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July 28, 1999

By Cynthia L. Moore, NCTR Washington Counsel

Action Today. As this report goes to press, the full Senate is considering S. 1429, the Taxpayer Refund Act of 1999. The bill, which is estimated to provide tax benefits of $792 billion over 10 years, includes the portability and other pension provisions supported by NCTR. The Finance Committee approved the bill July 21.

Partisanship on Bill Less Sharp in Senate. Unlike the House bill, which was also approved July 21 (H.R. 2488, the Financial Freedom Act of 1999), the Senate bill enjoys some bipartisan support. All Finance Committee Republicans and two of the seven Democrats voted in favor of it. Other moderate Democrats may join in supporting final passage of the bill.

NCTR Registers Support on Bill’s Pension Provisions. NCTR joined 26 other groups that promote retirement security in writing Senate Majority Leader Trent Lott and Minority Leader Tom Daschle in support of the pension provisions included in S. 1429. The letter noted that the "legislation will facilitate the portability and preservation of retirement benefits – in both private and public retirement systems."

Good Likelihood that New Federal Notice Requirement May Not Apply to Governmental Plans. We reported in the July 22 update that both the House and Senate bills contain a provision that would impose a new federal notice requirement. Specifically, pension plan sponsors would have to provide written notice to plan participants who, because of a plan amendment, may reasonably be expected to experience significantly reduced future benefit accruals. If the administrator failed to comply with the provision, an excise tax equal to $100 per day per affected participant would be imposed. Although the language is not identical in the bills, both versions, as passed, appear to apply to both private and governmental plans. We have been informed by Senate pension counsel that the provision has been re-drafted to exclude governmental plans from the requirement. Because the House version still includes governmental plans, efforts will be made to ensure that the Senate language is contained in the final version of the bill.

Prospects for Future. The Senate is expected to complete action this week. A conference committee of the House and Senate will then be convened to work out a compromise before the August recess. The final product will not, however, be sent immediately to the President, who is expected to veto it. Instead, the bill will likely linger until fall. Some Washington observers say that the President and Congress at that point will negotiate a deal that includes a more modest tax cut, some Medicare reform, and possibly a way to shore up Social Security.