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Automated Records Management System (ARMS) Email from the Office of Policy Development (OPD) Bucket
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Withdrawal/Redaction Sheet
Clinton Library
DOCUMENT NO.
SUBJECT/TITLE
DATE
RESTRICTION
AND TYPE
001. email
Maya A. Bernstein to Toni S. Hustead at 10:27:59.00. Subject: Re:
05/13/1997
b(6)
DC pensions. [partial] (1 page)
002. email
Toni S Hustead at 13:10:18.00. Subject: DC Pension Language.
06/13/1997
b(6)
[partial] (1 page)
COLLECTION:
Clinton Presidential Records
Automated Records Management System [Email]
OPD ([PBGC])
OA/Box Number:
FOLDER TITLE:
[05/05/1997 - 03/13/1998]
2014-0226-F
ab1481
RESTRICTION CODES
Presidential Records Act |44 U.S.C. 2204(a)|
Freedom of Information Act - 15 U.S.C. 552(b)|
P1 National Security Classified Information |(a)(1) of the PRAJ
b(1) National security classified information |(b)(1) of the FOIA]
P2 Relating to the appointment to Federal office [(a)(2) of the PRA]
b(2) Release would disclose internal personnel rules and practices of
P3 Release would violate a Federal statute [(a)(3) of the PRA]
an agency |(b)(2) of the FOIA]
P4 Release would disclose trade secrets or confidential commercial or
b(3) Release would violate a Federal statute |(b)(3) of the FOIA]
financial information |(a)(4) of the PRA]
b(4) Release would disclose trade secrets or confidential or financial
P5 Release would disclose confidential advice between the President
information [(b)(4) of the FOIA|
and his advisors, or between such advisors [a)(5) of the PRA|
b(6) Release would constitute a clearly unwarranted invasion of
P6 Release would constitute a clearly unwarranted invasion of
personal privacy |(b)(6) of the FOIA]
personal privacy [(a)(6) of the PRA]
b(7) Release would disclose information compiled for law enforcement
purposes [(b)(7) of the FOIA]
C. Closed in accordance with restrictions contained in donor's deed
b(8) Release would disclose information concerning the regulation of
of gift.
financial institutions |(b)(8) of the FOIA]
PRM. Personal record misfile defined in accordance with 44 U.S.C.
b(9) Release would disclose geological or geophysical information
2201(3).
concerning wells [(b)(9) of the FOIA]
RR. Document will be reviewed upon request.
RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: Toni S. Hustead ( CN=Toni S. Hustead/OU=OMB/O=EOP [ OMB
CREATION DATE/TIME: 5-MAY-1997 13:59:10.00
SUBJECT: DC Pension - outstanding issues
TO: Ingrid M. Schroeder ( CN=Ingrid M. Schroeder/OU=OMB/O=EOP @ EOP [ OMB ])
READ:UNKNOWN
CC: Mark D. Menchik ( CN=Mark D. Menchik/OU=OMB/O=EOP @ EOP [ OMB
READ:UNKNOWN
CC: Larry R. Matlack ( CN=Larry R. Matlack/OU=OMB/O=EOP @ EOP [ OMB ])
READ:UNKNOWN
CC: Ellen S. Seidman ( CN=Ellen S. Seidman/OU=OPD/O=EOP @ EOP [ OPD
READ:UNKNOWN
TEXT:
I have a fax here that asks to arrange a conference call. In the interest
of time, I thought that I would address some of the comments -- as I think
many agree. Maybe then, the conference call can be quicker.
1) Adoption date:
In the Definitions for the Pension section of the MOU, PBGC altered the
language to read:
"Adoption date" means the date the legislation enacted by the District
government establishing the Replacement Plan becomes effective." This
mirrors the definition in the legislation Section 104 (15). In the
legislation, none of the liability moves until the adoption date. No
wiggle room here! I believe this definition solves Treasury's problem and
Menchik's problem.
2) This is background for M Menckik on the "leaving significant amount of
pension assets with DC". The assets left with the District have been
"solved for" by the actuaries. Essentially, FDR stated exactly how much
savings DC would get in testimony. The pension part of the proposal has
been the plug item. It was determined that we needed to save about $250
million in pension contributions for DC in FY98. This meant that their
payment to the fund must be $57 million since their current contribution W
ould be $307 million. Using either the entry age normal cost or the
aggregate funding method, we solved for what amount of assets would have
to stay behind in order to come up with a $57 million fund payment. We
would have to leave behind about $1.275 billion dollars ("a significant
amount"). This would give us about $2.5 billion. We did not want to
write the exact amount in here as all of these are estimates and will be
estimates until the legislation is enacted into law.
3) PBGC, OMB, and the DC consulting actuary all feel that the aggregate
funding method should be used by the DIstrict in the future. This is why
we added this amount. Both the aggregate and the entry age normal give
the same DC contribution amount in the first year. I believe no one to
date has voiced a problem with this.
4) The reason that "under the terms of the existing program" was
eliminated is because we do not want to alter benefits with this
legislation. Some of the benefits have twice a year colas, some have once
a year colas, and some have recomputation (where benefits are increased
with pay increases!). It would be tempting to alter these -- but the
intent was to produce pension legislation where the govt merely took over
existing liability. However, it was decided not to lock in something
that has never been locked in in the past with this legislative package.
Over and over again courts have ruled that federal colas are not
considered property. It is an area that the congress and/or the
administration may want to assess down the road. The decision was made to
eliminate "under the terms of the existing program" so that this decision
is not addressed now.
I think that I have aligned all of the concerns that you have given us.
Let me know if you still want a conference call.
RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: Mark D. Menchik CN=Mark D. Menchik/OU=OMB/O=EOP [ OMB ])
CREATION DATE/TIME: 5-MAY-1997 15:14:11.00
SUBJECT: Re: DC Pension - outstanding issues
TO: Toni S. Hustead (CN=Toni S. Hustead/OU=OMB/O=EOP @ EOP [ OMB
READ:UNKNOWN
CC: Ellen S. Seidman ( CN=Ellen S. Seidman/OU=OPD/O=EOP @ EOP [ OPD )
READ:UNKNOWN
CC: Larry R. Matlack (CN=Larry R. Matlack/OU=OMB/O=EOP @ EOP [ OMB ])
READ:UNKNOWN
CC: Ingrid M. Schroeder ( CN=Ingrid M. Schroeder/OU=OMB/O=EOP @ EOP [ OMB ])
READ:UNKNOWN
TEXT:
I agree with 1, 3, and 4. Thanks, Toni!
On #2, I was under the impression (perhaps "misimpression") that the new
numbers involved an increased federal financial commitment for DC
pensions, not just a recalculation of the original commitment. Last week,
Ed's draft testimony was changed from federal payments of "about $400
million" over 5 years to "over $450 million." Is this a real increase? If
so, is it associated with the changed expectation of the pension assets to
be left with DC?
In the second package of PBGC edits (p. 3, sec 2, line 5) the phrase "a
third party Trustee" is changed to "a Trustee". Does anyone know the
origin of this edit? I wouldn't want to weaken the "third-party-ness" of
the Administration plan.
Thanks.
Toni S. Hustead
05/05/97 01:57:55 PM
Record Type: Record
To: Ingrid M. Schroeder/OMB/EOP
cc: Ellen S. Seidman/OPD/EOP, Mark D. Menchik/OMB/EOP, Larry R.
Matlack/OMB/EOP
Subject: DC Pension - outstanding issues
I have a fax here that asks to arrange a conference call. In the interest
of time, I thought that I would address some of the comments -- as I think
many agree. Maybe then, the conference call can be quicker.
1) Adoption date:
In the Definitions for the Pension section of the MOU, PBGC altered the
language to read:
"Adoption date" means the date the legislation enacted by the DIstrict
government establishing the Replacement Plan becomes effective." This
mirrors the definition in the legislation Section 104 (15). In the
legislation, none of the liability moves until the adoption date. No
wiggle room here! I believe this definition solves Treasury's problem and
Menchik's problem.
2) This is background for M Menckik on the "leaving significant amount of
pension assets with DC". The assets left with the District have been
"solved for" by the actuaries. Essentially, FDR stated exactly how much
savings DC would get in testimony. The pension part of the proposal has
been the plug item. It was determined that we needed to save about $250
million in pension contributions for DC in FY98. This meant that their
payment to the fund must be $57 million since their current contribution W
ould be $307 million. Using either the entry age normal cost or the
aggregate funding method, we solved for what amount of assets would have
to stay behind in order to come up with a $57 million fund payment. We
would have to leave behind about $1.275 billion dollars ("a significant
amount"). This would give us about $2.5 billion. We did not want to
write the exact amount in here as all of these are estimates and will be
estimates until the legislation is enacted into law.
3) PBGC, OMB, and the DC consulting actuary all feel that the aggregate
funding method should be used by the DIstrict in the future. This is why
we added this amount. Both the aggregate and the entry age normal give
the same DC contribution amount in the first year. I believe no one to
date has voiced a problem with this.
4) The reason that "under the terms of the existing program" was
eliminated is because we do not want to alter benefits with this
legislation. Some of the benefits have twice a year colas, some have once
a year colas, and some have recomputation (where benefits are increased
with pay increases!). It would be tempting to alter these -- but the
intent was to produce pension legislation where the govt merely took over
existing liability. However, it was decided not to lock in something
that has never been locked in in the past with this legislative package.
Over and over again courts have ruled that federal colas are not
considered property. It is an area that the congress and/or the
administration may want to assess down the road. The decision was made to
eliminate "under the terms of the existing program" so that this decision
is not addressed now.
I think that I have aligned all of the concerns that you have given us.
Let me know if you still want a conference call.
RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: Mark D. Menchik (CN=Mark D. Menchik/OU=OMB/O=EOP [ OMB ])
CREATION DATE/TIME: 5-MAY-1997 16:24:16.00
SUBJECT: Re: DC Pension - outstanding issues
TO: Toni S. Hustead (CN=Toni S. Hustead/OU=OMB/O=EOP @ EOP [ OMB ])
READ:UNKNOWN
CC: Ellen S. Seidman ( CN=Ellen S. Seidman/OU=OPD/O=EOP @ EOP [ OPD
READ:UNKNOWN
CC: Larry R. Matlack (CN=Larry R. Matlack/OU=OMB/O=EOP @ EOP [ OMB )
READ:UNKNOWN
CC: Ingrid M. Schroeder ( CN=Ingrid M. Schroeder/OU=OMB/O=EOP @ EOP [ OMB )
READ:UNKNOWN
TEXT:
Thanks yet again, Toni.
On the basis of what you said, I agree with you on #2.
However, I can't agree with PBGC on omitting "third party" from
"trustee," From the first, the third-party character of the fiduciary
trustee has been a key feature of the President's plan. Proclaiming our
idea is not "fencing in" the Administration, it's doing what the MOU
should do, which is implementing the plan. It's not at all a matter of
flexibility how can the trust serve as a fiduciary for the pensioners
if it has any financial interest in the matter? That's why it is
essential to have a third-party trustee and why the MOU should state
this.
Ingrid: There doesn't seem any need for a conference call, but as you can
see, I still strongly object to removing "third party". If PBGC is
seriously opposed to restoring the original language, I'd be glad to speak
with them.
Toni S. Hustead
05/05/97 04:01:28 PM
Record Type: Record
To: Mark D. Menchik/OMB/EOP
cc: Ingrid M. Schroeder/OMB/EOP, Ellen S. Seidman/OPD/EOP, Larry R.
Matlack/OMB/EOP
bcc:
Subject: Re: DC Pension - outstanding issues
Mark,
You are correct in that Ed's changed the $400 million to $450 last week.
THis statement is : " While net Federal costs come to over $450 million
over 5 years, the Plan will save DC nearly $750 million over the same
period. Most of this difference results because pension assets -- not
other Federal budget resources -- will be used to pay beneficiaries until
after 2002."
Our leaving behind assets did not change the federal liability between now
and 2002. This was the one most sacred assumption. THe assets that we
take with us will definitely last beyond this time. Hence, his adjustment
had nothing to do with these assets levels - they were fine tuning other
items.
In regard to changing "the third-party trustee" to "trustee" -- I can only
speculate that they felt that it was not necessary to clearly define this
and gives us more room. Our proposed legislation states that the
Treasury must enter into a contract with a Trustee (implying that it is
not within the Treasury). It does not say any where that this Trustee can
not be the current Trustee or part of the government (franchise funds
etc). Omitting "third-party" ensures that the Administration can avoid
being fenced in in the future as to the Trustee.
Mark D. Menchik 05/05/97 03:12:52 PM
Record Type: Record
To: Toni S. Hustead/OMB/EOP
cc: Ingrid M. Schroeder/OMB/EOP, Ellen S. Seidman/OPD/EOP, Larry R.
Matlack/OMB/EOP
bcc:
Subject: Re: DC Pension - outstanding issues
I agree with 1, 3, and 4. Thanks, Toni!
On #2, I was under the impression (perhaps "misimpression") that the new
numbers involved an increased federal financial commitment for DC
pensions, not just a recalculation of the original commitment. Last week,
Ed's draft testimony was changed from federal payments of "about $400
million" over 5 years to "over $450 million." Is this a real increase? If
so, is it associated with the changed expectation of the pension assets to
be left with DC?
In the second package of PBGC edits (p. 3, sec 2, line 5) the phrase "a
third party Trustee" is changed to "a Trustee". Does anyone know the
origin of this edit? I wouldn't want to weaken the "third-party-ness" of
the Administration plan.
Thanks.
Toni S. Hustead
05/05/97 01:57:55 PM
Record Type: Record
To: Ingrid M. Schroeder/OMB/EOP
cc: Ellen S. Seidman/OPD/EOP, Mark D. Menchik/OMB/EOP, Larry R.
Matlack/OMB/EOP
Subject: DC Pension - outstanding issues
I have a fax here that asks to arrange a conference call. In the interest
of time, I thought that I would address some of the comments -- as I think
many agree. Maybe then, the conference call can be quicker.
1) Adoption date:
In the Definitions for the Pension section of the MOU, PBGC altered the
language to read:
"Adoption date" means the date the legislation enacted by the DIstrict
government establishing the Replacement Plan becomes effective." This
mirrors the definition in the legislation Section 104 (15). In the
legislation, none of the liability moves until the adoption date. No
wiggle room here! I believe this definition solves Treasury's problem and
Menchik's problem.
2) This is background for M Menckik on the "leaving significant amount of
pension assets with DC". The assets left with the District have been
"solved for" by the actuaries. Essentially, FDR stated exactly how much
savings DC would get in testimony. The pension part of the proposal has
been the plug item. It was determined that we needed to save about $250
million in pension contributions for DC in FY98. This meant that their
payment to the fund must be $57 million since their current contribution W
ould be $307 million. Using either the entry age normal cost or the
aggregate funding method, we solved for what amount of assets would have
to stay behind in order to come up with a $57 million fund payment. We
would have to leave behind about $1.275 billion dollars ("a significant
amount"). This would give us about $2.5 billion. We did not want to
write the exact amount in here as all of these are estimates and will be
estimates until the legislation is enacted into law.
3) PBGC, OMB, and the DC consulting actuary all feel that the aggregate
funding method should be used by the DIstrict in the future. This is why
we added this amount. Both the aggregate and the entry age normal give
the same DC contribution amount in the first year. I believe no one to
date has voiced a problem with this.
4) The reason that "under the terms of the existing program" was
eliminated is because we do not want to alter benefits with this
legislation. Some of the benefits have twice a year colas, some have once
a year colas, and some have recomputation (where benefits are increased
with pay increases!). It would be tempting to alter these -- but the
intent was to produce pension legislation where the govt merely took over
existing liability. However, it was decided not to lock in something
that has never been locked in in the past with this legislative package.
Over and over again courts have ruled that federal colas are not
considered property. It is an area that the congress and/or the
administration may want to assess down the road. The decision was made to
eliminate "under the terms of the existing program" so that this decision
is not addressed now.
I think that I have aligned all of the concerns that you have given us.
Let me know if you still want a conference call.
RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: Ellen S. Seidman (CN=Ellen S. Seidman/OU=OPD/O=EOP [ OPD ])
CREATION DATE/TIME: 5-MAY-1997 17:41:21.00
SUBJECT: Re: DC Pension - outstanding issues
TO: Mark D. Menchik ( CN=Mark D. Menchik/OU=OMB/O=EOP @ EOP [ OMB 1)
READ:UNKNOWN
CC: Ingrid M. Schroeder ( CN=Ingrid M. Schroeder/OU=OMB/O=EOP @ EOP [ OMB D
READ:UNKNOWN
CC: Larry R. Matlack ( CN=Larry R. Matlack/OU=OMB/O=EOP @ EOP [ OMB 1)
READ:UNKNOWN
CC: Toni S. Hustead (CN=Toni S. Hustead/OU=OMB/O=EOP @ EOP [ OMB D
READ:UNKNOWN
TEXT:
Actually, I think the real issue is that "third-party" adds ABSOLUTELY
NOTHING. If you want to say "non-governmenal" or "who shall not be part
of the Federal Government" that might mean something. I would go along
with the latter, or is this part not of the PBGC's effort not to box in
the Treasury, but the Treasury's effort, a la the argument over the
Actuarial Board?
ellen
RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: Mark D. Menchik (CN=Mark D. Menchik/OU=OMB/O=EOP [ OMB
CREATION DATE/TIME: 6-MAY-1997 09:31:48.00
SUBJECT: Re: DC Pension - outstanding issues
TO: Ellen S. Seidman ( CN=Ellen S. Seidman/OU=OPD/O=EOP @ EOP [ OPD
READ:UNKNOWN
CC: Ingrid M. Schroeder ( CN=Ingrid M. Schroeder/OU=OMB/O=EOP @ EOP [ OMB ])
READ:UNKNOWN
CC: Larry R. Matlack (CN=Larry R. Matlack/OU=OMB/O=EOP @ EOP [ OMB )
READ:UNKNOWN
CC: Toni S. Hustead ( CN=Toni S. Hustead/OU=OMB/O=EOP @ EOP [ OMB )
READ:UNKNOWN
TEXT:
Ellen,
I'm afraid that I'm confused by your message. Maybe my faculties are
suffering a May decliine.
I think that adding "third party" to "trustee" adds:
a limitation on the range of trustees, say, ruling out the signers of the
MOU.
a strong link to the Administration's speeches -- and promises -- on its
initiative for DC plus a specification and validation of them.
a non-lawyerly term that has considerable meaning in context.
a kind of partial protection -- the most to be expected -- against many
varieties of simple mistakes and willful distortions, given the political,
legislative, and drafting hurly-burly. For example, the MOU should become
part of the bill's non-Scalia legislative history.
In my view, the other wordings could be very useful, so long as the "link"
function (above) is performed elsewhere in the MOU. And Treasury's view
on the Actuarial Board would well be related to PBGC's suggested removal
of those words.
It seems to me that all this makes it doubly important for us to hear
PBGC's response to Toni. Just what did they have in mind when they made
that edit? I'll await that response eagerly.
Mark
Ellen S. Seidman
05/05/97 05:39:54 PM
Record Type: Record
To: Mark D. Menchik/OMB/EOP
cc: Toni S. Hustead/OMB/EOP, Ingrid M. Schroeder/OMB/EOP, Larry R.
