miller that had the effect of requiring DC plans to include an index fund as an investment option.
The DB funding relief in the latest bill would allow plans to extend amortization periods for investment losses for two of the years between 2008 and 2011 and over a period of either 15 years or nine years, at the option of the plan sponsor. Current law requires plans to amortize their investment losses over seven years.
Also, if passed, investment partnerships would be required to treat 75% of carried interest that is not the result of a return on capital as ordinary income, taxed at a rate of up to 35%. Carried interest in investment partnerships is currently taxed as a capital gain at 15%.
The American Benefits Council, though critical of some legislative provisions, endorsed passage of the bill.
“While we appreciate the earnest effort to provide funding relief, we remain concerned that the conditions attached to the relief … may have the effect of reducing the value of the relief for select companies based on their structure or industry,” James Klein, ABC president, said in a news release.
