NU Online News Service, July 18, 2003, 11:14 p.m. EDT – The House Ways and Means Committee has approved an amended version of H.R. 1776 by a voice vote after a markup that was distinguished by a call to the Capitol police.
One section of the long, complicated bill would accelerate implementation of the pension and retirement provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001.
Another section of the bill would encourage beneficiaries of retirement accounts to annuitize retirement benefits payments, by exempting some annuity income for five years if a taxpayer agreed to receive retirement income distributions through a “lifetime annuity” that would make payments for the rest of the taxpayer’s life.
The sponsors of the bill are Reps. Rob Portman, R-Batavia, Ohio, and Dr. Benjamin Cardin, D-Baltimore.
Rep. Bill Thomas, R-Bakersfield, Calif., the chairman of the Ways and Means Committee, introduced a substitute version of his own Thursday. The version of the bill that the committee adopted was the Thomas substitute, according to a committee spokesman.
One of the major changes that Thomas made would replace the official interest rate, or discount rate, used in many actuarial calculations for defined benefit pension plans, with an index based on long-term corporate bond rates, for three years.
The discount rate is now based on the yield on 30-year Treasury bonds. The 30-year Treasury rate is obsolete because the government no longer issues the 30-year bonds.
The original version of the bill would have permanently replaced the discount rate with an index based on long-term corporate bond rates. Officials at the Treasury Department have been lobbying for pension sponsors to adopt a “yield curve” approach, with employers using different corporate bond rates for liabilities of different durations.
The Thomas substitute would let Congress put off making a decision about a permanent replacement for the 30-year Treasury rate for three years.
Other sections of the Thomas substitute would let disabled taxpayers contribute to individual retirement accounts, change the minimum participation rules for defined benefit pension plans and allow additional nonelective contributions to SIMPLE plans.
The markup was more exciting than most, according to published reports.
Thomas called the Capitol police after most of the Democratic committee members left for a congressional library to talk about Thomas’s substitute bill, according to an account published by the Washington Post.
The remaining Democratic member, who got into a heated argument with a Republican member, called the Republican member a fruitcake, according to the Post.
Many Washington-based financial services groups, including the American Benefits Council and the American Council of Life Insurers, are supporting H.R. 1776.
The ACLI put out a statement praising the Ways and Means Committee for passing the bill. Passage “illustrates that Congress is beginning to recognize that managing assets in retirement is as important as accumulating them in working years,” ACLI President Frank Keating says in the statement.
Fair Taxes for All, Washington, a coalition of consumer groups and labor groups that includes the American Federation of State, County & Municipal Employees, Washington, is opposing the bill.
The tax provisions of the bill “expand tax shelters for higher-income individuals who already are accumulating substantial tax-favored savings for retirement, but do nothing to increase pensions or retirement savings for lower-income individuals,” the coalition argues in a letter to Ways and Means committee members.
The coalition argues, for example, that provisions that would raise contribution limits for 401(k) plans and individual retirement accounts would help fewer than 5% of eligible workers, and that most of the workers who would be helped have annual incomes over $75,000.
The text of the Thomas amendment and other documents related to the markup are posted at http://waysandmeans.house.gov/legis.asp?formmode=item&number=100
The American Benefits Council has posted a detailed analysis of the original version of the bill on its Web site, at http://www.americanbenefitscouncil.com