Matlack/OMB/EOP
Subject: Re: DC Pension - outstanding issues
Actually, I think the real issue is that "third-party" adds ABSOLUTELY
NOTHING. If you want to say "non-governmenal" or "who shall not be part
of the Federal Government" that might mean something. I would go along
with the latter, or is this part not of the PBGC's effort not to box in
the Treasury, but the Treasury's effort, a la the argument over the
Actuarial Board?
ellen
RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: Toni S. Hustead (CN=Toni S. Hustead/OU=OMB/O=EOP [ OMB 1)
CREATION DATE/TIME: 6-MAY-1997 19:09:59.00
SUBJECT: Changes to DC Pension language
TO: Rosalyn J. Rettman ( CN=Rosalyn J. Rettman/OU=OMB/O=EOP @ EOP [ OMB 1)
READ:UNKNOWN
CC: Ellen S. Seidman ( CN=Ellen S. Seidman/OU=OPD/O=EOP @ EOP [ OPD
READ:UNKNOWN
CC: Gustafson.David ( Gustafson.David @ pbgc.gov @ INET @ LNGTWY [ UNKNOWN )
READ:UNKNOWN
CC: Sirkin.Stuart ( Sirkin.Stuart @ PBGC.gov @ INET @ LNGTWY [ UNKNOWN )
READ:UNKNOWN
CC: Michael D. Gerich ( CN=Michael D. Gerich/OU=OMB/O=EOP @ EOP [ OMB 1)
READ:UNKNOWN
CC: Harry E. Moran ( CN=Harry E. Moran/OU=OMB/O=EOP @ EOP [ OMB 1)
READ:UNKNOWN
CC: Pacelli.Jane ( Pacelli.Jane @ pbgc.gov @ INET @ LNGTWY [ UNKNOWN ])
READ:UNKNOWN
CC: Mathew C. Blum ( CN=Mathew C. Blum/OU=OMB/O=EOP @ EOP [ OMB 1)
READ:UNKNOWN
CC: M. Jill Gibbons (CN=M. Jill Gibbons/OU=OMB/O=EOP @ EOP [ OMB 1)
READ:UNKNOWN
Toni S. Hustead ( CN=Toni S. Hustead/OU=OMB/O=EOP [ OMB )
READ:UNKNOWN
TEXT:
We are in a crunch to clear the legislation and need to iron out the
remaining issues. I am trying to summarize them and we need input from
you all in your areas. This is also faxed to PBGC in order to ensure
delivery as can not count on email above to get through. I am numbering
the issues below for easy discussion reference:
Number 1:
I talked to Roz Rettman (OMB GC for those of you in PBGC who might not
know her!) this morning and have faxed her the most recent version of the
language. She thinks that we will need something in Sec 302 (probably a
new Section 302 b) that states something like:
"Assets of the Retirement Trust may continue to be invested in the same
manner as prior to the transfer."
Rusty, do you have any problems with such language? PBGC?
Number 2:
Also, while she has not come to a final conclusion, she is thinking that
we should take out Section 304 (c): "The Retirement Trust shall not be
considered an agency or department of the United States."
We were wondering then if language involving contracting out should be
included so that the selection of the Trustee (who is dealing with the DC
assets) does not have to go through the normal and long RFP process etc.
I told Roz that I would talk to someone in OFPP. I talked this evening to
Michael Gerich who educated me (as hopeless as it may be on procurement
issues) somewhat. He stated that most procurement laws pertain to
appropriated funds. By being silent on this issue may mean that Treasury
may have some flexibility here. He suggested that he consult his
colleague, Matt Blum, and that you Roz check with your Treasury contacts
in GC as Treasury has some special authorities in nonprocurement
solicitations maybe. If so, then section 304 (c) could be taken out.
I hope that Roz and Michael and Matt jump in here if I have said something
wrong.
Number 3:
Labor Dept issue that we still need input on from PBGC ERISA experts:
Section 309(a)(2) of Title I would give undue weight to any factual
determination made by the Trustee. The President's Commission on Health
Care Policy will be considering, among other things, the procedures and
rights afforded to persons who appeal benefit determinations. We are
concerned that such a provision could be used to argue against protections
that the President's Commission on Health Care Policy may propose to add
to ERISA.
Number 4:
Labor Dept issue that we still need input on from PBGC ERISA experts:
Section 803(a) of Title I would limit the statute of limitation for filing
a civil action for benefits to 180 days. This is substantially shorter
than the time limit customarily provided for a claim under an ERISA plan,
which is typically three years or more. We are concerned that such a
provision could be used to argue against protections that the President's
Commission on Health Care Policy may propose to add to ERISA. Therefore,
we propose that the 180 day period be extended to three years.
RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: Harry E. Moran ( CN=Harry E. Moran/OU=OMB/O=EOP [ OMB ])
CREATION DATE/TIME: 7-MAY-1997 10:16:08.00
SUBJECT: Re: Changes to DC Pension language
TO: Toni S. Hustead ( CN=Toni S. Hustead/OU=OMB/O=EOP @ EOP [ OMB 1)
READ:UNKNOWN
CC: Ellen S. Seidman ( CN=Ellen S. Seidman/OU=OPD/O=EOP @ EOP [ OPD )
READ:UNKNOWN
CC: pacelli.jane ( pacelli.jane @ pbgc.gov @ inet @ Ingtwy [ UNKNOWN ])
READ:UNKNOWN
CC: M. Jill Gibbons (CN=M. Jill Gibbons/OU=OMB/O=EOP @ EOP [ OMB ])
READ:UNKNOWN
CC: gustafson.david ( gustafson.david @ pbgc.gov @ inet @ Ingtwy [ UNKNOWN ])
READ:UNKNOWN
CC: sirkin.stuart ( sirkin.stuart @ pbgc.gov @ inet @ Ingtwy [ UNKNOWN 1)
READ:UNKNOWN
CC: Rosalyn J. Rettman ( CN=Rosalyn J. Rettman/OU=OMB/O=EOP @ EOP [ OMB 1)
READ:UNKNOWN
TEXT:
I talked to Roz about the additional language in Number 1. Something is
needed to make the funds available, once they are transferred, for
investment. We concluded that the place to put it is in sec. 302(c).
After "available" insert "for investment in the same manner as prior to
the transfer pursuant to subsection (a) and".
Toni S. Hustead
05/06/97 07:08:44 PM
Record Type: Record
To: Rosalyn J. Rettman/OMB/EOP
cc: See the distribution list at the bottom of this message
Subject: Changes to DC Pension language
We are in a crunch to clear the legislation and need to iron out the
remaining issues. I am trying to summarize them and we need input from
you all in your areas. This is also faxed to PBGC in order to ensure
delivery as can not count on email above to get through. I am numbering
the issues below for easy discussion reference:
Number 1:
I talked to Roz Rettman (OMB GC for those of you in PBGC who might not
know her!) this morning and have faxed her the most recent version of the
language. She thinks that we will need something in Sec 302 (probably a
new Section 302 b) that states something like:
"Assets of the Retirement Trust may continue to be invested in the same
manner as prior to the transfer."
Rusty, do you have any problems with such language? PBGC?
Number 2:
Also, while she has not come to a final conclusion, she is thinking that
we should take out Section 304 (c): "The Retirement Trust shall not be
considered an agency or department of the United States."
We were wondering then if language involving contracting out should be
included so that the selection of the Trustee (who is dealing with the DC
assets) does not have to go through the normal and long RFP process etc.
I told Roz that I would talk to someone in OFPP. I talked this evening to
Michael Gerich who educated me (as hopeless as it may be on procurement
issues) somewhat. He stated that most procurement laws pertain to
appropriated funds. By being silent on this issue may mean that Treasury
may have some flexibility here. He suggested that he consult his
colleague, Matt Blum, and that you Roz check with your Treasury contacts
in GC as Treasury has some special authorities in nonprocurement
solicitations maybe. If so, then section 304 (c) could be taken out.
I hope that Roz and Michael and Matt jump in here if I have said something
wrong.
Number 3:
Labor Dept issue that we still need input on from PBGC ERISA experts:
Section 309(a)(2) of Title I would give undue weight to any factual
determination made by the Trustee. The President's Commission on Health
Care Policy will be considering, among other things, the procedures and
rights afforded to persons who appeal benefit determinations. We are
concerned that such a provision could be used to argue against protections
that the President's Commission on Health Care Policy may propose to add
to ERISA.
Number 4:
Labor Dept issue that we still need input on from PBGC ERISA experts:
Section 803(a) of Title I would limit the statute of limitation for filing
a civil action for benefits to 180 days. This is substantially shorter
than the time limit customarily provided for a claim under an ERISA plan,
which is typically three years or more. We are concerned that such a
provision could be used to argue against protections that the President's
Commission on Health Care Policy may propose to add to ERISA. Therefore,
we propose that the 180 day period be extended to three years.
Message Copied
To:
M. Jill Gibbons/OMB/EOP
Michael D. Gerich/OMB/EOP
Mathew C. Blum/OMB/EOP
Sirkin.Stuart @ PBGC.gov @ INET @ LNGTWY
Pacelli.Jane @ pbgc.gov @ INET @ LNGTWY
Gustafson.David @ pbgc.gov @ INET @ LNGTWY
Harry E. Moran/OMB/EOP
Ellen S. Seidman/OPD/EOP
RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: Toni S. Hustead (CN=Toni S. Hustead/OU=OMB/O=EOP [ OMB ]
CREATION DATE/TIME: 7-MAY-1997 09:40:04.00
SUBJECT: Changes to DC Pension language
TO: Harry E. Moran (CN=Harry E. Moran/OU=OMB/O=EOP @ EOP [ OMB ])
READ:UNKNOWN
TO: Ellen S. Seidman ( CN=Ellen S. Seidman/OU=OPD/O=EOP @ EOP [ OPD
READ:UNKNOWN
CC: Mathew C. Blum ( CN=Mathew C. Blum/OU=OMB/O=EOP @ EOP [ OMB
READ:UNKNOWN
TEXT:
OFPP comments enclosed.
Forwarded by Toni S. Hustead/OMB/EOP on 05/07/97
08:40 AM
Mathew C. Blum
05/06/97 10:21:31 PM
Record Type: Record
To: Michael D. Gerich/OMB/EOP
cc: Steven L. Schooner/OMB/EOP, Toni S. Hustead/OMB/EOP, Rosalyn J.
Rettman/OMB/EOP, Allan E. Brown/OMB/EOP
Subject: Changes to DC Pension language
Mike:
Regarding item no. 2, I don't know the details, but would tend to think
that our Hill Committees would probably not be too upset if the Federal
Property Act and other procurement laws were not applied to a Retirement
Trust, where, presumably, procurement is a very small function and the
organization is potentially quasi-governmental. (Last year, we did not
object to broad waivers for the Presidio Trust.)
I was a bit confused, however, about your comment (as reported by Toni)
regarding appropriated funds. Isn't the key issue whether the trust is
considered to be an executive agency? In an (admittedly) quick read of
Nash and Cibinic, I noted a case, for example, where a Trust formed by
airlines for purposes of receiving airport landing fees due to the U.S.
was considered to be an executive agency because, among other things, FAA
played a prominent role in its administration even though (presumably) no
appropriated funds were involved. If this is the case, the language
proposed for deletion in item no. 2 might actually help to ensure that the
Property Act does not apply to the Trust at hand. (Of course, there may be
other non-procurement reasons for not making this statement, in which case
your point about Treasury comes into play, and would help resolve whether
the same result -- i.e., inapplicability of procurement laws to the Trust
-- would be achieved even absent this language.)
In short, if I understand Toni's restatement, I think I am in general
agreement with your bottom line (for what it's worth) -- which is probably
all that matters at this point (but am a bit confused about the means by
which you get there).
Forwarded by Mathew C. Blum/OMB/EOP on 05/06/97
07:53 PM
Toni S. Hustead
05/06/97 07:08:44 PM
Record Type: Record
To: Rosalyn J. Rettman/OMB/EOP
cc: See the distribution list at the bottom of this message
Subject: Changes to DC Pension language
We are in a crunch to clear the legislation and need to iron out the
remaining issues. I am trying to summarize them and we need input from
you all in your areas. This is also faxed to PBGC in order to ensure
delivery as can not count on email above to get through. I am numbering
the issues below for easy discussion reference:
Number 1:
I talked to Roz Rettman (OMB GC for those of you in PBGC who might not
know her!) this morning and have faxed her the most recent version of the
language. She thinks that we will need something in Sec 302 (probably a
new Section 302 b) that states something like:
"Assets of the Retirement Trust may continue to be invested in the same
manner as prior to the transfer."
Rusty, do you have any problems with such language? PBGC?
Number 2:
Also, while she has not come to a final conclusion, she is thinking that
we should take out Section 304 (c): "The Retirement Trust shall not be
considered an agency or department of the United States."
We were wondering then if language involving contracting out should be
included so that the selection of the Trustee (who is dealing with the DC
assets) does not have to go through the normal and long RFP process etc.
I told Roz that I would talk to someone in OFPP. I talked this evening to
Michael Gerich who educated me (as hopeless as it may be on procurement
issues) somewhat. He stated that most procurement laws pertain to
appropriated funds. By being silent on this issue may mean that Treasury
may have some flexibility here. He suggested that he consult his
colleague, Matt Blum, and that you Roz check with your Treasury contacts
in GC as Treasury has some special authorities in nonprocurement
solicitations maybe. If so, then section 304 (c) could be taken out.
I hope that Roz and Michael and Matt jump in here if I have said something
wrong.
Number 3:
Labor Dept issue that we still need input on from PBGC ERISA experts:
Section 309(a)(2) of Title I would give undue weight to any factual
determination made by the Trustee. The President's Commission on Health
Care Policy will be considering, among other things, the procedures and
rights afforded to persons who appeal benefit determinations. We are
concerned that such a provision could be used to argue against protections
that the President's Commission on Health Care Policy may propose to add
to ERISA.
Number 4:
Labor Dept issue that we still need input on from PBGC ERISA experts:
Section 803(a) of Title I would limit the statute of limitation for filing
a civil action for benefits to 180 days. This is substantially shorter
than the time limit customarily provided for a claim under an ERISA plan,
which is typically three years or more. We are concerned that such a
provision could be used to argue against protections that the President's
Commission on Health Care Policy may propose to add to ERISA. Therefore,
we propose that the 180 day period be extended to three years.
Message Copied
To:
M. Jill Gibbons/OMB/EOP
Michael D. Gerich/OMB/EOP
Mathew C. Blum/OMB/EOP
Sirkin.Stuart @ PBGC.gov @ INET @ LNGTWY
Pacelli.Jane @ pbgc.gov @ INET @ LNGTWY
Gustafson.David @ pbgc.gov @ INET @ LNGTWY
Harry E. Moran/OMB/EOP
Ellen S. Seidman/OPD/EOP
RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: Toni S. Hustead ( CN=Toni S. Hustead/OU=OMB/O=EOP [ OMB ])
CREATION DATE/TIME: 7-MAY-1997 18:33:42.00
SUBJECT: PBGC language
TO: Ellen S. Seidman ( CN=Ellen S. Seidman/OU=OPD/O=EOP @ EOP [ OPD )
READ:UNKNOWN
TEXT:
Forwarded by Toni S. Hustead/OMB/EOP on 05/07/97
05:35 PM
Rosalyn J. Rettman
05/07/97 04:07:51 PM
Record Type: Record
To: Toni S. Hustead/OMB/EOP, Harry E. Moran/OMB/EOP
cc:
Subject: PBGC language
PBGC proposes to rewrite section 302(c) as follows:
(c) The assets of the Retirement Trust are hereby made available
for investment in private securities and all other investments deemed
appropriate by the Secretary, and for the payments of benefits and
necessary administrative expenses.
Any reaction?
Thank.s
RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: Toni S. Hustead (CN=Toni S. Hustead/OU=OMB/O=EOP [ OMB ])
CREATION DATE/TIME: 9-MAY-1997 17:05:49.00
SUBJECT: DC Document
TO: M. Jill Gibbons ( (CN=M. Jill Gibbons/OU=OMB/O=EOP @ EOP [ OMB )
READ:UNKNOWN
CC: Kathleen M. Turco ( CN=Kathleen M. Turco/OU=OMB/O=EOP @ EOP [OMB])
READ:UNKNOWN
CC: Ellen S. Seidman ( CN=Ellen S. Seidman/OU=OPD/O=EOP @ EOP [ OPD
READ:UNKNOWN
CC: Maya A. Bernstein ( CN=Maya A. Bernstein/OU=OMB/O=EOP @ EOP [ OMB ])
READ:UNKNOWN
TEXT:
Note the PBGC response to the privacy act questions. The guidance was
given by Ellen Seidman I think (copied here). Do you still have
concerns? If so, then we need to connect Ellen up with Maya and Kathleen
on this issue.
Forwarded by Toni S. Hustead/OMB/EOP on 05/09/97
04:01 PM
Pacelli.Jane @ pbgc.gov
05/09/97 01:37:00 PM
Record Type: Record
To: Toni S. Hustead
cc:
Subject: DC Document
1. DOL has withdrawn its concerns.
2. Section 304 (c) is gone - see copy we faxed to you.
3. The exception to Code Section 6103 has a great deal of background. At
an early stage,
we received firm instructions to draft a provision allowing the Secretary
of the Treasury
and the Trustee to obtain tax return info. This is necessary, among other
things, because no
one trusts DC employment records (specifically, it was noted that if the
school system
doesn't know who its employees are, then the pension service and salary
data is clearly
suspect). OPM doesn't have any info on DC employees, and neither does
Social Security
(remember, these folks are not covered). The basic thought behind the
current language
is the fact that the Secretary of the Treasury and the Trustee are
federal officials who can
be trusted to deal responsibly with the info. Please advise us if the
previous drafting
instructions are no longer operative.
Any views expressed by the author of this message are not those of
the Pension Benefit Guaranty Corporation.
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RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: Kathleen M. Turco ( CN=Kathleen M. Turco/OU=OMB/O=EOP [ OMB ])
CREATION DATE/TIME: 9-MAY-1997 18:12:02.00
SUBJECT: Re: DC Document
TO: Toni S. Hustead ( CN=Toni S. Hustead/OU=OMB/O=EOP @ EOP [ OMB 1)
READ:UNKNOWN
CC: Maya A. Bernstein ( CN=Maya A. Bernstein/OU=OMB/O=EOP @ EOP [OMB])
READ:UNKNOWN
CC: Ellen S. Seidman ( CN=Ellen S. Seidman/OU=OPD/O=EOP @ EOP [ OPD
READ:UNKNOWN
CC: M. Jill Gibbons (CN=M. Jill Gibbons/OU=OMB/O=EOP @ EOP [ OMB )
READ:UNKNOWN
TEXT:
Toni/Ellen/Jill/Maya - The issue for Treasury is that, 6103 blanket
exemption aside, IRS does not have current employment data (IRS' master
file does not maintain records over 6 years for individuals and in most
cases information is retired between 3-4 years). Also, any information
that IRS would provide would be 12 to 18 months after a filing season.
If everyone has concluded that IRS is the only source for this
information, then we need to work with Treasury to draft the language.
First step, call Chris Rizek, Attorney-Advisor/GC/Treasury for IRC 6103.
Chris can advise as to the exact language necessary for tax return
information. I spoke with him today on this issue and he said that he
advised PBGC of the problems with the language a couple of weeks ago.
Second, Chris, PBGC and others should get together and discuss necessary
modifications to the provision(s). Chris is at 622-1338.
I'm on vacation from May 12 - May 30th so don't wait for me! Thanks -
Kathleen
RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: Peter R. Orszag ( CN=Peter R. Orszag/OU=OPD/O=EOP [OPD])
CREATION DATE/TIME:11-MAY-1997 13:32:14.00
SUBJECT: Pensions
TO: Ellen S. Seidman ( CN=Ellen S. Seidman/OU=OPD/O=EOP @ EOP [ OPD ])
READ:UNKNOWN
TEXT:
Ellen --
Gene is going to speak to the American Council of Life Insurance on
Tuesday (it's a brief talk -- 15 minutes plus about 15 to 20 minutes of
Q&A). I want to make sure that he has a set of materials on the PBGC,
our pensions initiatives, etc. Could you please help me out?
