Bill Could Create Annuity Income Tax Break

“We also need to continue to encourage workers to take personal responsibility for their financial futures so they will not have to rely so greatly on governmental assistance in their retirement,” he adds.

Another key section of the Portman-Cardin bill would establish a new interest rate benchmark for pension calculations.

Plan sponsors have been using the 30-year Treasury bond rate, but that rate has fallen dramatically as a result of the discontinuation of the 30-year bond. The drop has sparked fears that employers might have to make billions of dollars in additional, unexpected plan contributions.

The Portman-Cardin bill would ease those fears by adopting a benchmark based on long-term corporate bond rates, the sponsors say.

Other sections of the bill would:

• Accelerate the increased savings limits contained in the 2001 tax relief act by putting them into effect beginning in 2004.
• Immediately accelerate the limit on contributions to individual retirement accounts to $5,000.
• Simplify administration of defined benefit plans. One provision would streamline the plan valuation data-collection process.
• Allow employers with defined contribution plans to fund a portion of retiree medical expenses on a pre-tax basis.