Grassley: Tax Bill Will Improve Retirement Income


Sen. Chuck Grassley, chairman of the Special Committee on Aging, said thetax relief bill under consideration today includes important provisions that will improve theretirement income for millions of Americans.

"We tell people to save money for retirement, but we don't give them the tools to do it,"Grassley said. "This bill fills the void in two important areas, long-term care and pensions. Inpromoting long-term care insurance, we'll protect millions of Americans from the financial drainof nursing home care. By encouraging employers to offer pensions, we'll increase the incomesecurity of future retirees. The tax bill is a win for our aging nation."

Grassley, a senior member of the Finance Committee, worked to secure the inclusion of thefollowing provisions in the Taxpayers' Refund Act of 1999, the tax cut bill under consideration today by the Finance Committee:

  • A deduction for the cost of long-term care insurance.



The Long-Term Care Affordability and Availability Act (S. 35), sponsored by Grassley andSen. Bob Graham, encourages people to buy long-term care insurance by establishing a taxdeduction for the cost of such insurance. The tax deduction would benefit the majority of workingAmericans, Grassley said.

"Too many family caregivers can tell stories about financial devastation caused by the seriouslong-term care needs of a family member," Grassley said. "Because increasing numbers ofAmericans are likely to need long-term care, it's important to prepare today. This provision willencourage planning and personal responsibility by making long-term care insurance more affordablefor many taxpayers."

  • Reform of the "top-heavy" rules for pension plans.

Top-heavy rules were intended to prevent companies from giving a high percentage ofpension plan assets to top employees, Grassley said. If top-heavy rules are triggered, employersmust make a mandatory contribution to every employee and comply with special vesting rules.

While the intent was commendable, the top-heavy rules now prevent expansion of pensioncoverage far more than curbing perceived abuses by employers.

Moreover, because other provisions enacted after adoption of the top-heavy rules preventpension plans from disproportionately advantaging highly-compensated employees, the reasons forthese rules no longer exist, Grassley said. The top-heavy rules discourage small businesses fromadopting and maintaining retirement plans for their employees.  The reforms of the top-heavy ruleswould:

  • provide that matching contributions may be taken into account in satisfying the minimumbenefit requirement;


    eliminate the family attribution of stock ownership rules for purposes of determining whetheran individual is a key employee by reason of being a 5 percent owner;

  • and provide that a safe-harbor 401(k) plan is not a top-heavy plan.



  • A majority of pension simplifications from the Pension Coverage and Portability Act,sponsored by Grassley and Graham.


This comprehensive measure advances six important goals: increased pension portability;expanded coverage for small businesses; enhanced fairness for women and families; strengthenedpension security and enforcement; improved retirement education; and reduced regulatory burdens.

Provisions in the tax bill include:

 

  • eliminating the percentage limit on employer and employee contributions to definedcontribution pension plans;


  • requiring periodic benefit statements to pension plan participants;

    • and faster vesting for 401(k) plans.



    Grassley also joined his colleagues on the Committee in offering their bill to save SocialSecurity as an amendment to the tax bill. That amendment was withdrawn before coming to a vote. The Bipartisan Social Security Reform Act of 1999 is sponsored by Grassley and Sens. Judd Gregg,Bob Kerrey and John Breaux.

    "We can cut taxes and save Social Security and Medicare," Grassley said. "Cutting taxes topromote retirement savings fits perfectly with our goal of saving these important programs. There'sno reason that we can't do it all."