Thanks,
Peter
RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: Toni S. Hustead ( CN=Toni S. Hustead/OU=OMB/O=EOP [ OMB 1)
CREATION DATE/TIME:12-MAY-1997 16:59:44.00
SUBJECT: DC Pension Bill and Sec. 6103
TO: M. Jill Gibbons ( CN=M. Jill Gibbons/OU=OMB/O=EOP @ EOP [ OMB 1)
READ:UNKNOWN
TO: Kathleen M. Turco ( CN=Kathleen M. Turco/OU=OMB/O=EOP @ EOP [ OMB ])
READ:UNKNOWN
TO: Marcia D. Occomy ( CN=Marcia D. Occomy/OU=OMB/O=EOP @ EOP [ OMB )
READ:UNKNOWN
TO: Maya A. Bernstein ( CN=Maya A. Bernstein/OU=OMB/O=EOP @ EOP [ OMB 1)
READ:UNKNOWN
TO: Ellen S. Seidman ( CN=Ellen S. Seidman/OU=OPD/O=EOP @ EOP [ OPD D
READ:UNKNOWN
TEXT:
This is more info for you. It is clearly outside my area. Let me know
what you want to do.
Forwarded by Toni S. Hustead/OMB/EOP on 05/12/97
03:51 PM
Finke.Charles @ pbgc.gov
05/12/97 02:12:00 PM
Record Type: Record
To: Toni S. Hustead
cc:
Subject: DC Pension Bill and Sec. 6103
Please respond to "[email protected]"
Let us explain the background of section 308:
(1) Pension benefits under the District's programs are based on
compensation and
years of service.
(2) The Federal government is assuming a portion of those liabilities.
(3) As illustrated by two major stories in the Washington Post this very
weekend,
the District's employment records (especially, but not limited to
teachers' records) are unreliable.
(4) These facts were known to the policymakers who gave us our drafting
specifications.
(5) We were instructed to allow the Secretary of the Treasury and his
Trustee access
to any info. that would assist in correcting errors (or fraud) in the
existing record base
as to employment and income.
(6) These DC employees/retirees were not covered by Social Security so we
cannot get
data from SSA.
(7) Over 50% of employees and retirees live outside the District so we
can't get this info.
from DC tax records!
(8) This led to the incorporation of the Section 308 language in drafts
that appeared several
months ago.
(9) Because it is anticipated that the Secretary's/trustee's need for 6103
info will continue
for only a limited number of years, it was decided to include the sec.
308 language rather
than cluttering the Code with numerous amendments to 6103.
(10) In addition, the present draft language allows the Secretary to
obtain the information
he needs on a timely basis.
(11) If the previous policy specifications we were given have been
modified, we will of
course incorporate new language that reflects the changed policy.
Any views expressed by the author of this message are not those of
the Pension Benefit Guaranty Corporation.
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RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: Ellen S. Seidman (CN=Ellen S. Seidman/OU=OPD/O=EOP [ OPD ])
CREATION DATE/TIME:12-MAY-1997 08:56:16.00
SUBJECT: Re: DC Document
TO: Kathleen M. Turco ( CN=Kathleen M. Turco/OU=OMB/O=EOP @ EOP [ OMB ] )
READ:UNKNOWN
CC: M. Jill Gibbons (CN=M. Jill Gibbons/OU=OMB/O=EOP @ EOP [ OMB ])
READ:UNKNOWN
CC: Maya A. Bernstein ( CN=Maya A. Bernstein/OU=OMB/O=EOP @ EOP [ OMB 1)
READ:UNKNOWN
CC: Toni S. Hustead (CN=Toni S. Hustead/OU=OMB/O=EOP @ EOP [ OMB 1)
READ:UNKNOWN
TEXT:
Toni, this does sound like a serious problem. I assume DC never waived
its Social SEcurity exemption, so that SSA is not a source either, right?
I'm not sure the benefit to the IRS privacy override is worth the
potential firestorm under these circumstances. After all, the more recent
employment data should be the easier to obtain from the District, and more
so as the District cleans up its systems in the future. Give me a call.
ellen
PS Sorry I didn't notice this earlier. I actually have no recollection of
telling the PBGC we needed to do it, although I think it is the case that
they raised the issue with me and I said go ahead.
Withdrawal/Redaction Marker
Clinton Library
DOCUMENT NO.
SUBJECT/TITLE
DATE
RESTRICTION
AND TYPE
001. email
Maya A. Bernstein to Toni S. Hustead at 10:27:59.00. Subject: Re:
05/13/1997
b(6)
DC pensions. [partial] (1 page)
COLLECTION:
Clinton Presidential Records
Automated Records Management System [Email]
OPD ([PBGC])
OA/Box Number:
FOLDER TITLE:
[05/05/1997 - 03/13/1998]
2014-0226-F
ab1481
RESTRICTION CODES
Presidential Records Act - |44 U.S.C. 2204(a)|
Freedom of Information Act - 15 U.S.C. 552(b)]
P1 National Security Classified Information |(a)(1) of the PRA]
b(1) National security classified information [(b)(1) of the FOIA]
P2 Relating to the appointment to Federal office |(a)(2) of the PRA]
b(2) Release would disclose internal personnel rules and practices of
P3 Release would violate a Federal statute |(a)(3) of the PRA]
an agency |(b)(2) of the FOIA]
P4 Release would disclose trade secrets or confidential commercial or
b(3) Release would violate a Federal statute [(b)(3) of the FOIA]
financial information [(a)(4) of the PRA]
b(4) Release would disclose trade secrets or confidential or financial
P5 Release would disclose confidential advice between the President
information [(b)(4) of the FOIA]
and his advisors, or between such advisors |a)(5) of the PRA]
b(6) Release would constitute a clearly unwarranted invasion of
P6 Release would constitute a clearly unwarranted invasion of
personal privacy [(b)(6) of the FOIA]
personal privacy [(a)(6) of the PRA
b(7) Release would disclose information compiled for law enforcement
purposes |(b)(7) of the FOIA]
C. Closed in accordance with restrictions contained in donor's deed
b(8) Release would disclose information concerning the regulation of
of gift.
financial institutions |(b)(8) of the FOIA]
PRM. Personal record misfile defined in accordance with 44 U.S.C.
b(9) Release would disclose geological or geophysical information
2201(3).
concerning wells [(b)(9) of the FOIA]
RR. Document will be reviewed upon request.
RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: Maya A. Bernstein (CN=Maya A. Bernstein/OU=OMB/O=EOP [OMB])
CREATION DATE/TIME:13-MAY-1997 10:27:59.00
SUBJECT: Re: DC pensions
TO: Toni S. Hustead ( CN=Toni S. Hustead/OU=OMB/O=EOP @ EOP [ OMB ])
READ:UNKNOWN
CC: Ellen S. Seidman ( CN=Ellen S. Seidman/OU=OPD/O=EOP @ EOP [ OPD ])
READ:UNKNOWN
CC: M. Jill Gibbons ( CN=M. Jill Gibbons/OU=OMB/O=EOP @ EOP [ OMB ])
READ:UNKNOWN
TEXT:
(b)(6)
[001 ]
With neither Kathy nor me here, I have passed along our message traffic to
Debra Bond (the PBGC desk officer), Steve Aitken (OMB GC and Privacy Act
maven), and Lew Oleinick (my backup privacy analyst).
Please share future messages with them too.
Thanks.
--- Maya
RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: M. Jill Gibbons ( CN=M. Jill Gibbons/OU=OMB/O=EOP [ OMB 1)
CREATION DATE/TIME:13-MAY-1997 17:15:16.00
SUBJECT: Meeting on DC Pension bill and Sec. 6103
TO: Harry G. Meyers ( CN=Harry G. Meyers/OU=OMB/O=EOP @ EOP [ OMB ])
READ:UNKNOWN
TO: Lewis W. Oleinick ( CN=Lewis W. Oleinick/OU=OMB/O=EOP @ EOP [ OMB ])
READ:UNKNOWN
TO: Toni S. Hustead (CN=Toni S. Hustead/OU=OMB/O=EOP @ EOP [ OMB 1)
READ:UNKNOWN
TO: Debra J. Bond ( CN=Debra J. Bond/OU=OMB/O=EOP @ EOP [ OMB D
READ:UNKNOWN
TO: Steven D. Aitken ( CN=Steven D. Aitken/OU=OMB/O=EOP @ EOP [ OMB 1)
READ:UNKNOWN
TO: Ellen S. Seidman ( CN=Ellen S. Seidman/OU=OPD/O=EOP @ EOP [OPD])
READ:UNKNOWN
CC: James J. Jukes ( CN=James J. Jukes/OU=OMB/O=EOP @ EOP [ OMB D
READ:UNKNOWN
TEXT:
There will be a meeting tomorrow at 3:00 in room 7218 of the NEOB (Jim's
office) to resolve the Privacy Act/6103 problem with the DC pension
legislation. Representatives from Treasury and PBGC will be present.
Thanks
RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: Ellen S. Seidman (CN=Ellen S. Seidman/OU=OPD/O=EOP [ OPD ])
CREATION DATE/TIME:16-MAY-1997 16:05:56.00
SUBJECT: REVISED SAP on HR 1377, SAVERS Act
TO: Melissa Y. Cook ( CN=Melissa Y. Cook/OU=OMB/O=EOP @ EOP [ OMB ])
READ:UNKNOWN
TEXT:
I think my suggestions show up below. Thanks for your help. ellen.
PS Please make certain the PBGC gets a crack at this. Judy Schub
frequently has pretty good ideas. her fax is 326-4016.
Forwarded by Ellen S. Seidman/OPD/EOP on 05/16/97
04:05 PM
Melissa Y. Cook
05/16/97 03:06:30 PM
Record Type: Record
To: Ellen S. Seidman/OPD/EOP
cc: See the distribution list at the bottom of this message
Subject: REVISED SAP on HR 1377, SAVERS Act
The below text for the HR 1377 SAP has been revised to reflect the
discussion during today's conference call. Please review the proposed SAP
language and let me know as soon as possible if you have any comments on
it. Once I hear from you, I will circulate the SAP to the agencies.
Thanks.
REVISED SAP TEXT
Although the goal of H.R. 1377 is laudable, the Administration believes
that the bill is unnecessary. H.R. 1377 would mandate the Department of
Labor to conduct specific educational activities, and require the
President to convene three national pension summits to increase public
awareness of the need for retirement savings and develop pension policy
recommendations.
Educating the public about retirement savings is an Administration
priority. For some time, the Administration has been vigorously
conducting many of the same educational activities that are required by
H.R. 1377. The Administration has also worked with existing public and
private pension advisory bodies, representing a broad range of views and
interests, to increase public knowledge of the necessity of retirement
savings and to develop pension policies, many of which were enacted during
the last Congress. The pension summits required by H.R. 1377 would
unnecessarily duplicate these ongoing collaborative efforts and divert
attention from them. Although the Administration cannot support H.R.
1377, it looks forward to working with Congress in the future to enhance
further retirement savings education and the private pension and
retirement savings system. system of pensions and retirement savings.
Message Copied
To:
James C. Murr/OMB/EOP
Janet R. Forsgren/OMB/EOP
Larry R. Matlack/OMB/EOP
Mark D. Menchik/OMB/EOP
Debra J. Bond/OMB/EOP
RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: Toni S. Hustead (CN=Toni S. Hustead/OU=OMB/O=EOP [ OMB ])
CREATION DATE/TIME:19-MAY-1997 12:03:46.00
SUBJECT: PBGC
TO: G.E. DeSeve (CN=G. E. DeSeve/OU=OMB/O=EOP @ EOP [ OMB 1)
READ:UNKNOWN
TO: Ellen S. Seidman ( CN=Ellen S. Seidman/OU=OPD/O=EOP @ EOP [ OPD
READ:UNKNOWN
Toni S. Hustead ( CN=Toni S. Hustead/OU=OMB/O=EOP [ OMB 1)
READ:UNKNOWN
TEXT:
I I asked Terry Deneen in the last meeting if he could list all of the
people at PBGC who worked on the DC pension issue and he gave me one
immediately. I tried to be as spontaneous as I could be to ensure that
he did not suspect anything. However, I asked for it because I have been
so impressed with their quick and professional staffing of a project that
we asked them to do that has nothing to do with their mission. It is an
impressive bunch of folks. Too many times we at EXOP forget how much it
means to agency folks to get letters of thanks from us. I am
recommending that you two send a jointly signed letter to the Acting PBGC
Executive Director with copies to each of the following thanking them for
highly responsive, very team-oriented, professional expertise:
Stuart Sirkin
Terrence Deneen
Jane Pacelli
David Gustafson
Charles Finke
William Beyer
James Marion
Harold Ashton
Deborah Murphy
Jim Gabriel
Letter would go to:
Mr. John Seals
Acting, Executive Director
1200 K Street, N.W.
Washington, D.C. 20005
RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: G.E. DeSeve (CN=G. E. DeSeve/OU=OMB/O=EOP [OMB])
CREATION DATE/TIME:19-MAY-1997 12:56:42.00
SUBJECT: Re: PBGC
TO: Toni S. Hustead ( CN=Toni S. Hustead/OU=OMB/O=EOP @ EOP [ OMB ])
READ:UNKNOWN
CC: Ellen S. Seidman ( CN=Ellen S. Seidman/OU=OPD/O=EOP @ EOP [ OPD 1)
READ:UNKNOWN
TEXT:
This sounds like a great idea to me. Ellen how do you want to handle the
logistics? We could use generic "White House" or EXOP stationary. I
would be happy to draft or have you draft.
RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: James J. Jukes ( CN=James J. Jukes/OU=OMB/O=EOP [ OMB 1)
CREATION DATE/TIME:19-MAY-1997 08:54:12.00
SUBJECT: 9:30 conference call on tax infor sharing language
TO: Ellen S. Seidman ( CN=Ellen S. Seidman/OU=OPD/O=EOP @ EOP [OPD])
READ:UNKNOWN
CC: Lewis W. Oleinick ( CN=Lewis W. Oleinick/OU=OMB/O=EOP @ EOP [ OMB 1)
READ:UNKNOWN
CC: M. Jill Gibbons (CN=M. Jill Gibbons/OU=OMB/O=EOP @ EOP [ OMB 1)
READ:UNKNOWN
CC: Harry G. Meyers ( CN=Harry G. Meyers/OU=OMB/O=EOP @ EOP [ OMB D
READ:UNKNOWN
CC: Debra J. Bond ( CN=Debra J. Bond/OU=OMB/O=EOP @ EOP [ OMB ])
READ:UNKNOWN
CC: Toni S. Hustead ( CN=Toni S. Hustead/OU=OMB/O=EOP @ EOP [ OMB ])
READ:UNKNOWN
TEXT:
Here is the information for the call, at which we will review with
Treasury and PBGC the language that Treasury supplied Friday night. (For
OMB staff who don't have it yet, I'll have extra copies on my table.)
Dial either 6-6777 or 6-6799. The code is 7210.
Since there seemed to be agreement on the substance Friday afternoon, I
hope this will be a quick and easy call.
RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: Ellen S. Seidman ( CN=Ellen S. Seidman/OU=OPD/O=EOP [OPD])
CREATION DATE/TIME:19-MAY-1997 13:19:08.00
SUBJECT: Re: PBGC
TO: Toni S. Hustead ( CN=Toni S. Hustead/OU=OMB/O=EOP @ EOP [OMB])
READ:UNKNOWN
TEXT:
I actually think ewe can and should do better. ellen
RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: Ellen S. Seidman ( CN=Ellen S. Seidman/OU=OPD/O=EOP [ OPD 1)
CREATION DATE/TIME:19-MAY-1997 13:19:48.00
SUBJECT: Re: PBGC
TO: G. E. DeSeve (CN=G. E. DeSeve/OU=OMB/O=EOP @ EOP [OMB])
READ:UNKNOWN
TEXT:
Ed, I frankly think we should get Frank to sign this. You and me just
won't have the same impact -- particularly me, who they work with all the
time. ellne
RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: G.E. DeSeve (CN=G. E. DeSeve/OU=OMB/O=EOP [OMB])
CREATION DATE/TIME:19-MAY-1997 17:22:17.00
SUBJECT: Re: PBGC
TO: Toni S. Hustead ( CN=Toni S. Hustead/OU=OMB/O=EOP @ EOP [ OMB ])
READ:UNKNOWN
TO: Ellen S. Seidman ( CN=Ellen S. Seidman/OU=OPD/O=EOP @ EOP [OPD])
READ:UNKNOWN
TEXT:
Your are right. Toni could we impose on you (it was your idea and no good
deed goes unpunished) to do a letter for the Director? Thanks
RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: Toni S. Hustead (CN=Toni S. Hustead/OU=OMB/O=EOP [ OMB ])
CREATION DATE/TIME:20-MAY-1997 10:39:04.00
SUBJECT: Re: PBGC
TO: G.E. DeSeve (CN=G. E. DeSeve/OU=OMB/O=EOP @ EOP [ OMB ])
READ:UNKNOWN
CC: Mary M. Chuckerel ( CN=Mary M. Chuckerel/OU=OMB/O=EOP @ EOP [ OMB ])
READ:UNKNOWN
CC: Ellen S. Seidman ( CN=Ellen S. Seidman/OU=OPD/O=EOP @ EOP [ OPD 1)
READ:UNKNOWN
TEXT:
Sure. I will be out of office after today until next tuesday. Will try
to get to it today but if not - will put it on my agenda for next week.
Will send you both a draft copy by email (and Mary C) so she can
coordinate any changes you might want and then send it on to the Director
for signature.
RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: G.E. DeSeve (CN=G. E. DeSeve/OU=OMB/O=EOP [ OMB ])
CREATION DATE/TIME:20-MAY-1997 10:45:10.00
SUBJECT: Re: PBGC
TO: Toni S. Hustead ( CN=Toni S. Hustead/OU=OMB/O=EOP @ EOP [ OMB ])
READ:UNKNOWN
CC: Mary M. Chuckerel ( CN=Mary M. Chuckerel/OU=OMB/O=EOP @ EOP [OMB])
READ:UNKNOWN
CC: Ellen S. Seidman ( CN=Ellen S. Seidman/OU=OPD/O=EOP @ EOP [OPD])
READ:UNKNOWN
TEXT:
Great thanks.
RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: Toni S. Hustead ( CN=Toni S. Hustead/OU=OMB/O=EOP [ OMB 1)
CREATION DATE/TIME:29-MAY-1997 16:12:10.00
SUBJECT: DC Draft
TO: James J. Jukes ( CN=James J. Jukes/OU=OMB/O=EOP @ EOP [ OMB )
READ:UNKNOWN
TO: Ellen S. Seidman ( CN=Ellen S. Seidman/OU=OPD/O=EOP @ EOP [OPD])
READ:UNKNOWN
TO: M. Jill Gibbons (CN=M. Jill Gibbons/OU=OMB/O=EOP @ EOP [ OMB 1)
READ:UNKNOWN
Toni S. Hustead ( CN=Toni S. Hustead/OU=OMB/O=EOP [ OMB ])
READ:UNKNOWN
TEXT:
I am reviewing the Treasury and PBGC suggestions. Will give you (Jill)
my opinion by 6p.m.
Forwarded by Toni S. Hustead/OMB/EOP on 05/29/97
03:05 PM
Pacelli.Jane @ pbgc.gov
05/29/97 03:01:00 PM
Record Type: Record
To: Toni S. Hustead
cc:
Subject: DC Draft
I'm faxing you our mark-up of Jill's draft so you can see the way we
removed the actuarial board.
With respect to Harlan's changes we have the following comments.
1. We would prefer that sections 132 and 133 stay as they were. If you
take Harlan's changes,
the redline language should begin "The transfer of assets and obligations
shall not apply to
any employee contributions
" Employee contributions are both
an asset and a benefit obligation.
2. We would prefer that the Secretary choose methods and assumptions
rather than the enrolled
actuary doing so. Are any of the small systems without boards funded
systems, or do they just
do PL 95-595 reporting? If yes, do their actuaries choose methods and
assumptions? In this
system the actuarial calculations will matter! We'll defer to your
judgment on this.
3. In section 164(a) the "not later than 6 months" language is gone.
Harlan was working with an
old draft.
