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Retirement Planning > Saving for Retirement

S. 219 Could Do More Than Shore Up Pensions

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Senators have included provisions that could affect life insurers in a bill better known for sections dealing with federal retirement benefit guarantee insurance.[@@]

You may not be able to read S. 219 on the Web right now, because, at press time, the Library of Congress bill posting system had not yet received the text from the Government Printing Office, but the core is a section that is supposed to improve the financial stability of the Pension Benefit Guaranty Corp.

The PBGC, the organization that backs defined benefit pension plans, has seen its deficit increase to $23 billion, from $11 billion, in just 1 year.

Other sections of the bill could:

- Codify ground rules for the sale of corporate-owned life insurance.

- Create a retirement plan investment advice provision that might prevent life insurance agents and company representatives from giving advice at the worksite.

- Loosen retirement plan portability rules.

- Let certain 401(k) plan members contribute “catch-up” payments to individual retirement accounts, if the plan members were employed by a “a currently bankrupt employer, and the employer is currently under indictment or subject to conviction.”

- Let plan sponsors avoid liability for the investment advice that a qualified investment advisor gives to retirement plan participants.

- Allow employers to deduct up to $1,000 in retirement planning advice fees per year from employees’ taxable income.

The new bill, which would create the National Employee Savings and Trust Equity Guarantee Act, is similar to the NESTEG bill that died in the previous Congress. The new NESTEG bill was introduced by Sen. Charles Grassley, R-Iowa, chairman of the Senate Finance Committee, and Sen. Max Baucus, D-Mont., the committee’s ranking minority member.

The COLI provision uses the same language that the Senate Finance Committee approved in February 2004.

COLI often is used to fund deferred compensation plans for highly paid executives, but members of Congress have heard complaints about some employers profiting from efforts to use COLI to insure rank-and-file employees without the employees’ consent.

The S. 219 COLI sales guidelines would require that employees insured by COLI policies receive written notices about the coverage and about the possibility that the coverage might continue even after the employees leave their jobs. Insured employees also would have to give their written consent.

Last year, a similar COLI provision had support in the Senate but died in the House.

Although life insurers may like the COLI provision, they may have problems with the provision that might limit insurers’ ability to give investment advice at the worksite. That provision is supported by Sen. Jeff Bingaman, D-N.M.

“We believe the best investment advice bill would be one allowing companies that already are providing pension plans and educational materials to employees to also be allowed to provide advice,” says Jack Dolan, a spokesman for the American Council of Life Insurers, Washington. “It is abundantly clear that employees want and need assistance in retirement planning, and we are hoping to provide it.”

The American Benefits Council, Washington, has problems with the core PBGC-solvency section, because it could force employers to square up their pension plan tabs at the end of every year, as if the plan were terminating at the end of the year.

The PBGC now assumes plans will keep going and lets employers spread contribution payments out over time.

Making employers settle pension tabs each year could increase immediate costs enough to force some employers out of the defined benefit pension system, according to Lynn Dudley, a senior counsel at the benefits council.

The 8-page press release describing S. 219 is on the Web at //

The Library of Congress has posted status information for S. 219 and links to other information about S. 219 at

Eventually, a link on the status page should bring up the text of the bill.


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