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August 29, 2000

The Final Lap of the 106th Congress: Where Do We Stand on Legislation Affecting NCTR Members?

By Cynthia L. Moore, NCTR Washington Counsel

A mixed bag of federal issues occupies NCTR’s attention at present. Two issues, pension reform and bankruptcy, have been debated intermittently throughout the year, whereas the third -- possible restrictions on the use of Social Security account numbers by states and localities -- is new. This report summarizes the status of these issues as Congress returns from the August recess.

Pension Reform

After drifting through Congress since the year’s beginning, pension reform took on a new dynamic July 19, when the House of Representatives passed H.R. 1102, the Portman-Cardin bill, by a vote of 401-25. As the bill goes to the Senate, will that momentum continue?

For a complete picture of Senate consideration, some comments about the fiscal year 2001 federal budget are needed. When Congress passed the resolution earlier this year approving the blueprint for the fiscal year 2001 budget, it instructed the House and Senate tax writing committees to pass two reconciliation bills. (It did not specify the bills’ content.) As it turned out, the first served as the vehicle for the Marriage Tax Relief Reconciliation Act, H.R. 4810, which the President vetoed on August 5, and the second will contain pension reform.

By way of background, reconciliation bills are not debated under the “regular rules” of the Senate, which permit unlimited debate and the introduction of amendments that are not germane to the bill under consideration. Instead, they are subject to special procedures that improve passage of a bill, including limited time for debate and restrictions about the type of provision that may be included in the bill.

Both Republican and Democratic Committee staff are drafting the bill. The Committee is scheduled to mark it up on September 7. At this point, the bill will be taken up as a freestanding measure, and only pension provisions will be included in it.

The staff reports that the Senate bill will follow H.R. 1102, but contain some additional items favored by Committee Chairman, Bill Roth (R-DE). It will also likely include a tax credit to encourage low to moderate income workers to save for retirement; the credit was not included in H.R. 1102. President Clinton strongly advocates such a savings program. The tax credit would be similar to the one proposed by the Democrats during House debate of the bill, except that the Senate version would be non-refundable. A refundable credit is entitlement spending that cannot be in a reconciliation bill. Moreover, Senate Republicans would not likely support that type of credit.

Finance Committee Chairman Roth wants to move a bill to the Senate floor that President Clinton can sign. Evidence of his commitment is the bipartisan drafting of the bill, the inclusion of the retirement savings tax credit, and consideration of the bill as a freestanding measure. Further, debate of pension reform under the reconciliation rules lessens the possibility that the bill will be slowed as it could be under the regular rules of the Senate.

Counterbalancing the Senate Committee interest is House Speaker Dennis Hastert’s recent proposal to the White House. The Speaker wrote August 28 offering to support a bill that would raise the minimum wage in exchange for tax cuts. Disturbingly, his tax cut package would not include pension reform.

Specifically, he proposes a $1 increase in the minimum wage in 50-cent increments. The current amount is $5.15. The first increment would go into effect January 1, 2001 and the second, a year later. His tax cut package would cost $24 billion over five years and about $76 billion over 10 years. The House passed a tax cut/minimum wage increase bill (H.R. 3081) in March, which included pension reform. Its price tag was $122 over 10 years.

In light of this discouraging development, what is the outlook for final passage? Pension reform enjoys the support of a wide variety of groups. It is hampered, however, by charges that it disproportionately benefits higher income individuals. For example, the Clinton Administration and the Center for Budget and Policy Priorities say that the proposal’s increase in benefit limits under Section 415 of the Internal Revenue Code does nothing for lower income workers. Senator Roth is attempting to offset this concern by including the retirement savings tax credit. Moreover, other groups such as those favoring the Marriage Tax Relief Reconciliation Act (which, as noted previously, was vetoed by the President) may try to attach their bills onto pension reform, which could delay or halt the process. Despite bipartisanship in the Finance Committee, a question remains whether the rest of Congress and the President will succeed in working cooperatively. In an election year such as this one, that question affects the consideration of all legislation. In sum, the outlook for final passage will be unclear until we see 1) whether the Senate Finance Committee’s bipartisan effort passes and 2) whether the White House accepts Speaker Hastert’s offer.

Bankruptcy

Very little has occurred since our last report on H.R. 833, the Bankruptcy Reform Act. Staff reported this month that the Senate leadership is drafting a formal proposal for the White House’s consideration. The proposal is an effort to re-kindle activity on the bill before Congress adjourns. If it does not succeed, the bill will not likely be enacted.

In lobbying on the bankruptcy bill, NCTR has two goals: 1) ensuring that the bill does not disturb protections for pension plans under existing case law; and 2) adding provisions for pension programs not currently protected.

Possible Restrictions on Use of Social Security Account Numbers by States and Localities

NCTR sent a letter to the Chairman of the House Social Security Subcommittee, E. Clay Shaw, Jr., (R-FL) expressing concern about H.R. 4857, the “Privacy and Identity Protection Act of 2000,” which the Subcommittee passed on July 20. It would prohibit display to the general public of social security account numbers (SSANs) possessed by governmental agencies; ban the use of SSANs on checks issued for payment by governmental agencies; and stop the display by governmental agencies of SSANs for purposes of identification, e.g., employee identification tags. It would make state and local government officers and employees personally liable for violations.

The bill as currently drafted 1) is unclear about the meaning of “display to the general public,” 2) would impose significant cost if retirement systems were required to remove SSANs from checks, 3) needs to provide definitions about the such removal, 4) is unclear about the unauthorized use of personal identification numbers, and 5) needs to clarify that government officers and employees are not liable for the unauthorized activity of third party providers with whom they have contracted for certain services, such as health insurance.

NCTR is very concerned about fraudulent and other misuse of Social Security account numbers. H.R. 4857, however, was brought up with little advance notice. NCTR strongly recommended to Chairman Shaw that, before further action on the bill is taken, the Subcommittee request the General Accounting Office (GAO) to 1) assess the current usage of SSANs by the federal, state, and local governments for identification and other purposes and 2) determine how current usage may result in fraud and other misuse. See the Chairman Shaw letter.