4. We would prefer to leave the amortization periods up to the discretion
of the Secretary. We'll defer to your judgment on this.
5. Harlan's change in section 165 is ok.
Be sure you work with Jill if any of these changes are made, because
Harlan was working with
an old draft.
Any views expressed by the author of this message are not those of
the Pension Benefit Guaranty Corporation.
ATTACHMENT 1
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END ATTACHMENT 1
RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: Toni S. Hustead (CN=Toni S. Hustead/OU=OMB/O=EOP [ OMB ])
CREATION DATE/TIME:29-MAY-1997 19:11:28.00
SUBJECT: Final(!?) pension language
TO: M. Jill Gibbons (CN=M. Jill Gibbons/OU=OMB/O=EOP @ EOP [ OMB ])
READ:UNKNOWN
TO: James J. Jukes ( CN=James J. Jukes/OU=OMB/O=EOP @ EOP [ OMB 1)
READ:UNKNOWN
CC: Pacelli.Jane ( Pacelli.Jane @ pbgc.gov @ INET @ LNGTWY [ UNKNOWN] )
READ:UNKNOWN
CC: Gustafson.David ( Gustafson.David @ pbgc.gov @ INET @ LNGTWY [ UNKNOWN ])
READ:UNKNOWN
CC: Ellen S. Seidman ( CN=Ellen S. Seidman/OU=OPD/O=EOP @ EOP [ OPD )
READ:UNKNOWN
TEXT:
I have just got off the phone with Jane Pacelli. We went through the PBGC
language changes and the Treasury language changes side-by-side and have
marked up the PBGC language changes to incorporate all. Treasury's mark
up was outdated -- hence some of the requested changes had already been
made in later drafts. This final copy includes all of the substance of
Treasury changes. (Cosmetic changes were not incorporated when the
substance did not change).
PBGC no longer has the disk -- hence, Jill, I am placing them on your desk
chair. Jane has requested a copy of the final language so that they can
adjust the section by section. (Please give me a copy of final also).
RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: James J. Jukes ( CN=James J. Jukes/OU=OMB/O=EOP [ OMB 1)
CREATION DATE/TIME:13-JUN-1997 13:19:47.00
SUBJECT: Re: DC Pension Language
TO: Toni S. Hustead (CN=Toni S. Hustead/OU=OMB/O=EOP @ EOP [ OMB ])
READ:UNKNOWN
CC: Michael H. LaFave ( CN=Michael H. LaFave/OU=OMB/O=EOP @ EOP [ OMB 1)
READ:UNKNOWN
CC: G. E. DeSeve (CN=G. E. DeSeve/OU=OMB/O=EOP @ EOP [OMB])
READ:UNKNOWN
CC: Ellen S. Seidman ( CN=Ellen S. Seidman/OU=OPD/O=EOP @ EOP [ OPD )
READ:UNKNOWN
CC: M. Jill Gibbons (CN=M. Jill Gibbons/OU=OMB/O=EOP @ EOP [ OMB ])
READ:UNKNOWN
TEXT:
Hamm was working from an earlier version of the bill. We expect that he
will change it to conform with changes subsequently made by the
Administration (including deletion of the Actuarial Board).
Jill -- I have just made this clear to Treasury in response to a question
from them. Please make it clear to PBGC if you hadn't already done so.
Withdrawal/Redaction Marker
Clinton Library
DOCUMENT NO.
SUBJECT/TITLE
DATE
RESTRICTION
AND TYPE
002. email
Toni S Hustead at 13:10:18.00. Subject: DC Pension Language.
06/13/1997
b(6)
[partial] (1 page)
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RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: Toni S. Hustead (CN=Toni S. Hustead/OU=OMB/O=EOP [ OMB ])
CREATION DATE/TIME:13-JUN-1997 13:10:18.00
SUBJECT: DC Pension Language
TO: Ellen S. Seidman (CN=Ellen S. Seidman/OU=OPD/O=EOP @ EOP [ OPD ])
READ:UNKNOWN
TO: M. Jill Gibbons (CN=M. Jill Gibbons/OU=OMB/O=EOP @ EOP [ OMB ])
READ:UNKNOWN
TO: Michael H. LaFave CN=Michael H. LaFave/OU=OMB/O=EOP @ EOP [ OMB ])
READ:UNKNOWN
TO: G.E. DeSeve (CN=G. E. DeSeve/OU=OMB/O=EOP @ EOP [ OMB
READ:UNKNOWN
TO: James J. Jukes (CN=James J. Jukes/OU=OMB/O=EOP @ EOP [ OMB
READ:UNKNOWN
TEXT:
I have quickly read it and have talked to Jane Pacelli at PBGC. THis is
the Board of Actuaries version of our bill (we are not unhappy about
this fact). We do not plan on marking this part out -- but a couple of
changes were made since this draft that were rather important but small
and PBGC will place into their comments coming back to you.
Ed and Ellen:
I have not forgotten about writing the FDR to PBGC thank you letter. In
order to make it more personnel, I have consulted with Jane (asking her to
not mention it to her colleagues) and she has agreed to give me the names
as well as the occupations of the team which worked on this. She will
have it to me by July 1st and I will write the letter before the 4th.
[002]
((b)(6)
In
addition, I will be in the OMB Branch Chief all day off-site training
session on Tuesday July 1st. Consequently, my first day back will be
Wednesday, July 2. Best of luck over the next couple of weeks.
RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: M. Jill Gibbons (CN=M. Jill Gibbons/OU=OMB/O=EOP [ OMB ])
CREATION DATE/TIME:13-JUN-1997 13:46:29.00
SUBJECT: Re: DC Pension Language
TO: James J. Jukes ( CN=James J. Jukes/OU=OMB/O=EOP @ EOP [ OMB ])
READ:UNKNOWN
CC: Michael H. LaFave ( CN=Michael H. LaFave/OU=OMB/O=EOP @ EOP [ OMB ])
READ:UNKNOWN
CC: G. E. DeSeve (CN=G. E. DeSeve/OU=OMB/O=EOP @ EOP [ OMB D
READ:UNKNOWN
CC: Ellen S. Seidman ( CN=Ellen S. Seidman/OU=OPD/O=EOP @ EOP [ OPD 1)
READ:UNKNOWN
CC: Toni S. Hustead ( CN=Toni S. Hustead/OU=OMB/O=EOP @ EOP [ OMB 1)
READ:UNKNOWN
TEXT:
I spoke to Ron Hamm and he was aware that they were working from an
earlier version of the Admin's bill. He said that leg. counsel didn't
have enough time to put in all the changes but that they intended to make
them eventually.
I'll inform PBGC.
RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: Ellen S. Seidman ( CN=Ellen S. Seidman/OU=OPD/O=EOP [ OPD ])
CREATION DATE/TIME: 1-JUL-1997 19:20:00.00
SUBJECT: DCpension meeting
TO: Mary M. Chuckerel ( (CN=Mary M. Chuckerel/OU=OMB/O=EOP @ EOP [OMB])
READ:UNKNOWN
CC:G.E. DeSeve (CN=G. E. DeSeve/OU=OMB/O=EOP @ EOP [OMB])
READ:UNKNOWN
TEXT:
I think the earliest we can get the relevant people together is next
Thursday. In the interim, the PBGC and Treasury will review the CRS
document, and speak to the CRS authors to see if they can figure out
what's happening. I'll have the names of the individuals later, but the
process has started. ellen
RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: Ellen S. Seidman (CN=Ellen S. Seidman/OU=OPD/O=EOP [OPD])
CREATION DATE/TIME: 2-JUL-1997 10:33:52.00
SUBJECT: Re: DCpension meeting
TO: Mary M. Chuckerel (CN=Mary M. Chuckerel/OU=OMB/O=EOP @ EOP [ OMB ])
READ:UNKNOWN
TEXT:
11:00 is fine with me. The people who should be invited are Toni Hustead,
the following from teh PBGC: Dave Gustafson (326-4080, X 3218), Jane
Pacelli (326-4080, I don't know extension), and Terry Dineen (326-4020),
and the following from Treasury: Harlan Weller (622-1001) and Regina Van
Valkenburgh (622-1861). Ellen
RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: Toni S. Hustead (CN=Toni S. Hustead/OU=OMB/O=EOP [OMB])
CREATION DATE/TIME: 8-JUL-1997 10:01:25.00
SUBJECT: credibility
TO: Ellen S. Seidman ( CN=Ellen S. Seidman/OU=OPD/O=EOP @ EOP [ OPD ])
READ:UNKNOWN
TEXT:
I am going to lose my credibility with you. Meeting is in a.m. (11:00) --
I should have known you were right. I will be in your office at 10:40
unless you tell me differently. Is PBGC going and have they received
questions in advance?
RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: Ellen S. Seidman ( CN=Ellen S. Seidman/OU=OPD/O=EOP [ OPD 1)
CREATION DATE/TIME: 8-JUL-1997 10:45:35.00
SUBJECT: Re: credibility
TO: Toni S. Hustead ( CN=Toni S. Hustead/OU=OMB/O=EOP @ EOP [ OMB ])
READ:UNKNOWN
TEXT:
We should meet in the West Basement (the driveway between the EOP and the
White House) at 10:40. With the PResident gone, there shouldn't be any
problem getting a car. PBGC not only has the CRS document, they are
meeting with the CRS folks today to discuss it. I will talk to them
afterwards. Do you want to be conferenced in? They think this will all
be settled amiably, perhaps with some additional language in the findings
and purposes. ellen
RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: Toni S. Hustead ( CN=Toni S. Hustead/OU=OMB/O=EOP [ OMB ])
CREATION DATE/TIME:17-JUL-1997 17:59:08.00
SUBJECT: Urgent - Requested DC pension language enclosed
TO: James J. Jukes ( CN=James J. Jukes/OU=OMB/O=EOP @ EOP [ OMB 1)
READ:UNKNOWN
TO: M. Jill Gibbons (CN=M. Jill Gibbons/OU=OMB/O=EOP @ EOP [OMB])
READ:UNKNOWN
CC: G.E. DeSeve (CN=G. E. DeSeve/OU=OMB/O=EOP @ EOP [OMB])
READ:UNKNOWN
CC: Ellen S. Seidman ( CN=Ellen S. Seidman/OU=OPD/O=EOP @ EOP [ OPD )
READ:UNKNOWN
TEXT:
Ed asked me to ensure that you all, Treasury, and any others that need to
see this requested insert to the Davis Bill get it. I am assuming that
you will do the coordinating -- as it is unclear to me who the
distribution list should include. (Note: PBGC does not need to get it as
they developed the language for us). Thanks and please let me know if I
need to do something.
Forwarded by Toni S. Hustead/OMB/EOP on 07/17/97
04:48 PM
Toni S. Hustead
07/17/97 01:19:27 PM
Record Type: Record
To: G. E. DeSeve/OMB/EOP, Ellen S. Seidman/OPD/EOP
cc: Mary M. Chuckerel/OMB/EOP
Subject: Urgent Requested DC pension language enclosed
I am enclosing the language developed by PBGC that you requested today to
insert in TItle I of the DC bill.
ATTACHMENT 1
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The following is a HEX DUMP:
END ATTACHMENT
I
Proposed changes to Title I of the District of Columbia initiative
July 17, 1997
In "SEC. 112. FINDINGS AND DECLARATION OF POLICY" add the following new
subsection 112(a)(1):
(1) state and municipal retirement programs should be funded on an actuarially sound
basis:
Renumber current subsections (a)(1) through (11) as (a)(2) through (12).
Add a new section 195 as follows:
"SEC. 195. STUDY OF ALTERNATIVES TO FINANCING THE FEDERAL
OBLIGATIONS UNDER THIS TITLE.
(a) As soon as practicable after enactment of this title, the Secretary shall retain an
independent consultant to conduct a study of actuarial alternatives for financing the federal
obligations assumed under this title, and their impact on the federal budget. Within nine months
after being retained, the consultant shall report the results of the study to the Secretary, to the
chairperson and ranking member of the Committee on Governmental Reform and Oversight of
the House of Representatives, and to the chairperson and ranking member of the Committee on
Governmental Affairs of the Senate. The Secretary and the District Government shall cooperate
with the consultant and shall provide direct access to such information systems, records,
documents, information or data as will enable the consultant to conduct the study.
(b) Nothing in this section shall in any way relate to the obligation of the federal
government to make benefit payments under this title."
C.AUSERS\ABERGFEL\DESKTOPVELECTRONIC PROCESSING\2014-0226-F\PBGC\OPD\1261A.OPD DOC
[AUTOFIE-0]
Automated Records Management System
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RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: G.E. DeSeve (CN=G. E. DeSeve/OU=OMB/O=EOP [OMB])
CREATION DATE/TIME:17-JUL-1997. 18:03:44.00
SUBJECT: Re: Urgent - Requested DC pension language enclosed
TO: Toni S. Hustead ( CN=Toni S. Hustead/OU=OMB/O=EOP @ EOP [ OMB 1)
READ:UNKNOWN
CC: James J. Jukes ( CN=James J. Jukes/OU=OMB/O=EOP @ EOP [ OMB 1)
READ:UNKNOWN
CC: Ellen S. Seidman ( CN=Ellen S. Seidman/OU=OPD/O=EOP @ EOP [ OPD ])
READ:UNKNOWN
CC: M. Jill Gibbons ( CN=M. Jill Gibbons/OU=OMB/O=EOP @ EOP [ OMB ])
READ:UNKNOWN
TEXT:
The language that Toni was good enough to work with PBGC on is a draft for
discussion with the Hill. It does not represent an Administration
position yet. I sent it to Treasury on my own but would be happy for you
to circulate it to them and anyone else you believe needs it.
RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: Toni S. Hustead (CN=Toni S. Hustead/OU=OMB/O=EOP [ OMB ])
CREATION DATE/TIME:17-JUL-1997 13:19:33.00
SUBJECT: Urgent - Requested DC pension language enclosed
TO: Ellen S. Seidman ( CN=Ellen S. Seidman/OU=OPD/O=EOP @ EOP [OPD])
READ:UNKNOWN
TO: G.E. DeSeve (CN=G. E. DeSeve/OU=OMB/O=EOP @ EOP [OMB])
READ:UNKNOWN
CC: Mary M. Chuckerel ( CN=Mary M. Chuckerel/OU=OMB/O=EOP @ EOP [ OMB D
READ:UNKNOWN
TEXT:
I am enclosing the language developed by PBGC that you requested today to
insert in TItle I of the DC bill.
ATTACHMENT 1
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END ATTACHMENT 1
Proposed changes to Title I of the District of Columbia initiative
July 17, 1997
In "SEC. 112. FINDINGS AND DECLARATION OF POLICY" add the following new
subsection 112(a)(1):
(1) state and municipal retirement programs should be funded on an actuarially sound
basis:
Renumber current subsections (a)(1) through (11) as (a)(2) through (12).
Add a new section 195 as follows:
"SEC. 195. STUDY OF ALTERNATIVES TO FINANCING THE FEDERAL
OBLIGATIONS UNDER THIS TITLE.
(a) As soon as practicable after enactment of this title, the Secretary shall retain an
independent consultant to conduct a study of actuarial alternatives for financing the federal
obligations assumed under this title, and their impact on the federal budget. Within nine months
after being retained, the consultant shall report the results of the study to the Secretary, to the
chairperson and ranking member of the Committee on Governmental Reform and Oversight of
the House of Representatives, and to the chairperson and ranking member of the Committee on
Governmental Affairs of the Senate. The Secretary and the District Government shall cooperate
with the consultant and shall provide direct access to such information systems, records,
documents, information or data as will enable the consultant to conduct the study.
(b) Nothing in this section shall in any way relate to the obligation of the federal
government to make benefit payments under this title."
CAUSERS\ABERGFEL/DESKTOPAELECTRONIC PROCESSING\2014-0226-F\PBGC\OPD\1263A.OPD.DOC
AUTO FIELD]
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RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: Toni S. Hustead (CN=Toni S. Hustead/OU=OMB/O=EOP [ OMB 1)
CREATION DATE/TIME:17-JUL-1997 11:25:20.00
SUBJECT: Language for committee - dc pension
TO: Ellen S. Seidman ( CN=Ellen S. Seidman/OU=OPD/O=EOP @ EOP [ OPD
READ:UNKNOWN
CC: Mary M. Chuckerel ( CN=Mary M. Chuckerel/OU=OMB/O=EOP @ EOP [ OMB )
READ:UNKNOWN
CC: G.E. DeSeve (CN=G. E. DeSeve/OU=OMB/O=EOP @ EOP [ OMB 1)
READ:UNKNOWN
Toni S. Hustead ( CN=Toni S. Hustead/OU=OMB/O=EOP [ OMB 1)
READ:UNKNOWN
Christina Barnes ( CN=Christina Barnes/OU=OMB/O=EOP [ OMB ])
READ:UNKNOWN
Lavonne D. Sampson ( CN=Lavonne D. Sampson/OU=OMB/O=EOP [ OMB D
READ:UNKNOWN
TEXT:
After getting instructions from Ed this a.m. I have had a conference call
with Stuart, Dave, and Charles at PBGC to get two paragraphs drafted so
that Ed can pass them to the Senate Govt Affairs Committee. I will get
them in the next couple hours.
In general, the new language will accomplish the following:
- the first insert will talk in general terms aobut the desirability to
fund municipal pension systems properly.
- the second insert will require the sec of treasury upon passage of the
bill to commission an outside consultanting firm to study and prepare a
report on the proposed and alternative financing scenarios (to include
annual deficit impact) of the Federal governments pension obligations
under this act. The report shall go to congress 9 months after the
contract has been awarded.
Ellen - I will fax you the proposed language when I get it and get your
input before we send it to Ed. We need to get it to him by 3 p.m.
RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: Toni S. Hustead ( CN=Toni S. Hustead/OU=OMB/O=EOP [ OMB ])
CREATION DATE/TIME:17-JUL-1997 13:28:03.00
SUBJECT: Re: DC pension bill provisions
TO: Sirkin.Stuart ( Sirkin.Stuart @ PBGC.gov @ INET @ LNGTWY [ UNKNOWN ])
READ:UNKNOWN
TO: Gustafson.David ( Gustafson.David @ pbgc.gov @ INET @ LNGTWY [ UNKNOWN 1)
READ:UNKNOWN
TO: deneen. Terrence ( deneen.Terrence @ pbgc.gov @ INET @ LNGTWY [ UNKNOWN ])
READ:UNKNOWN
TO: Finke.Charles ( Finke.Charles @ pbgc.gov @ INET @ LNGTWY [ UNKNOWN 1)
READ:UNKNOWN
CC: Ellen S. Seidman ( CN=Ellen S. Seidman/OU=OPD/O=EOP @ EOP [ OPD 1)
READ:UNKNOWN
TEXT:
Thanks once again for quick and fantastic work. We really appreciate it.
RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: Toni S. Hustead (CN=Toni S. Hustead/OU=OMB/O=EOP [ OMB ]
CREATION DATE/TIME:18-JUL-1997 15:00:43.00
SUBJECT: Re: DC -- Open Issues and New Language
TO: Ellen S. Seidman ( CN=Ellen S. Seidman/OU=OPD/O=EOP @ EOP [ OPD ])
READ:UNKNOWN
TEXT:
I have no clue. When I talked to PBGC the other day they referenced
language that I had not seen (they seemed to have a new copy) and they
were directly linked to Noah. Do you know what they are talking about
when they say "does not allow a reversion of liability to the District?".
Given the instructions and the uncertainty of where we are on the pension
part and the quick turnaround on this I find the drill overwhelming.
PBGC has been wonderful on these quick responses but may be hard to find
again today for this drill.
Guidance?
RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: Toni S. Hustead ( CN=Toni S. Hustead/OU=OMB/O=EOP [ OMB ])
CREATION DATE/TIME:21-JUL-1997 20:48:42.00
SUBJECT: PBGC thanks
TO: Ellen S. Seidman ( CN=Ellen S. Seidman/OU=OPD/O=EOP @ EOP [ OPD 1)
READ:UNKNOWN
TEXT:
This is long overdue. I really want to get it out. Before I send it
to Ed for comment etc - thought I could get your input? Thanks.
