Home | About NCTR | Resources | Meetings | News Room | Member Directory

Fraternal Order of Police (FOP)
Government Finance Officers Association (GFOA)
International Union of Police Associations (IUPA)
National Association of Counties (NaCo)
National Association of Government Deferred Compensation Administrators (NAGDCA)
National Association of Police Organizations (NAPO)
National Association of State Auditors, Comptrollers and Treasurers (NASACT)
National Association of State Retirement Administrators (NASRA)
National Association of State Treasurers (NAST)
National Conference on Public Employee Retirement Systems (NCPERS)
National Council on Teacher Retirement (NCTR)
National Education Association (NEA)

April 12, 2000

The Honorable Orrin G. Hatch

SR-131 Russell Senate Office Building
Washington, DC 20510

Dear Senator Hatch:

The conferees for H.R. 833, the Bankruptcy Reform Act, will be named shortly. The national organizations listed above represent state and local governments, public employee unions, public retirement systems, and millions of public employees, retirees, and beneficiaries. A number of technical issues between the House and Senate versions of H.R. 833 are still unsettled. These issues, if not resolved, could impair the retirement savings of state and local government employees and the administration of state and local government retirement systems. We respectfully request your support for our positions.

Include Senate Clarification that Protects Governmental Plans

Both the Senate and House versions of H.R. 833 expand the types of retirement savings protected from creditors’ claims in bankruptcy proceedings. The Senate version, however, contains a more refined definition providing greater clarity that all governmental plan assets are protected. We ask the conferees to recede to the Senate language under Section 224 to ensure the clearer language is included in the final bill.

Eliminate Waiver in Senate Version that Nullifies New Retirement Asset Protection

The Senate, but not the House, version of H.R. 833 would allow a debtor to waive the new protections for retirement savings discussed above. If enacted, creditors would likely include this waiver in the boilerplate language of every loan or credit agreement. The waiver would nullify the new retirement asset protections on which both Houses of Congress have worked so diligently. We ask the conferees to recede to the House version to ensure these protections are realized.

Make Technical Corrections

1.) Required Employee Contributions are Not Disposable Income. Until recently, courts adhered to the well-established rule that contributions required of an employee to a defined benefit plan are not disposable income in Chapter 13 cases. A few months ago, two courts ruled otherwise. If allowed to stand, these decisions will impair the funding of affected defined benefit plans. Current language in the House and Senate versions would clarify such contributions are not part of the bankruptcy estate. We request that the conferees include in the final version of the bill a technical correction clarifying employee contributions do not constitute "disposable income." (Recommended language also attached.)

2.) Employee Plan Contributions are Not Part of Estate if Holder of Contributions Becomes Bankrupt. Each version contains a provision intended to exclude employee contributions to an employee benefit plan from the bankruptcy estate of a debtor employer or other debtor entity and thereby assure these funds are not paid over to creditors but are paid into the plan as intended. These provisions should be clarified by adding contributions intended for governmental, 403(b), and 457 plans. No employee contributions intended for an employee benefit plan should become an asset of the debtor employer or other debtor entity if it goes into bankruptcy. At present, the language only covers employee contributions to private sector employee benefit plans. We request a technical correction that would extend the coverage to employee contributions to public sector employee benefit plans. (Recommended language also attached.)

3.) Plan Loan Re-Payments are Not Disposable Income. Some retirement plans allow their participants to take out a "loan" against their retirement assets. Calling these arrangements "loans" is actually a misnomer. They are actually an advance against one’s pension. Current language in the House and Senate versions clarify that a bankrupt plan participant may continue to re-pay plan loans. We request that a technical correction be added to the final version of the bill to also make clear that plan loan repayments are not considered "disposable income" in Chapter 13 cases. (Recommended language also attached.)

This letter summarizes our position. A more detailed description of our concerns is attached. Sincerely,

Tim Richardson – FOP (202-547-8189)
Alice Buchalter – GFOA (202-429-2750)
Samantha Schasberger – IUPA (703-549-7473)
Neil Bomberg – NaCo (202-942-4205)
Susan White – NAGDCA (703-683-2573)
Mike Troubh – NAPO (202-842-4420)
Cornelia Schneider – NASACT (202-624-5451)
Jeannine Markoe Raymond – NASRA (202-624-1417)
Chris Allen – NAST (202-624-8595)
Heidi Zimmerman – NCPERS (202-624-1456)
Cindie Moore – NCTR (703-243-1667)
David Bryant – NEA (202-822-7345)

Cc: The Honorable Trent Lott, Senate Majority Leader
The Honorable Don Nickles, Senate Majority Whip
The Honorable Tom Daschle, Senate Minority Leader
The Honorable Harry Reid, Senate Minority Whip
The Honorable J. Dennis Hastert, Speaker of the House
The Honorable Dick Armey, House Majority Leader
The Honorable Tom DeLay, House Majority Whip
The Honorable Richard A. Gephardt, House Minority Leader
The Honorable David E. Bonior, House Minority Whip

Attachment