I try not to write about bills pending before Congress because most ERISA-related legislation is introduced with little fanfare and then will spend months or years in obscurity before dying on the Dec. 31st of an even-numbered year when the Congressional term ends. A quick search of Thomas.gov today revealed 47 bills introduced during this Congressional term containing the word “ERISA”. Only one of those bills has become law (H.R. 2832 which became Public Law 112-40) and it didn’t really affect the ERISA landscape in any major way. It mostly had to do with amending the Trade Act of 1974 and only had a little to do with amending the Internal Revenue Code to extend the tax credit for health insurance costs paid by TAA (Trade Adjustment Assistance).
An exception to this rule is H.R. 3561, the Small Business Pension Promotion Act of 2011. It has everything to do with ERISA. In concise and efficient language, it proposes these important changes by:
- 1. Allowing a later valuation date to determine required minimum distributions (RMDs), and allowing additional time for making RMDs;
- 2. Changing the way net earnings from self-employment are calculated beginning after Dec. 31, 2011, by including deductions for pension and IRA contributions;
- 3. Changing Code section 436(j)(2) to adjust the funding target attainment percentage for single-employer defined benefit plans;
- 4. Repealing Code section 4972, the tax on nondeductible contributions to qualified employer plans, for taxable years beginning after Dec. 31, 2011;
- 5. Instructing the Secretary of the Treasury to provide greater flexibility and reduce plan sponsor burden for interim amendments to qualified plans;
- 6. Adding Code section 411(f), grandfathering plans with normal retirement age based on earlier of attainment of specific age or completion of 30 or more years of benefit accrual services;
The Small Business Pension Promotion Act, H.R. 3561, was introduced on Dec. 5, 2011 by Rep. Ron Kind (R-WI) and was immediately referred to the House Ways and Means Committee and the House Education and the Workforce Committee. It remained there with nothing happening until March 29, 2012, when it was referred to the Subcommittee on Health, Employment, Labor and Pensions. It is a small step but it means that this bill may be moving forward into worth-watching territory.
If this bill does move forward, it would be nice to see something added to it which amends Code section 401(a)(9) to increase the required beginning date for required minimum distributions from age 70 ½ to at least age 75. When the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) added the age 70 ½ required beginning date requirement to Code section 401(a)(9), it was debated whether age 70 ½ was too young, and a later date, such as age 75, would be more realistic while still accomplishing the same public policy goal. With so many participants delaying retirement due to the rough economy over the last several years, maybe it is time to re-open the debate over what is, or should be, the best required beginning date for required minimum distributions.