ATTACHMENT 1
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END ATTACHMENT
I
Mr. David M. Strauss
Executive Director
Pension Benefit Guaranty Corporation
1200 K Street, N.W.
Washington, D.C. 20005-4026
Dear Mr. Strauss,
This letter is meant to bring to your attention the outstanding professional support that the
Executive Office of the President (EXOP) has received from PBGC over the last several months
in our efforts to develop and implement the "National Capital Revitalization and Self-
Government Improvement Act of 1997". We would like to especially thank the following
PBGC staff members: Stuart Sirkin, David Gustafson, Jane Pacelli, James Marion, Terrence
Deneen, William Beyer, and Charles Finke.
As you know, part of our proposal to assist the District involves a partial assumption of their
pension liability. Early in the process, we asked for PBGC expertise. Analysis had to result in
an understanding of benefit formulas, funding arrangements, program administration, audit and
legal issues, and problems unique to the District. Your staff accomplished all of this. They then
worked with us, and the District's consulting actuary, to define the Federal DC pension liability
and a financing scenario under defined global deficit and cost parameters.
PBGC's participation did not end after the design phase. Quite the contrary. Your staff have
played key technical support roles in numerous aspects since. Not only did they draft the
language needed to support our proposal, but they have been available constantly to fine tune and
help coordinate this effort. They have attended a multitude of meetings with us to ensure
immediate expert advice. These meetings included union groups, the District pension board,
congressional staff, intra-governmental groups, etc.
Throughout this entire process, we have received nothing but untiring professional expertise from
PBGC. The urgent turnaround time requested on many of our calls for assistance had to have
placed a personal burden on these employees, but each time they unflinchingly accepted and
produced a high-quality product.
Our interactions with your organization have proven that the Federal government can produce
top-notch and timely intra-governmental products when it brings together experts as dedicated
and professional as those found on your staff. Please thank them for me.
Raines Signature Block
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RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: Toni S. Hustead ( CN=Toni S. Hustead/OU=OMB/O=EOP [ OMB )
CREATION DATE/TIME:24-JUL-1997 10:59:22.00
SUBJECT: Thanks to PBGC
TO: G. E. DeSeve (CN=G. E. DeSeve/OU=OMB/O=EOP @ EOP [ OMB ])
READ:UNKNOWN
CC: Ellen S. Seidman ( CN=Ellen S. Seidman/OU=OPD/O=EOP @ EOP [ OPD D
READ:UNKNOWN
CC: Lavonne D. Sampson ( CN=Lavonne D. Sampson/OU=OMB/O=EOP @ EOP [ OMB ])
READ:UNKNOWN
CC: Mary M. Chuckerel CN=Mary M. Chuckerel/OU=OMB/O=EOP @ EOP [ OMB ])
READ:UNKNOWN
Bruce D. Long ( CN=Bruce D. Long/OU=OMB/O=EOP [ OMB ])
READ:UNKNOWN
TEXT:
As you requested (long ago) I am enclosing a letter for the Director's
signature thanking PBGC employees for their hard work. This letter
contains Ellen's edits. Ed, I recommend that you edit asap and that Mary
sees that it gets put into final form and that the letters (and copies) go
as soon as possible. I do not know what cycle PBGC is on as to
performance appraisals etc - but it would be nice to get it there in case
it is taking place now. In addition, the new Executive Director has been
in place only a couple of weeks - and this is a nice way for him to
understand his new employees. I am out of the office tomorrow and all of
next week on vacation, so this is why I am handing off following through
on the letter going out.
ATTACHMENT
1
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END ATTACHMENT
I
Mr. David M. Strauss
Executive Director
Pension Benefit Guaranty Corporation
1200 K Street, N.W.
Washington, D.C. 20005-4026
Dear Mr. Strauss,
This letter is meant to bring to your attention the outstanding support that the Executive Office of
the President has received from the staff of the PBGC over the last several months in our efforts
to develop and implement the "National Capital Revitalization and Self-Government
Improvement Act of 1997". We would like to especially thank Stuart Sirkin, David Gustafson,
Jane Pacelli, James Marion, Terrence Deneen, William Beyer, and Charles Finke.
As you know, part of our proposal to assist the District involves a partial assumption of their
pension liability. Early in the process, we asked the PBGC to help us craft and draft the
proposal. To do the job well required an understanding of benefit formulas, funding
arrangements, program administration, audit and legal issues, and problems unique to the
District. Your staff accomplished all of this. They then worked with us, and the District's
consulting actuary, to define the Federal DC pension liability and a financing scenario under
specified deficit and cost parameters.
Your staff have continued to provide crucial technical support. They drafted the language needed
to support our proposal, and have been available constantly to fine tune and help coordinate this
effort. They have attended a multitude of meetings with us to provide immediate expert advice.
These meetings included union groups, the District pension board, congressional staff, intra-
governmental groups, etc.
Throughout this entire process, we have received nothing but untiring professional expertise from
PBGC. The urgent turnaround time requested on many of our calls for assistance had to have
placed a personal burden on these employees, but each time they unflinchingly accepted and
produced a high-quality product.
Our interactions with your organization have proven that the Federal government can produce
top-notch and timely products when it brings together experts as dedicated and professional as
those on your staff. Please thank them for me.
Frank Raines Signature Block
cc:
Stuart Sirkin
David Gustafson
Jane Pacelli
James Marion
Terrence Deneen
William Beyer
Charles Finke
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RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: G. E. DeSeve (CN=G. E. DeSeve/OU=OMB/O=EOP [ OMB ])
CREATION DATE/TIME: 4-AUG-1997 18:52:37.00
SUBJECT: DC Pensions and Borrowing
TO: Carol Thompson-Cole ( CN=Carol Thompson-Cole/OU=OMB/O=EOP @ EOP [ OMB ])
READ:UNKNOWN
TO: Ellen S. Seidman ( CN=Ellen S. Seidman/OU=OPD/O=EOP @ EOP [ OPD )
READ:UNKNOWN
TO: Michael Deich ( CN=Michael Deich/OU=OMB/O=EOP @ EOP [ OMB ])
READ:UNKNOWN
CC: Franklin D. Raines ( CN=Franklin D. Raines/OU=OMB/O=EOP @ EOP [ OMB ])
READ:UNKNOWN
TEXT:
I spoke with Michael Froman at Treasury who indicated that Jerry Hawke
would be responsible for both borrowing and pensions. The first will be
handled by the Domestic Finance Office as they always have. Mozelle
Thompson is setting up the next status meeting in the next week or two.
Pensions will either go to FMS or the Bureau of Public Debt. Jerry will
make the decision and set up a work program very shortly. Whichever
entity does pensions, it will be important to keep PBGC involved.
RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: Ellen S. Seidman ( CN=Ellen S. Seidman/OU=OPD/O=EOP [ OPD 1)
CREATION DATE/TIME: 5-AUG-1997 09:43:58.00
SUBJECT: Re: DC Pensions and Borrowing
TO: G.E. DeSeve (CN=G. E. DeSeve/OU=OMB/O=EOP @ EOP [OMB])
READ:UNKNOWN
TEXT:
I just talked to Hawke, and put in my pitch for close coordination with
the PBGC. I also put in my preference for BDP (my favorite little
bureau), but emphasized to Jerry that [if he wanted to be so silly as to
give it to FMS] it's his call. He certainly agrees that getting it out of
the Office of the Secretary is a good idea. ellen
RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: Rosemary Evans ( CN=Rosemary Evans/OU=OMB/O=EOP [ OMB ])
CREATION DATE/TIME: 7-AUG-1997 18:00:01.00
SUBJECT: Mtg tomorrow to discuss pension options for DC
TO: Ellen S. Seidman ( CN=Ellen S. Seidman/OU=OPD/O=EOP @ EOP [ OPD ])
READ:UNKNOWN
CC: Toni S. Hustead ( CN=Toni S. Hustead/OU=OMB/O=EOP @ EOP [ OMB D
READ:UNKNOWN
TEXT:
Ed would like you and Toni Hustead to attend a meeting to discuss new plan
options for the district. He would like for you to see if the members
from the Pension Benefit Guarantee Corp. and the Treasury can attend.
Friday @ 5:30pm looks good.
I understand this is short notice so please let me know if it is a problem
and I will try to reschedule the meeting.
Ed would also like me to schedule a meeting with both you and Toni to
brief Jerry Hawke, of Treasury, on the options for DC. He would like for
the meeting to occur sometime early next week(possibly Tuesday). Due to
the fact that you will be on vacation, I will check Toni's availability.
RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: Ellen S. Seidman ( CN=Ellen S. Seidman/OU=OPD/O=EOP [ OPD 1)
CREATION DATE/TIME: 8-AUG-1997 18:01:01.00
SUBJECT: DC pensions - judges effective date
TO: G.E. DeSeve (CN=G. E. DeSeve/OU=OMB/O=EOP @ EOP [ OMB 1)
READ:UNKNOWN
CC: Toni S. Hustead ( CN=Toni S. Hustead/OU=OMB/O=EOP @ EOP [ OMB 1)
READ:UNKNOWN
TEXT:
As if we didn't have enough trouble already, we just discovered that
Treasury got the judges' plan AS OF LAST WEDNESDAY!!! I have spoken to
Jerry Hawke about it, and we got Mozelle on the phone. They will get
right on it, probably having to do an MOU with the District to make
payments for at least a month. At least there aren't many retirees,
there's no allocation issue, and the employment records are probably in
pretty good shape. Mozelle has also talked to Secretary Rubin about
doing an expedited procurement for the Trustee, and Rubin is OK with
that. PBGC is providing Mozelle with an RFP for a trustee and
administrator that they used, and which Treasury can use to start from.
No word on who will administer, but there's clear sentiment not to do it
in the office of the secretary. I fear, however, if Jerry hears BPD from
one more person, he's going to go the other way. Be careful.
Happy trails.
Ellen
RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: Toni S. Hustead (CN=Toni S. Hustead/OU=OMB/O=EOP [OMB])
CREATION DATE/TIME: 8-AUG-1997 10:51:50.00
SUBJECT: Re: Mtg tomorrow to discuss pension options for DC
TO: Rosemary Evans ( CN=Rosemary Evans/OU=OMB/O=EOP @ EOP [ OMB 1)
READ:UNKNOWN
CC: Ellen S. Seidman ( CN=Ellen S. Seidman/OU=OPD/O=EOP @ EOP [ OPD 1)
READ:UNKNOWN
TEXT:
Had a call in to you today. Read this email this morning for the first
time. I am pretty booked today and doubt seriously that we could get PBGC
and Treasury at 5:30 this evening. I am free on Monday almost all day but
I know that Ellen is gone. Can we make the meeting on Monday without
Ellen? If absolutely necessary I can rearrange the day to do a 5:30
meeting - GUIDANCE?
RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: Toni S. Hustead (CN=Toni S. Hustead/OU=OMB/O=EOP [ OMB 1)
CREATION DATE/TIME:11-AUG-1997 12:05:19.00
SUBJECT: Re: URGENT finding - judges effective date
TO: Ellen S. Seidman ( CN=Ellen S. Seidman/OU=OPD/O=EOP @ EOP [OPD])
READ:UNKNOWN
CC: G.E. DeSeve (CN=G. E. DeSeve/OU=OMB/O=EOP @ EOP [ OMB ])
READ:UNKNOWN
Lavonne D. Sampson ( CN=Lavonne D. Sampson/OU=OMB/O=EOP [OMB])
READ:UNKNOWN
TEXT:
We all took the DC plan home over the weekend to figure out the timeline
of takeover items etc. Most of us thought you were right on the Judges
except Terry Deneen who looked further as it was too unclear of the time
line. He points us to Chapter 3, Sec 11721:
"Except as otherwise provided in this title, the provisions of this title
shall take effect on the later of October 1, 1997, or the day the DC
Financial Responsibility and Management Assistance Authority certifies
that the financial plan and budget for DC for fiscal year 1998 meet the
requirements of section 201(c)(1) of the DC Financial Responsibility and
Management Assistance Act of 1995, as amended by this title."
PBGC's initial interpretation of this is that it buys us until October I
to take over the judges. They have taken all of our notes and are
creating the timeline we promised. We think it will be ready by cob today.
RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: Melissa Green ( CN=Melissa Green/OU=OPD/O=EOP [ OPD )
CREATION DATE/TIME:12-AUG-1997 19:00:06.00
SUBJECT: Entitlement Mtg with NAM
TO: Peter R. Orszag (CN=Peter R. Orszag/OU=OPD/O=EOP @ EOP [ OPD
READ:UNKNOWN
TEXT:
FYI:
Forwarded by Melissa Green/OPD/EOP on 08/12/97
07:00 PM
William H. White Jr.
08/12/97 06:23:37 PM
Record Type: Record
To: See the distribution list at the bottom of this message
cc: Cheryl M. Carter/WHO/EOP, Peter O'Keefe/WHO/EOP, Melissa
Green/OPD/EOP, Sarah A. Bianchi/OMB/EOP
Subject: Entitlement Mtg with NAM
At their request, Peter O'Keefe and I met with two reps from the National
Association of Manufacturers - Stephen Elkins, Director of Pensions and
Entitlement Policy and Sharon Canner, Vice President of Entitlement
Policy. They wanted to talk Medicare and Social Security.
On MEDICARE, they will be sending the President a letter nominating NAM
Chair Warren Bass for the Medicare Commission. Bass is CEO of
Tupperware/Kitchenaid and is on the board at Children's Hospital in
Chicago.
On SOCIAL SECURITY, they are working with Congressman Nick Smith (R-MI) on
a privitization plan. They propose to test the plan through a 5 year
demonstration project. They envision the demo to include 500,000 people,
age 20-30, possibly 10,000 per state, administered by Treasury,
participants would be offered three investment choices. Investments would
not be guaranteed, but they envision PBGC or the establishment of a
separate gov't organization to provide some level of insurance. They say
the cost is less than $1 billion. Results would be evaluated after 5 year
period.
NAM reports that Rep Smith plans to introduce legislation in September
calling for $5-10 million to design such a program. NAM said Smith will
approach the Blue Dogs for support, and mentioned Stenholm and Tanner as
potential sponsors. Jerry Jasinowski will be calling Gene to discuss the
above proposal.
Message Sent
To:
Gene B. Sperling/OPD/EOP
Maria Echaveste/WHO/EOP
Peter R. Orszag/OPD/EOP
Jake Siewert/OPD/EOP
Christopher C. Jennings/OPD/EOP
RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: G.E. DeSeve (CN=G. E. DeSeve/OU=OMB/O=EOP [OMB])
CREATION DATE/TIME: 4-SEP-1997 18:37:45.00
SUBJECT: PBGC Letters
TO: Ellen S. Seidman ( CN=Ellen S. Seidman/OU=OPD/O=EOP @ EOP [OPD])
READ:UNKNOWN
TO: Mary M. Chuckerel ( CN=Mary M. Chuckerel/OU=OMB/O=EOP @ EOP [ OMB 1)
READ:UNKNOWN
TO: Toni S. Hustead ( CN=Toni S. Hustead/OU=OMB/O=EOP @ EOP [OMB])
READ:UNKNOWN
TEXT:
Neither Jill nor Lois could find out what is going on with the letters.
If you could give Mary the necessary information to track it through the
system, we will start the detective work. Thanks
RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: G. E. DeSeve (CN=G. E. DeSeve/OU=OMB/O=EOP [ OMB ])
CREATION DATE/TIME: 4-SEP-1997 15:23:26.00
SUBJECT: DC Pension Status
TO: Ellen S. Seidman ( CN=Ellen S. Seidman/OU=OPD/O=EOP @ EOP [ OPD 1)
READ:UNKNOWN
TO: Alan B. Rhinesmith (CN=Alan B. Rhinesmith/OU=OMB/O=EOP @ EOP [ OMB
READ:UNKNOWN
TO: Carol Thompson-Cole CN=Carol Thompson-Cole/OU=OMB/O=EOP @ EOP [ OMB )
READ:UNKNOWN
TO: Toni S. Hustead (CN=Toni S. Hustead/OU=OMB/O=EOP @ EOP [ OMB 1)
READ:UNKNOWN
TO: Marcia D. Occomy ( CN=Marcia D. Occomy/OU=OMB/O=EOP @ EOP [ OMB 1)
READ:UNKNOWN
TO: Michael Deich ( CN=Michael Deich/OU=OMB/O=EOP @ EOP [ OMB D
READ:UNKNOWN
TO: Franklin D. Raines ( CN=Franklin D. Raines/OU=OMB/O=EOP @ EOP [ OMB 1)
READ:UNKNOWN
TEXT:
Jerry Hawke hosted a large meeting including PBGC, OMB, and Treasury.
A new legal theory has gained considerable currency as a result of
Treasury trying to sort out its own responsibilities and their timing.
The new conclusion, supported by most but not all of those involved, is
that the general provisions of the bill that allow it to superseed
previous statutes wipe out the DC obligation to make pension payments for
employees in regard to service prior to the freeze date. It does not
superseed the obligation of the fund to make benefit payments.
Previously, we had all been under the understanding that DC would be under
an obligation to continue to make payments until a new plan was put in
place.
As I noted this morning, Larry King advises me that the District is going
forward with a new plan and we will see a copy of it shortly. Given the
potential that Council would act on the new plan soon, Treasury agreed
that it should meet with the City and the Authority shortly to discuss who
would do what when assuming that a new plan was in place by October 1.
Jerry has asked Treasury, PBGC and OMB to structure a list of issues to
be addresed prior to and at that meeting. These include timing of Trustee
appointment ( there was general recognition that an interim MOU would be
needed with the City.); when to make a decision on which assets to leave
behind; the general strategy for holding and managing assets. Others are
being developed.
I would like others to comment but I felt that Treasury has sorted things
out and is committed to making the process work in a timely fashion.
There was no denial or talk of some kind of technical corrections action.
We will participate in all of the meetings.
RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: Toni S. Hustead ( CN=Toni S. Hustead/OU=OMB/O=EOP [ OMB ])
CREATION DATE/TIME: 4-SEP-1997 19:18:35.00
SUBJECT: Re: PBGC Letters
TO: G.E. DeSeve (CN=G. E. DeSeve/OU=OMB/O=EOP @ EOP [ OMB ])
READ:UNKNOWN
CC: Mary M. Chuckerel ( CN=Mary M. Chuckerel/OU=OMB/O=EOP @ EOP [ OMB ])
READ:UNKNOWN
CC: Ellen S. Seidman ( CN=Ellen S. Seidman/OU=OPD/O=EOP @ EOP [OPD])
READ:UNKNOWN
TEXT:
I got the signed copy this afternoon! Let us hope it went out after it
was signed. Have notified Pacelli and told her to let me know if
they do not show in a week.
Ed - So sorry I could not leave the meeting tonight. Looked for you
afterwards. We have been trying to get guidance on two major issues and I
could not get up when we had such little time to explain it.
G.E. DeSeve
09/04/97 06:37:38 PM
Record Type: Record
To: Toni S. Hustead/OMB/EOP, Ellen S. Seidman/OPD/EOP, Mary M.
Chuckerel/OMB/EOP
cc:
Subject: PBGC Letters
Neither Jill nor Lois could find out what is going on with the letters.
If you could give Mary the necessary information to track it through the
system, we will start the detective work. Thanks
RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: Toni S. Hustead ( CN=Toni S. Hustead/OU=OMB/O=EOP [ OMB D
CREATION DATE/TIME:24-SEP-1997 18:19:20.00
SUBJECT: Re: Meeting today
TO: Ellen S. Seidman ( CN=Ellen S. Seidman/OU=OPD/O=EOP@EOP [ OPD )
READ:UNKNOWN
TEXT:
WRONG. I went to both. Boring is the word for it. I missed the first
hour but Janie told me they were only on page 3 and please come on over.
I input nothing but answering the question that there was no new
appropriated funds for admin expense - they are to come from the assets.
It is interesting to see the endgame but time consuming. Conference
call on buying back service?? on Friday. I am contacting PBGC to
understand what this is about. Since I came in the meeting late - am not
sure.
RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: Ellen S. Seidman (CN=Ellen S. Seidman/OU=OPD/O=EOP [ OPD ])
CREATION DATE/TIME:24-SEP-1997 16:58:47.00
SUBJECT: Re: Meeting today
TO: Toni S. Hustead (CN=Toni S. Hustead/OU=OMB/O=EOP @ EOP [ OMB ])
READ:UNKNOWN
TEXT:
I hope my inability to respond until after 3:30 meant that you went to the
VA meeting. Other than the sheer desire of OMB to know what's going on,
and the fact that the meetings are SOOOO boring that Janie, for example,
fell asleep yesterday, I think the PBGC people can make sure treasury
stays honest just fine. The Treasury lawyers have figured out that Terry
and Chuck know what they're doing, and they are relying on them. ellen
RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: Ellen S. Seidman ( CN=Ellen S. Seidman/OU=OPD/O=EOP [ OPD ])
CREATION DATE/TIME:16-OCT-1997 10:22:23.00
SUBJECT: THERE WILL BE A MEETING TODAY
TO: Judith Welles ( Judith Welles @ 326-4042 @ fax [ UNKNOWN ])
READ:UNKNOWN
TO: MAZUR_M MAZUR_M @ A1 @ CD @ LNGTWY [ UNKNOWN )
READ:UNKNOWN
TO: Monica Healy ( Monica Healy @ 219-8822 @ Fax [ UNKNOWN ])
READ:UNKNOWN
TO: Mark lwry ( Mark Iwry @ 622-0646 @ fax [ UNKNOWN ])
READ:UNKNOWN
TO: Kelly Traw ( Kelly Traw @ 219-5526 @ fax [ UNKNOWN 1)
READ:UNKNOWN
TO: Meredith Miller ( Meredith Miller @ 219-5526 @ fax [ UNKNOWN ])
READ:UNKNOWN
TO: MaryAnn Richardson ( MaryAnn Richardson @ 219-5120 @ fax [ UNKNOWN ])
READ:UNKNOWN
TO: Stephen Lee ( Stephen Lee @ 219-4745 @ fax [ UNKNOWN ])
READ:UNKNOWN
TO: Alan Lebowitz ( Alan Lebowitz @ 219-6531 @ fax [ UNKNOWN 1)
READ:UNKNOWN
TO: Judy Schub (Judy Schub @ 326-4016 @ fax [ UNKNOWN 1)
READ:UNKNOWN
TO: John F. Morrall III (CN=John F. Morrall III/OU=OMB/O=EOP @ EOP [ OMB ])
READ:UNKNOWN
TO: Mark D. Menchik ( CN=Mark D. Menchik/OU=OMB/O=EOP @ EOP [ OMB ])
READ:UNKNOWN
TO: Daniel J. Chenok ( CN=Daniel J. Chenok/OU=OMB/O=EOP @ EOP [ OMB ])
READ:UNKNOWN
TO: Alan B. Rhinesmith (CN=Alan B. Rhinesmith/OU=OMB/O=EOP @ EOP [ OMB D
READ:UNKNOWN
TO: Emil E. Parker ( CN=Emil E. Parker/OU=OPD/O=EOP @ EOP [ OPD )
READ:UNKNOWN
TO: David Gustafson ( David Gustafson @ 326-4085 @ fax [ UNKNOWN ])
READ:UNKNOWN
TO: Calvin Mitchell ( Calvin Mitchell @ 622-2808 @ fax [ UNKNOWN ])
READ:UNKNOWN
TO: Nell Hennessey (Nell Hennessey @ 326-4016 @ fax [ UNKNOWN 1)
READ:UNKNOWN
TO: Vicki Judson ( Vicki Judson @ 622-0236 @ fax [ UNKNOWN ])
READ:UNKNOWN
TO: Stuart Sirkin ( Stuart Sirkin @ 326-4085 @ fax [ UNKNOWN D
READ:UNKNOWN
TO: Joseph Grant ( Joseph Grant @ 326-4016 @ fax [ UNKNOWN ])
READ:UNKNOWN
TO: Richard Sinkfield ( Richard Sinkfield @ 622-0534 @ fax [ UNKNOWN ])
READ:UNKNOWN
TO: Rinchard Hinz ( Rinchard Hinz @ 219-5526 @ fax [ UNKNOWN 1)
READ:UNKNOWN
TO: Olena Berg ( Olena Berg @ 219-5526 @ fax [ UNKNOWN ])
READ:UNKNOWN
TO: Jonathan A. Kaplan ( CN=Jonathan A. Kaplan/OU=OPD/O=EOP @ EOP [ OPD D
READ:UNKNOWN
TO: Alexander T. Hunt ( CN=Alexander T. Hunt/OU=OMB/O=EOP @ EOP [ OMB ])
READ:UNKNOWN
TO: Larry R. Matlack ( CN=Larry R. Matlack/OU=OMB/O=EOP @ EOP [ OMB 1)
READ:UNKNOWN
TO: Debra J. Bond ( CN=Debra J. Bond/OU=OMB/O=EOP @ EOP [ OMB 1)
READ:UNKNOWN
TO: Ellen S. Seidman ( CN=Ellen S. Seidman/OU=OPD/O=EOP @ EOP [ OPD ])
READ:UNKNOWN
TEXT:
At the request of the Labor Department, we're going to discuss options for
a simple DB plan. PBGC has some ideas. I know this sounds like deja vu
all over again, but it's for real. ellen
RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: Ellen S. Seidman (CN=Ellen S. Seidman/OU=OPD/O=EOP [ OPD ])
CREATION DATE/TIME:24-OCT-1997 09:22:36.00
SUBJECT: Re: congratulations
TO: Sirkin.Stuart ( Sirkin.Stuart @ pbgc.gov @ INET @ LNGTWY [ UNKNOWN 1)
READ:UNKNOWN
TEXT:
You show us how to do it safely and profitably and we'll try. ellen
RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: Melissa N. Benton ( CN=Melissa N. Benton/OU=OMB/O=EOP [ OMB ])
CREATION DATE/TIME:31-OCT-1997 17:14:02.00
SUBJECT: Revised version of SAFE memo
TO: Emil E. Parker ( CN=Emil E. Parker/OU=OPD/O=EOP@EOP [ OPD
READ:UNKNOWN
TEXT:
Hey Emil--could you please add me to your distribution list for things
like this? Pensions are part of my portfolio (for better or for worse),
and I'd like to try to stay in the loop as best I can.
Thanks! Have a Happy Halloween
Forwarded by Melissa N. Benton/OMB/EOP on 10/31/97
05:11 PM
Mark D. Menchik 10/31/97 04:37:05 PM
Record Type: Record
To: Melissa N. Benton/OMB/EOP@EOP
cc:
Subject: Revised version of SAFE memo
Forwarded by Mark D. Menchik/OMB/EOP on 10/31/97
04:38 PM
Emil E. Parker
10/31/97 03:07:03 PM
Record Type: Record
To: See the distribution list at the bottom of this message
cc:
Subject: Revised version of SAFE memo
Attached is a revised version of the SAFE memo. I apologize for the
delay. I expect that PBGC (and possibly others) will want to add
additional pros, since the memo is now rather unbalanced. To expedite the
process, I will share these pros with the other agencies before
incorporating them in the memo. If I receive comments by noon on Tuesday,
I can probably finalize the memo by Wednesday or Thursday.
Thank you very much for your help.
Message Sent
To:
Alan B. Rhinesmith/OMB/EOP@EOP
Debra J. Bond/OMB/EOP@EOP
Daniel J. Chenok/OMB/EOP@EOP
Larry R. Matlack/OMB/EOP@EOP
Mark D. Menchik/OMB/EOP@EOP
Alexander T. Hunt/OMB/EOP@EOP
John F. Morrall III/OMB/EOP@EOP
Jonathan A. Kaplan/OPD/EOP@EOP
Judy Schub@326-4016 @ fax
Olena Berg@219-5526 @ fax
Alan Lebowitz@219-6531 @ fax
Richard Hinz@219-5526 @ fax
Stephen Lee@219-4745 @ fax
Richard Sinkfield@622-0534 @ fax
MaryAnn Richardson@219-5120 @ fax
Joseph Grant@326-4016 @ fax
Meredith Miller@219-5526 @ fax
Stuart Sirkin@326-4085 @ fax
Kelly Traw@219-5526 @ fax
Vicki Judson@622-0236 @ fax
Mark Iwry@622-0646 @ fax
Nell Hennessey@326-4016 @ fax
Monica Healy@219-8822 @ fax
Calvin Mitchell@622-2808 @ fax
David Gustafson@326-4085 @ fax
Judith Welles@326-4042 @ fax
Jane Malloy@482-0325 @ fax
ATTACHMENT
I
ATT CREATION TIME/DATE: 0 00:00:00.00
TEXT:
Unable to convert ARMS_EXT:[ATTACH.D74JMA1L45073630F.316 to ASCII,
The following is a HEX DUMP:
END ATTACHMENT
1
ISSUE
Should the Administration propose and support a simplified defined benefit pension plan
directed toward small employers?
BACKGROUND
In looking at the demographics of the current employer-sponsored pension system, four facts
stand out:
The percentage of full-time private sector workers covered by pension plans of
any sort has held steady at approximately 50% over the last 25 years;
There has been a shift in primary coverage from defined benefit to defined
contribution plans, with many employees now covered only by a defined
contribution plan;
Workers in small businesses are disproportionately not covered by any sort of
plan, and when they are covered, it is disproportionately in a defined contribution
plan; there have been nearly 50,000 defined benefit plans terminated in the last
decade, the vast majority in small businesses; and
Women have significantly lower coverage rates than men
Small businesses assert that they do not have pension plans for a number of reasons, including
the uncertainty of firm longevity and variability of profits, and the fact that employees value
wages and other benefits -- particularly health coverage -- above pension coverage. They cite
additional reasons why they do not have defined benefit plans, including administrative
complexity and cost (relating to features such as the non-discrimination and funding
requirements); the variability in funding requirements (which is related to interest rate volatility,
investment returns and worker characteristics rather than to profits); and employees' lack of
appreciation of the value of defined benefit plans. One reason for this lack of appreciation is that
such benefits are generally not portable. Small businesses employ a disproportionately large
number of young, part-time, or temporary employees, for whom defined-benefit plans have little
appeal.
Over the past four years, the Administration has taken a series of statutory, administrative and
educational actions to increase pension coverage, including coverage by small businesses. The
most visible action was the development of the SIMPLE, a small business defined contribution
plan which appears to be bringing thousands of businesses -- and tens of thousands of workers
into the system. However, the SIMPLE, like all defined contribution plans, relies on a
combination of worker willingness to save significant amounts over a long period and successful
investment experience to generate a reasonable retirement income. For lower income workers
and for those who do not, for whatever reason, start to save for retirement until they reach 40 or
later, defined contribution plans are unlikely to generate a significant retirement income,
particularly if the money is invested conservatively or during a period of equity investment
returns more in line with historical averages than we have seen recently.
Automated Records Management System
Hex-Dump Conversion
- 2 -
Some have suggested that if it were possible to develop a simplified defined benefit plan -- one
that reduced both cost and uncertainty by simplifying both the non-discrimination and the
funding rules some stable small businesses would establish such plans. (They point out that
many small businesses had defined benefit plans before both the non-discrimination and funding
rules were tightened in the 1980s; the funding rules may have been tightened largely for revenue,
rather than pension policy, purposes). They believe this sort of plan would be particularly
attractive to businesses whose owners and key workers are nearing retirement.
The American Society of Pension Actuaries, an association of actuaries who service pension
plans for small employers, has developed such a plan the SAFE (Secure Assets for
Employees). Representatives Nancy Johnson and Earl Pomeroy in May introduced a bill
including a version of the SAFE. Senator Bob Graham has also indicated support.
Representative Johnson, who is on the House Ways and Means Committee, has expressed to
Secretary Herman her desire for Administration support of some version of this legislation. And
the Department of Labor's own ERISA Advisory Council will be recommending adoption of a
small business defined benefit plan, such as some version of the SAFE.
THE SAFE
The SAFE, as proposed by ASPA, is essentially is a hybrid defined contribution/defined benefit
plan for employers with 100 or fewer workers. The SAFE has the following features:
Each year, the employer would contribute money to the account of each participant¹
sufficient to pay for a benefit at retirement equal to a set percentage of the employee's current
year pay (i.e., 3 or 2%--the same percentage for all participants), assuming that the money set
aside earns interest at 5% per year. Because the funding would be based on current salaries and a
low assumed interest rate, funding would be far more stable and predictable than under a
standard defined benefit plan, and there would be very limited actuarial expense.
If the plan earns more than the 5% assumed rate of interest, the extra earnings go into the
employee's account. If the rate of return for plan funds were below 5%, the employer would
have to make any additional contributions needed to keep the benefit fully funded.
Each participant would have a separate account, which could at the choice of the
employer either be a special SAFE individual retirement annuity (which could be rolled over
into another SAFE annuity but could not be distributed before retirement) or a sub-account in a
SAFE Trust. The accounts, as in a defined contribution plan, would be portable and the
retirement benefit would be based on the amount in the account at retirement.
Employees leaving before retirement could receive their SAFE benefits in the form of a
lump sum or an immediate annuity, or could defer the decision until retirement.
I
As with the SIMPLE, if an employer decided to have a SAFE, it would have to cover all
employees over the age of 21 who had at least $5,000 of W-2 earnings in each of two consecutive calendar
years.
Automated Records Management System
Hex-Dump Conversion
- 3 -
An employee could receive credit for, and the employer could make additional
contributions with respect to, service with the employer in the years prior to the establishment of
the plan.
Most non-discrimination limitations and requirements would be waived, and there would
be no PBGC coverage or premium. SAFE plans would have simplified reporting requirements,
including a simplified actuarial report verifying that the employer had satisfied the annual
funding requirements.
An employer with a SAFE plan could also offer a SIMPLE or 401(k) plan, but could not
maintain any other pension plan (e.g., another defined benefit plan).
The goal of the SAFE - to increase retirement plan coverage that generates meaningful
retirement income -- is very consistent with the Administration's pension policy. Moreover,
simplification is another Administration goal--we have consistently recognized that one of the
keys to increased coverage is simplification. On the other hand, the Administration generally
in contrast to the business community - has also focused its attention on making certain that
pension benefits flow equitably to workers across the income spectrum. Moreover, because the
pension system depends on tax breaks to encourage firms to establish plans (and workers to
contribute), the Administration must pay attention to both the absolute budget impact of any
pension proposal and the proposal's distribution of tax benefits by income.
WORKING GROUP DELIBERATIONS
The working group has therefore spent considerable time analyzing the likely impact on pension
coverage and the potential overall revenue and distributional implications of the SAFE. We have
been particularly concerned about several features of the SAFE, including the generosity of the
plan relative to other defined benefit plans, the distribution of tax benefits among higher and
lower-paid employees, and the lack of a guaranteed benefit level (the benefit depends on the
amount in the account at retirement).
We also noted that while many of the benefits (to business) of the SAFE could be accomplished
using safe harbors currently in law, because simplified plans encourage a larger number of
eligible businesses to establish them (that is, after all, their goal), the tax cost of the SAFE might
well be higher than what would be predicted based on current use of the existing safe harbors.
SAFE-Lite
The working group designed "SAFE-Lite" to address the aforementioned concerns, among
others, about the design of the SAFE. Although we are by no means united on whether the
Administration should pursue SAFE-Lite, we all agree that if the Administration chooses
to propose or support a simplified defined benefit plan, the SAFE-Lite would be preferable
to the original SAFE.
The primary differences between the SAFE and our SAFE-Lite are:
Automated Records Management System
Hex-Dump Conversion
- 4
At retirement or termination of the plan, the plan would have to purchase annuities
that paid at least the minimum promised monthly benefit, making the plan a true defined
benefit plan. If the amount in the account were not sufficient to purchase such an annuity,
the employer would have to contribute the additional dollars needed.
The benefit would be equal to 2% of compensation for each year of participation in the
plan, but it could be up to 3% for the first 10 years of a plan's existence, to allow some catch-up
for years before the plan was established. (For the SAFE the benefit could be either 2% or 3%, at
the employer's option; the 3% for the first ten years under the SAFE-Lite serves as a substitute
for the past service credit under the SAFE. Under the SAFE-Lite, the employer could choose to
set the percentage as low as 1% in any year.)
The SAFE benefit would be guaranteed by the PBGC. Since the promised benefit would
almost always be fully funded, the premium could be substantially reduced from that charged
other defined benefit plans. (The PBGC may propose extending the reduced premium to other
fully-funded small plans.)
If the program were still too expensive or too rich, very small companies or professional
corporations could be excluded.²
Should we do this?
The working group was unable to reach consensus on whether the Administration should propose
or support SAFE-Lite or something similar. The arguments for and against doing so are set out
below.
Pros
1. The SAFE can answer a real need for employees, particularly some low income and
older workers, by providing them with a significant guaranteed benefit. For workers who stay at
one job a substantial period of time, this is an important benefit that hedges against the
possibility that the worker will have difficulty saving or that investment returns will not be
successful. Every employee that meets the minimum standards (over 21 with at least $5,000 in
W-2 earnings for two consecutive years) is guaranteed a benefit, with no employee contribution
required. At the same time, its portability and the presence of individual accounts make the
SAFE attractive to younger and mobile workers.
2 The very small (e.g., under 10- or under 25-employee) exclusion would likely generate some
improvement in the distribution of tax benefits by income, but is likely to be politically infeasible.
Exclusion of professional corporations has been done before in pension law to eliminate some of the most
likely abusers, and might be more feasible. However, one should be aware that in a changing economy,
this is no longer just doctors, dentists, lawyers and accountants, but also architects, engineers, and many
financial services professionals.
Automated Records Management System
Hex-Dump Conversion
- 5 -
2. The SAFE will be attractive to small businesses because it is substantially easier and
cheaper to administer than a defined benefit plan developed using current law safe harbors, and it
lowers funding volatility.
3. The SAFE answers a political need, in that there is increasing pressure (1) from small
businesses for a simplified defined benefit plan and (2) from pension activists for a commitment
to defined benefit plans in general.
4. The SAFE may in fact not cost very much, and may not be scored as very costly, since
the take-up rate will likely be limited for all the structural reasons small businesses usually don't
have pension plans, such as limited and volatile income and an uncertain future. (This pro to
some extent contradicts pro #2 above).
5. Even small business owners don't make much money, so the fact that a
disproportionate part of the tax benefit goes to them should not be so upsetting: the
Administration has long since stopped arguing that people making $80,000 a year (the typical
income of a successful small business owner) are anything but "middle class."
Cons
1. The need may be more rhetorical than real; this is being pushed by businesses and
their consultants, not by workers or their advocates. We have just passed the SIMPLE, which
appears to be catching on well as a small business plan, and there is little reason to add to the
plethora of small business plans.
2. It is unclear whether, in a constrained budget environment, this is a better use of
pension funds than other items such as payroll deduction IRAs.
3. The relatively regressive distribution of the tax benefits -- few workers with average or
below-average pay would benefit from the SAFE or SAFE-Lite is not only an inefficient use of
the tax system, it is politically bad for the Administration.
4. The plan's tax preferences are not targeted so as to maximize the increase in coverage;
the SAFE or SAFE-Lite would probably instead increase tax benefits for workers who are
already covered.
5. SAFE or SAFE-Lite may often be taken up by employers who shift their employees
from (previously offered) money purchase or non-401(k) profit sharing plans which generally do
not weight contributions based on age. These employers would be able to increase contributions
for older, higher-paid employees without increasing their overall pension costs.
6. Even if we start with SAFE-Lite, we'll get SAFE or a more costly, top-heavy variant
(see, e.g., the NEST-SIMPLE transformation) that may well not be a true defined benefit plan.
Automated Records Management System
Hex-Dump Conversion
- 6 -
7. Given the demographics of small businesses, where the average tenure is three years
and 40% of the workers potentially eligible for the SAFE are under 21 or do not have two years
of service earning more than $5,000, very little of the lower-wage portion of the target population
would be covered, and those that were would likely not be helped by the defined benefit aspect of
the plan because they would leave before retirement. These workers would also not benefit from
the PBGC guarantee, since it would be lost when they changed jobs and rolled their account
balance into an IRA or spent it.
8. The proposal's defined benefit is dependent on purchase of an annuity at retirement or
at plan termination. The annuity market for individuals and small groups is notoriously over-
priced, due to both high administrative costs and adverse selection, so the plan may be less
effective than hoped in terms of actually providing a guaranteed benefit on retirement.
9. Many small business owners could be expected to terminate the plan on their
retirement, which would result in little benefit for lower-paid workers whose opportunity to build
up a benefit through employer contributions would thereby also by terminated.
10. There are more efficient ways to get retirement money to low income workers, such
as not only protecting Social Security but restructuring it to further benefit low income workers.
Automated Records Management System
Hex-Dump Conversion
RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: Emil E. Parker ( CN=Emil E. Parker/OU=OPD/O=EOP [OPD])
CREATION DATE/TIME:31-OCT-1997 15:07:06.00
SUBJECT: Revised version of SAFE memo
TO: Judith Welles ( Judith Welles @ 326-4042 @ fax [ UNKNOWN 1)
READ:UNKNOWN
TO: Calvin Mitchell ( Calvin Mitchell @ 622-2808 @ fax [ UNKNOWN ])
READ:UNKNOWN
TO: Nell Hennessey (Nell Hennessey @ 326-4016 @ fax [ UNKNOWN ])
READ:UNKNOWN
TO: Vicki Judson ( Vicki Judson @ 622-0236 @ fax [ UNKNOWN ])
READ:UNKNOWN
TO: Stuart Sirkin ( Stuart Sirkin @ 326-4085 @ fax [ UNKNOWN 1)
READ:UNKNOWN
TO: Joseph Grant ( Joseph Grant @ 326-4016 @ fax [ UNKNOWN ])
READ:UNKNOWN
TO: Richard Sinkfield ( Richard Sinkfield @ 622-0534 @ fax [ UNKNOWN ])
READ:UNKNOWN
TO: Richard Hinz ( Richard Hinz @ 219-5526 @ fax [ UNKNOWN D
READ:UNKNOWN
TO: Olena Berg ( Olena Berg @ 219-5526 @ fax [ UNKNOWN D
READ:UNKNOWN
TO: Jonathan A. Kaplan ( CN=Jonathan A. Kaplan/OU=OPD/O=EOP @ EOP [ OPD 1)
READ:UNKNOWN
TO: Alexander T. Hunt ( CN=Alexander T. Hunt/OU=OMB/O=EOP @ EOP [ OMB 1)
READ:UNKNOWN
TO: Larry R. Matlack ( CN=Larry R. Matlack/OU=OMB/O=EOP @ EOP [ OMB ])
READ:UNKNOWN
TO: Debra J. Bond ( CN=Debra J. Bond/OU=OMB/O=EOP @ EOP [ OMB ])
READ:UNKNOWN
TO: Jane Malloy ( Jane Malloy @ 482-0325 @ fax [ UNKNOWN 1)
READ:UNKNOWN
TO: David Gustafson ( David Gustafson @ 326-4085 @ fax [ UNKNOWN ])
READ:UNKNOWN
TO: Monica Healy ( Monica Healy @ 219-8822 @ fax [ UNKNOWN ])
READ:UNKNOWN
TO: Mark Iwry ( Mark Iwry @ 622-0646 @ fax [ UNKNOWN ])
READ:UNKNOWN
TO: Kelly Traw ( Kelly Traw @ 219-5526 @ fax [ UNKNOWN )
READ:UNKNOWN
TO: Meredith Miller ( Meredith Miller @ 219-5526 @ fax [ UNKNOWN ])
READ:UNKNOWN
TO: MaryAnn Richardson ( MaryAnn Richardson @ 219-5120 @ fax [ UNKNOWN )
READ:UNKNOWN
TO: Stephen Lee ( Stephen Lee @ 219-4745 @ fax [ UNKNOWN 1)
READ:UNKNOWN
TO: Alan Lebowitz ( Alan Lebowitz @ 219-6531 @ fax [ UNKNOWN 1)
READ:UNKNOWN
TO: Judy Schub ( Judy Schub @ 326-4016 @ fax [ UNKNOWN 1)
READ:UNKNOWN
TO: John F. Morrall III ( CN=John F. Morrall III/OU=OMB/O=EOP @ EOP [ OMB ])
READ:UNKNOWN
TO: Mark D. Menchik ( CN=Mark D. Menchik/OU=OMB/O=EOP @ EOP [ OMB 1)
READ:UNKNOWN
TO: Daniel J. Chenok ( CN=Daniel J. Chenok/OU=OMB/O=EOP @ EOP [ OMB 1)
READ:UNKNOWN
TO: Alan B. Rhinesmith ( CN=Alan B. Rhinesmith/OU=OMB/O=EOP @ EOP [ OMB ])
READ:UNKNOWN
TEXT:
Attached is a revised version of the SAFE memo. I apologize for the
delay. I expect that PBGC (and possibly others) will want to add
additional pros, since the memo is now rather unbalanced. To expedite the
process, I will share these pros with the other agencies before
incorporating them in the memo. If I receive comments by noon on Tuesday,
I can probably finalize the memo by Wednesday or Thursday.
Thank you very much for your help.
ATTACHMENT 1
ATT CREATION TIME/DATE: 0 00:00:00.00
TEXT:
Unable to convert ARMS_EXT:[ATTACH.D3]MAIL49955530O.316 to ASCII,
The following is a HEX DUMP:
END ATTACHMENT
I
ISSUE
Should the Administration propose and support a simplified defined benefit pension plan
directed toward small employers?
BACKGROUND
In looking at the demographics of the current employer-sponsored pension system, four facts
stand out:
The percentage of full-time private sector workers covered by pension plans of
any sort has held steady at approximately 50% over the last 25 years;
There has been a shift in primary coverage from defined benefit to defined
contribution plans, with many employees now covered only by a defined
contribution plan;
Workers in small businesses are disproportionately not covered by any sort of
plan, and when they are covered, it is disproportionately in a defined contribution
plan; there have been nearly 50,000 defined benefit plans terminated in the last
decade, the vast majority in small businesses; and
Women have significantly lower coverage rates than men
Small businesses assert that they do not have pension plans for a number of reasons, including
the uncertainty of firm longevity and variability of profits, and the fact that employees value
wages and other benefits -- particularly health coverage -- above pension coverage. They cite
additional reasons why they do not have defined benefit plans, including administrative
complexity and cost (relating to features such as the non-discrimination and funding
requirements); the variability in funding requirements (which is related to interest rate volatility,
investment returns and worker characteristics rather than to profits); and employees' lack of
appreciation of the value of defined benefit plans. One reason for this lack of appreciation is that
such benefits are generally not portable. Small businesses employ a disproportionately large
number of young, part-time, or temporary employees, for whom defined-benefit plans have little
appeal.
Over the past four years, the Administration has taken a series of statutory, administrative and
educational actions to increase pension coverage, including coverage by small businesses. The
most visible action was the development of the SIMPLE, a small business defined contribution
plan which appears to be bringing thousands of businesses -- and tens of thousands of workers
into the system. However, the SIMPLE, like all defined contribution plans, relies on a
combination of worker willingness to save significant amounts over a long period and successful
investment experience to generate a reasonable retirement income. For lower income workers
and for those who do not, for whatever reason, start to save for retirement until they reach 40 or
later, defined contribution plans are unlikely to generate a significant retirement income,
particularly if the money is invested conservatively or during a period of equity investment
returns more in line with historical averages than we have seen recently.
Automated Records Management System
Hex-Dump Conversion
- 2 -
Some have suggested that if it were possible to develop a simplified defined benefit plan -- one
that reduced both cost and uncertainty by simplifying both the non-discrimination and the
funding rules some stable small businesses would establish such plans. (They point out that
many small businesses had defined benefit plans before both the non-discrimination and funding
rules were tightened in the 1980s; the funding rules may have been tightened largely for revenue,
rather than pension policy, purposes). They believe this sort of plan would be particularly
attractive to businesses whose owners and key workers are nearing retirement.
The American Society of Pension Actuaries, an association of actuaries who service pension
plans for small employers, has developed such a plan the SAFE (Secure Assets for
Employees). Representatives Nancy Johnson and Earl Pomeroy in May introduced a bill
including a version of the SAFE. Senator Bob Graham has also indicated support.
Representative Johnson, who is on the House Ways and Means Committee, has expressed to
Secretary Herman her desire for Administration support of some version of this legislation. And
the Department of Labor's own ERISA Advisory Council will be recommending adoption of a
small business defined benefit plan, such as some version of the SAFE.
THE SAFE
The SAFE, as proposed by ASPA, is essentially is a hybrid defined contribution/defined benefit
plan for employers with 100 or fewer workers. The SAFE has the following features:
Each year, the employer would contribute money to the account of each participant¹
sufficient to pay for a benefit at retirement equal to a set percentage of the employee's current
year pay (i.e., 3 or 2%--the same percentage for all participants), assuming that the money set
aside earns interest at 5% per year. Because the funding would be based on current salaries and a
low assumed interest rate, funding would be far more stable and predictable than under a
standard defined benefit plan, and there would be very limited actuarial expense.
If the plan earns more than the 5% assumed rate of interest, the extra earnings go into the
employee's account. If the rate of return for plan funds were below 5%, the employer would
have to make any additional contributions needed to keep the benefit fully funded.
Each participant would have a separate account, which could - at the choice of the
employer either be a special SAFE individual retirement annuity (which could be rolled over
into another SAFE annuity but could not be distributed before retirement) or a sub-account in a
SAFE Trust. The accounts, as in a defined contribution plan, would be portable and the
retirement benefit would be based on the amount in the account at retirement.
Employees leaving before retirement could receive their SAFE benefits in the form of a
lump sum or an immediate annuity, or could defer the decision until retirement.
I
As with the SIMPLE, if an employer decided to have a SAFE, it would have to cover all
employees over the age of 21 who had at least $5,000 of W-2 earnings in each of two consecutive calendar
years.
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An employee could receive credit for, and the employer could make additional
contributions with respect to, service with the employer in the years prior to the establishment of
the plan.
Most non-discrimination limitations and requirements would be waived, and there would
be no PBGC coverage or premium. SAFE plans would have simplified reporting requirements,
including a simplified actuarial report verifying that the employer had satisfied the annual
funding requirements.
An employer with a SAFE plan could also offer a SIMPLE or plan, but could not
maintain any other pension plan (e.g., another defined benefit plan).
The goal of the SAFE - to increase retirement plan coverage that generates meaningful
retirement income -- is very consistent with the Administration's pension policy. Moreover,
simplification is another Administration goal--we have consistently recognized that one of the
keys to increased coverage is simplification. On the other hand, the Administration - generally
in contrast to the business community - has also focused its attention on making certain that
pension benefits flow equitably to workers across the income spectrum. Moreover, because the
pension system depends on tax breaks to encourage firms to establish plans (and workers to
contribute), the Administration must pay attention to both the absolute budget impact of any
pension proposal and the proposal's distribution of tax benefits by income.
WORKING GROUP DELIBERATIONS
The working group has therefore spent considerable time analyzing the likely impact on pension
coverage and the potential overall revenue and distributional implications of the SAFE. We have
been particularly concerned about several features of the SAFE, including the generosity of the
plan relative to other defined benefit plans, the distribution of tax benefits among higher and
lower-paid employees, and the lack of a guaranteed benefit level (the benefit depends on the
amount in the account at retirement).
We also noted that while many of the benefits (to business) of the SAFE could be accomplished
using safe harbors currently in law, because simplified plans encourage a larger number of
eligible businesses to establish them (that is, after all, their goal), the tax cost of the SAFE might
well be higher than what would be predicted based on current use of the existing safe harbors.
SAFE-Lite
The working group designed "SAFE-Lite" to address the aforementioned concerns, among
others, about the design of the SAFE. Although we are by no means united on whether the
Administration should pursue SAFE-Lite, we all agree that if the Administration chooses
to propose or support a simplified defined benefit plan, the SAFE-Lite would be preferable
to the original SAFE.
The primary differences between the SAFE and our SAFE-Lite are:
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At retirement or termination of the plan, the plan would have to purchase annuities
that paid at least the minimum promised monthly benefit, making the plan a true defined
benefit plan. If the amount in the account were not sufficient to purchase such an annuity,
the employer would have to contribute the additional dollars needed.
The benefit would be equal to 2% of compensation for each year of participation in the
plan, but it could be up to 3% for the first 10 years of a plan's existence, to allow some catch-up
for years before the plan was established. (For the SAFE the benefit could be either 2% or 3%, at
the employer's option; the 3% for the first ten years under the SAFE-Lite serves as a substitute
for the past service credit under the SAFE. Under the SAFE-Lite, the employer could choose to
set the percentage as low as 1% in any year.)
The SAFE benefit would be guaranteed by the PBGC. Since the promised benefit would
almost always be fully funded, the premium could be substantially reduced from that charged
other defined benefit plans. (The PBGC may propose extending the reduced premium to other
fully-funded small plans.)
If the program were still too expensive or too rich, very small companies or professional
corporations could be excluded.²
Should we do this?
The working group was unable to reach consensus on whether the Administration should propose
or support SAFE-Lite or something similar. The arguments for and against doing so are set out
below.
Pros
1. The SAFE can answer a real need for employees, particularly some low income and
older workers, by providing them with a significant guaranteed benefit. For workers who stay at
one job a substantial period of time, this is an important benefit that hedges against the
possibility that the worker will have difficulty saving or that investment returns will not be
successful. Every employee that meets the minimum standards (over 21 with at least $5,000 in
W-2 earnings for two consecutive years) is guaranteed a benefit, with no employee contribution
required. At the same time, its portability and the presence of individual accounts make the
SAFE attractive to younger and mobile workers.
2 The very small (e.g., under 10- or under 25-employee) exclusion would likely generate some
improvement in the distribution of tax benefits by income, but is likely to be politically infeasible.
Exclusion of professional corporations has been done before in pension law to eliminate some of the most
likely abusers, and might be more feasible. However, one should be aware that in a changing economy,
this is no longer just doctors, dentists, lawyers and accountants, but also architects, engineers, and many
financial services professionals.
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2. The SAFE will be attractive to small businesses because it is substantially easier and
cheaper to administer than a defined benefit plan developed using current law safe harbors, and it
lowers funding volatility.
3. The SAFE answers a political need, in that there is increasing pressure (1) from small
businesses for a simplified defined benefit plan and (2) from pension activists for a commitment
to defined benefit plans in general.
4. The SAFE may in fact not cost very much, and may not be scored as very costly, since
the take-up rate will likely be limited for all the structural reasons small businesses usually don't
have pension plans, such as limited and volatile income and an uncertain future. (This pro to
some extent contradicts pro #2 above).
5. Even small business owners don't make much money, so the fact that a
disproportionate part of the tax benefit goes to them should not be so upsetting: the
Administration has long since stopped arguing that people making $80,000 a year (the typical
income of a successful small business owner) are anything but "middle class."
Cons
1. The need may be more rhetorical than real; this is being pushed by businesses and
their consultants, not by workers or their advocates. We have just passed the SIMPLE, which
appears to be catching on well as a small business plan, and there is little reason to add to the
plethora of small business plans.
2. It is unclear whether, in a constrained budget environment, this is a better use of
pension funds than other items such as payroll deduction IRAs.
3. The relatively regressive distribution of the tax benefits - few workers with average or
below-average pay would benefit from the SAFE or SAFE-Lite is not only an inefficient use of
the tax system, it is politically bad for the Administration.
4. The plan's tax preferences are not targeted so as to maximize the increase in coverage;
the SAFE or SAFE-Lite would probably instead increase tax benefits for workers who are
already covered.
5. SAFE or SAFE-Lite may often be taken up by employers who shift their employees
from (previously offered) money purchase or non-401(k) profit sharing plans which generally do
not weight contributions based on age. These employers would be able to increase contributions
for older, higher-paid employees without increasing their overall pension costs.
6. Even if we start with SAFE-Lite, we'll get SAFE or a more costly, top-heavy variant
(see, e.g., the NEST-SIMPLE transformation) that may well not be a true defined benefit plan.
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7. Given the demographics of small businesses, where the average tenure is three years
and 40% of the workers potentially eligible for the SAFE are under 21 or do not have two years
of service earning more than $5,000, very little of the lower-wage portion of the target population
would be covered, and those that were would likely not be helped by the defined benefit aspect of
the plan because they would leave before retirement. These workers would also not benefit from
the PBGC guarantee, since it would be lost when they changed jobs and rolled their account
balance into an IRA or spent it.
8. The proposal's defined benefit is dependent on purchase of an annuity at retirement or
at plan termination. The annuity market for individuals and small groups is notoriously over-
priced, due to both high administrative costs and adverse selection, so the plan may be less
effective than hoped in terms of actually providing a guaranteed benefit on retirement.
9. Many small business owners could be expected to terminate the plan on their
retirement, which would result in little benefit for lower-paid workers whose opportunity to build
up a benefit through employer contributions would thereby also by terminated.
10. There are more efficient ways to get retirement money to low income workers, such
as not only protecting Social Security but restructuring it to further benefit low income workers.
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RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: Larry R. Matlack (CN=Larry R. Matlack/OU=OMB/O=EOP [ OMB
CREATION DATE/TIME:31-OCT-1997 12:53:22.00
SUBJECT: Re: Child Labor Report Comments
TO: Anne H. Lewis (CN=Anne H.Lewis/OU=OPD/O=EOP@EOP [OPD])
READ:UNKNOWN
Lori Schack ( CN=Lori Schack/OU=OMB/O=EOP [ OMB ])
READ:UNKNOWN
bond ( bond [ OMB
READ:UNKNOWN
Larry R. Matlack (CN=Larry R. Matlack/OU=OMB/O=EOP [ OMB
READ:UNKNOWN
schwartz nancy ( schwartz nancy [ UNKNOWN]
READ:UNKNOWN
TEXT:
When the dust settles?
There is nothing inappropriate in the comments on this report. They are
not harsh, merely to the point. I think you're projecting; for the most
part, tone is in the readers' mind, not on the screen (unless someone is
so gauche as to type in capitals).
I agree that there is merit to such reports that publicize bad practices
and praise good ones. The government should be the bully pulpit for such
things. But it also needs to be careful. I disagree that there is a
correlation between the ESA list and this report. ESA violators are
skirting the law. There is a rule on the books, they know the law, they
ignore it. They accept the consequences of what they do. Those who
participate voluntarily in a government survey may or may not be willing
to accept the consequences -- only if they are informed about how the
information will be used can we say that they walked in with their eyes
wide open. Also, you may recall that we have stopped publicizing the PBGC
top 50 list. So, we've been on both sides of shining the light in dark
places.
But, as to substance, we all agree that the report needs to be carefully
qualified so it can't be attacked for being extremely cavalier in its
assertions and conclusions. Also note that there is skepticism about how
well labeling works. Not that it doesn't work per se, but that there is
little enforcement, so do we really know what we think we know. (See
recent NYT article, for instance.)
I never mind being harsh with DOL or any other agency when they deserve it
for being cavalier and sloppy. This was not harsh.
RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: Emil E. Parker (CN=Emil E. Parker/OU=OPD/O=EOP [OPD])
CREATION DATE/TIME: 4-NOV-1997 10:14:54.00
SUBJECT: Re: CANCELLED: Conference call on Pomeroy portability legislation
TO: Mark D. Menchik (CN=Mark D. Menchik/OU=OMB/O=EOP @ EOP [ OMB D
READ:UNKNOWN
TEXT:
Leslie Kramerich of PBGC, who has been in close contact with Pomeroy's
office, does not have a draft bill as yet. I will be calling her to get a
run-down of the items under consideration. You could do the same; her
number is 326-4135.
Mark D. Menchik 11/03/97 04:17:32 PM
Record Type: Record
To: Emil E. Parker/OPD/EOP
cc:
Subject: Re: CANCELLED: Conference call on Pomeroy portability
legislation
Could you ship me a copy of the "Pomeroy package"? I don't recall seeing
anything like that. Or can I get it somewhere else?
I'm at NEOB #8202.
Thanks!
RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: Emil E. Parker (CN=Emil E. Parker/OU=OPD/O=EOP [ OPD
CREATION DATE/TIME: 6-NOV-1997 12:18:47.00
SUBJECT: Re: Retirement Commission
TO: Larry R. Matlack (CN=Larry R. Matlack/OU=OMB/O=EOP @ EOP [ OMB 1)
READ:UNKNOWN
CC: Christopher M. Sauer ( CN=Christopher M. Sauer/OU=OMB/O=EOP @ EOP [ OMB
READ:UNKNOWN
CC: Keith J. Fontenot ( CN=Keith J. Fontenot/OU=OMB/O=EOP @ EOP OMB 1)
READ:UNKNOWN
CC: Barry White (CN=Barry White/OU=OMB/O=EOP @ EOP [ OMB 1)
READ:UNKNOWN
CC: Richard E. Green CN=Richard E. Green/OU=OMB/O=EOP @ EOP [ OMB ])
READ:UNKNOWN
CC: Mark D. Menchik ( CN=Mark D. Menchik/OU=OMB/O=EOP @ EOP [ OMB ])
READ:UNKNOWN
CC: Joseph J. Minarik ( CN=Joseph J. Minarik/OU=OMB/O=EOP @ EOP [ OMB ])
READ:UNKNOWN
TEXT:
My understanding of the situation is this: Grassley and Fawell want the
Senate to take up the SAVER bill under UC, revised pursuant to extensive
negotiations with DOL, today or tomorrow, with the House to follow
shortly. DOL has already indicated to Fawell and Grassley's staff people
that the Department's concerns have been satisfied. Kennedy's staffer,
Susan Green, did not want to sign off on the bill until she had heard from
the White House as well as Labor. I promised her earlier that I would get
back to her by 11:30 today. Prior to that, I spoke to Joe Minarik, who
expressed concern but did not advise blocking the legislation, given the
impending action. Shortly after that conversation, I called Susan Green
to indicate that the Administration does not oppose the bill as it now
stands.
So, it is not so much a question of embracing the bill as not blocking
it. Mark Menchik indicated that Jack Lew and others may be concerned that
other items might be attached to the SAVER bill. I can call Susan Green
back to confirm that the earlier feedback applies only to the legislation
as it now stands. We of course reserve the right to change our position
if modifications are made.
While Labor is not "driving the train," they have proposed numerous
changes to the bill, most of which have been accepted. To now raise
concerns hitherto unmentioned strikes me as quite problematic.
Sperling is on the Hill going full bore on fast track. I will page him if
necessary, but I would like to know the specific policy or legislative
concerns that warrant holding up the bill.
I have sent Mark Menchik a copy of the revised bill, which has been a
topic of discussion in the pension working group for some time (PBGC and
Treasury have voiced no objections to the legislation as it now stands).
Thank you.
Larry R. Matlack 11/06/97 11:54:21 AM
Record Type: Record
To: Emil E. Parker/OPD/EOP
cc: See the distribution list at the bottom of this message
Subject: Retirement Commission
I've spoken to Joe Minarik and Barry White and we agree that because of
other proposals in the mix, we need to be sure everyone is on board with
supporting or negotiating over anything of this nature. Our other policy
folks are not aware of the interest in pursing this route. Thus, Gene
should call Jack Lew to discuss this before we would sign off on
approaching the Hill.
At the very least, if there is interest in this proposal, the parameters
for any discussion need to be set. DOL does not drive the train. Their
preferences may not be those of others.
Message Copied
To:
Joseph J. Minarik/OMB/EOP
Barry White/OMB/EOP
Mark D. Menchik/OMB/EOP
Keith J. Fontenot/OMB/EOP
Richard E. Green/OMB/EOP
Christopher M. Sauer/OMB/EOP
RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: Emil E. Parker (CN=Emil E. Parker/OU=OPD/O=EOP [ OPD
CREATION DATE/TIME:24-NOV-1997 18:52:13.00
SUBJECT: Pensions
TO: Jonathan A. Kaplan ( CN=Jonathan A. Kaplan/OU=OPD/O=EOP @ EOP [ OPD ])
READ:UNKNOWN
TO: Gene B. Sperling ( CN=Gene B. Sperling/OU=OPD/O=EOP @ EOP [ OPD
READ:UNKNOWN
CC: Russell W. Horwitz (CN=Russell W. Horwitz/OU=OPD/O=EOP @ EOP [OPD])
READ:UNKNOWN
TEXT:
As I mentioned to Jon, I did have a chance to speak briefly to Ellen about
potential next steps on pensions. She had the following general thoughts:
1) Seriously consider proposing the SAFE-Lite (the simplified
defined benefit plan);
2) Be very careful about imposing additional mandates on employers;
3) Think about ways to further reward (through the tax code)
employers with pension plans that provide relatively greater benefits to
low and moderate-income employees.
The pension group is split on SAFE-Lite, with PBGC strongly in favor and
Treasury firmly opposed. Moving ahead on a simplified defined benefit
plan will accordingly require a principals meeting.
I strongly recommend distributing the SAFE-Lite memo (attached) this week
or next, in preparation for a principals meeting on this and other pension
issues the week of December 8 (or December 15, depending on the timetable
for assembling the Administration ,S FY 1999 tax package).
ATTACHMENT 1
ATT CREATION TIME/DATE: 0 00:00:00.00
TEXT:
Unable to convert ARMS_EXT:[ATTACH.D66]MAIL42648672Q.316 to ASCII,
The following is a HEX DUMP:
END ATTACHMENT
1
- I -
DRAFT
ISSUE
Should the Administration propose and support a simplified defined benefit pension plan
directed toward small employers?
BACKGROUND
In looking at the demographics of the current employer-sponsored pension system, several
elements stand out:
The percentage of full-time private sector workers covered by pension plans of any sort
has held steady at approximately 50% over the last 25 years.
There has been a shift in primary coverage from defined benefit to defined contribution
plans, with many employees now covered only by a defined contribution plan.
Workers in small businesses are disproportionately not covered by any sort of plan, and
when they are covered, it is disproportionately in a defined contribution plan; there have been
nearly 50,000 defined benefit plans terminated in the last decade, the vast majority in small
businesses. The 50,000 figure, however, includes terminations of individual defined benefit
plans--i.e., plans established by, for example, doctors or lawyers covering only those individuals,
not any employees. These terminations were required by law--the 1986 Tax Reform Act
prohibited individual defined benefit plans.
Women have significantly lower coverage rates than men.
Small business owners assert that they do not have pension plans for a number of reasons,
including the uncertainty of firm longevity and variability of profits, and the fact that employees
value wages and other benefits -- particularly health coverage above pension coverage. The
owners cite additional reasons why they do not have defined benefit plans, including
administrative complexity and cost (relating to features such as the non-discrimination and
funding requirements); the variability in funding (which is related to interest rate volatility,
funding requirements and limitations, investment returns and worker characteristics rather than to
profits); and employees' lack of appreciation of the value of defined benefit plans. One reason
for this lack of appreciation is that such benefits are generally not portable. Small businesses
employ a disproportionately large number of young, part-time, or temporary employees, for
whom defined-benefit plans have little appeal.
Over the past four years, the Administration has taken a series of statutory, administrative and
educational actions to increase pension coverage, including coverage by small businesses. The
most visible action was the development of the SIMPLE, a small business defined contribution
plan that appears to be bringing thousands of businesses and tens of thousands of workers
into the system. However, the SIMPLE, like all defined contribution plans, relies on a
combination of worker willingness to save significant amounts over a long period and successful
investment experience to generate a reasonable retirement income. For lower income workers
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and for those who do not, for whatever reason, start to save for retirement until they reach 40 or
later, defined contribution plans are unlikely to generate sufficient retirement income, particularly
if the money is invested conservatively or during a period of equity investment returns more in
line with historical averages than we have seen recently.
Some have suggested that if it were possible to develop a simplified defined benefit plan one
that reduced both cost and uncertainty by simplifying both the non-discrimination and the
funding rules - some stable small businesses would establish such plans. (They point out that
many small businesses had defined benefit plans before both the non-discrimination and funding
rules were tightened in the 1980s; the funding rules may have been tightened largely for revenue,
rather than pension policy, purposes). They believe this sort of plan would be particularly
attractive to businesses whose owners and key workers are nearing retirement.
The American Society of Pension Actuaries, an association of actuaries and other benefit
professionals who service pension plans for, and sell pension plans to, small employers, has
developed such a plan -- the SAFE (Secure Assets for Employees). Representatives Nancy
Johnson and Earl Pomeroy in May introduced a bill including a version of the SAFE. Senator
Bob Graham has also indicated support. Representative Johnson, who is on the House Ways and
Means Committee, has expressed to Secretary Herman her desire for Administration support of
some version of this legislation. The Department of Labor's own ERISA Advisory Council will
be recommending adoption of a small business defined benefit plan, such as some version of the
SAFE.
THE SAFE
The SAFE, as proposed by ASPA, is essentially a hybrid defined contribution/defined benefit
plan for employers with 100 or fewer workers. The SAFE has the following features:
Each year, the employer would contribute money to the account of each participant¹
sufficient to fund a benefit at retirement equal to a set percentage of the employee's current year
pay (i.e., 1, 2 or 3%--the same percentage for all participants), assuming that the money set aside
earns interest at 5% per year. Because the funding would be based on current salaries, a low
assumed interest rate, and specified mortality assumptions, funding would be far more stable and
predictable than under a standard defined benefit plan, and there would be very limited need for
actuarial services.
If the plan earns more than the 5% assumed rate of interest, the extra earnings go into the
employee's account. If the cumulative rate of return for plan funds fell below 5%, the employer
would have to make any additional contributions needed to keep the benefit fully funded.
I
As with the SIMPLE, if an employer decided to have a SAFE, it would have to cover all
employees over the age of 21 who had at least $5,000 of W-2 earnings with that employer in two preceding
calendar years.
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Each participant would have a separate account, which could - at the choice of the
employer -- either be a special SAFE individual retirement annuity or a sub-account in a SAFE
Trust. The accounts, as in a defined contribution plan, would be portable (i.e., they could be
rolled over to another plan) and the retirement benefit would be based on the amount in the
account at retirement.
Employees leaving before retirement could receive their SAFE benefits in the form of a
lump sum or an immediate annuity. At separation or retirement the employee receives whatever
annuity his or her account will buy (even if that annuity does not pay the accrued monthly
benefit).
An employee could receive credit for, and the employer could make additional
contributions with respect to, service with the employer in the years prior to the establishment of
the plan. Past service credit would be limited to ten years, and could only be credited and funded
one year at a time (i.e., it would take ten years for the plan to provide ten years' past service
credit).
Most non-discrimination limitations and requirements would be waived, and there would
be no PBGC coverage or premium. SAFE plans would have simplified reporting requirements,
including a simplified actuarial report verifying that the employer had satisfied the annual
funding requirements.
An employer with a SAFE plan could also offer a SIMPLE or 401(k) plan, but could not
maintain any other pension plan (e.g., another defined benefit plan).
WORKING GROUP DELIBERATIONS
The ostensible goal of the SAFE - to increase retirement plan coverage that generates
meaningful retirement income - is very consistent with the Administration's pension policy.
Moreover, simplification is another Administration goal-- we have consistently recognized that
one of the keys to increased coverage is simplification. On the other hand, the Administration
generally in contrast to the business community -- has also focused its attention on making
certain that pension benefits flow equitably to workers across the income spectrum. Moreover,
because the pension system depends on tax breaks to encourage firms to establish plans (and
workers to contribute), the Administration must pay attention to both the absolute budget impact
of any pension proposal and the proposal's distribution of tax benefits by income. Consideration
must also be given to the extent to which a proposal would increase the number of workers with
pension coverage.
The working group has spent considerable time analyzing the likely impact on pension coverage
and the potential overall revenue and distributional implications of the SAFE. We have been
particularly concerned about several features of the SAFE, including the generosity of the plan
relative to other defined benefit plans, the distribution of tax benefits among higher and lower-
paid employees, and the lack of a guaranteed benefit level (the benefit depends on the amount in
the account at retirement).
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- 4
We also noted that while many of the benefits (to business) of the SAFE could be accomplished
using safe harbors currently in law, because simplified plans encourage a larger number of
eligible businesses to establish them (that is, after all, their goal), the tax cost of the SAFE might
well be higher than what would be predicted based on current use of the existing safe harbors.
SAFE-Lite
The working group designed "SAFE-Lite" in an attempt to address the aforementioned concerns,
among others, about the design of the SAFE. Although we are by no means united on
whether the Administration should pursue SAFE-Lite (a substantial segment of the group
would oppose such a course), we all agree that if the Administration chooses to propose or
support a simplified defined benefit plan, the SAFE-Lite would be preferable to the
original SAFE.
The primary differences between the SAFE and our SAFE-Lite are:
If the participant--at retirement, termination of employment or termination of the plan--
elected an annuity rather than a lump sum payment, the plan would have to purchase an
annuity that paid at least the minimum promised monthly benefit, making the plan a true
defined benefit plan. If the amount in the SAFE-Lite account is not sufficient to purchase
such an annuity, the employer has to contribute the additional dollars needed.
The benefit would be equal to 1 or 2% of compensation for each year of participation in
the plan, but it could be up to 3% for the first 10 years of a plan's existence. The 3% level allows
some catch-up for years before the plan was established. (For the SAFE the basic benefit level
could be 1, 2 or 3%, at the employer's option. The 3% for the first ten years under the SAFE-
Lite serves to some degree as a substitute for the past service credit under the SAFE, but the 3%
would have to be applied to all participants, even those without prior service with the employer.)
The SAFE benefit would be guaranteed by the PBGC. The PBGC is considering, given
the structure of the SAFE/SAFE-Lite (i.e., the promised benefit would almost always be fully
funded), whether it would be appropriate to have a reduced premium for this plan, and whether
such a reduced premium should be offered to all fully-funded small plans.
If the program were still too expensive or too rich, very small companies or professional
corporations could be excluded.²
Should we do this?
2 The very small (e.g., under 10- or under 25-employee) exclusion would likely generate some
improvement in the distribution of tax benefits by income, but is likely to be politically infeasible.
Exclusion of professional corporations has been done before in pension law to eliminate some of the most
likely abusers, and might be more feasible. However, one should be aware that in a changing economy,
this is no longer just doctors, dentists, lawyers and accountants, but also architects, engineers, and many
financial services professionals.
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The working group was unable to reach consensus on whether the Administration should propose
or support SAFE-Lite or something similar. The arguments for and against doing so are set out
below.
Pros
1. The SAFE shows a commitment to defined benefit plans and might get employers
(who do not currently offer a DB plan) and employees to reconsider the merits of such plans.
2. The SAFE will be attractive to small businesses because it is substantially easier and
cheaper to administer than a defined benefit plan developed using current law safe harbors, and it
lowers funding volatility.
3. The SAFE could be particularly beneficial for some older and/or low-income workers
who are unable to save enough through a 401(k) or SIMPLE plan to provide for their retirement
needs. For younger employees, the SAFE is a portable retirement benefit.
4. A SAFE combined with a SIMPLE can provide greater retirement balance for
American workers. Even if stock market performance is disappointing, the value of the SAFE
benefit would be maintained by the employer.
5. Unlike the SIMPLE, under the SAFE the employer makes a contribution for each
eligible employee. During the time the plan is maintained, retirement benefits would accumulate
for each employee meeting the minimum standards (over 21 with at least $5,000 in W-2 earnings
with that employer for two preceding years).
6. The SAFE would place on the employer not only the initial funding obligation but also
the responsibility of ensuring a 5 percent rate of return on SAFE plan assets. A higher rate of
return would in general result in a larger benefit for the employee.
7. The SAFE answers a political need, in that there is increasing pressure (1) from small
businesses for a simplified defined benefit plan and (2) from pension activists for a commitment
to defined benefit plans in general.
8. Even small business owners don't make much money (the typical income of a
successful small business owner is $80,000 per year), so the fact that a disproportionate part of
the tax benefit goes to them should not be so upsetting.
9. Those small business owners who are trying to maximize their retirement and tax
benefits, while providing the minimum required benefits to employees, can already do so under
current pension rules and regulations.
Cons
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1. The need for a simplified small business defined benefit plan may be more rhetorical
than real; the need is proclaimed by businesses and their consultants, not by workers or their
advocates. We have just passed the SIMPLE, which appears to be catching on well as a small
business plan, and there is little reason to add to the plethora of small business plans.
2. It is unclear whether, in a constrained budget environment, this is the best use of
revenue to promote retirement savings. There are more efficient ways to channel retirement
benefits to low-income workers, such as payroll deduction IRAs -- which would be better
targeted to low and moderate-wage workers currently without coverage.
3. Under the proposals, it seems likely that the lion's share of the tax benefits would
inure to small business owners and that comparatively little would go to the lower- and
moderate-wage workers who should be the main target population for any such tax incentives.
Such a regressive distribution of benefits would be hard to justify as a matter of policy.
4. The plan's tax preferences are not targeted so as to maximize the increase in coverage;
the SAFE or SAFE-Lite would probably instead increase tax benefits for workers who are
already covered. SAFE or SAFE-Lite may often be taken up by employers who shift their
employees from (previously offered) money purchase or non-401(k) profit sharing plans which
generally do not weight contributions based on age. These employers would be able to increase
contributions for older employees without increasing their overall pension costs.
5. Even if we start with SAFE-Lite, we'll get SAFE or a more costly, top-heavy variant
(see, e.g., the NEST-SIMPLE transformation) that may well not be a true defined benefit plan.
6. Given the demographics of small businesses, where the average tenure is three years
and 40% of the workers potentially eligible for the SAFE are in fact not eligible because they are
under 21 or do not have two years of service earning more than $5,000, very little of the lower-
wage portion of the target population would be covered. These workers would also not benefit
from the PBGC guarantee, since it would be lost when they changed jobs and rolled their account
balance into an IRA or spent it. Finally, many small business owners could be expected to
terminate the plan on their retirement, limiting the opportunity for workers to build up a
substantial benefit through employer contributions.
7. The SAFE-Lite's defined benefit is dependent on purchase of an annuity at retirement
or at plan termination. The annuity market for individuals and small groups may well be over-
priced, due to both high administrative costs and adverse selection, so the plan may be less
effective than hoped in terms of actually providing a guaranteed benefit on retirement.
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RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: Jake Siewert (CN=Jake Siewert/OU=OPD/O=EOP [ OPD
CREATION DATE/TIME: 2-DEC-1997 18:30:15.00
SUBJECT: Re: SAVER scheduling request
TO: Jonathan A. Kaplan ( CN=Jonathan A. Kaplan/OU=OPD/O=EOP @ EOP [OPD])
READ:UNKNOWN
TEXT:
I entirely agree, but I do not believe we should proceed until we get some
very specific direction from on high about how we want to traet this. If
Gene, Begala, Rubin, Rahm, etc. want to bury this -- and I have no idea
whether they do or don't -- we would proceed very differently than if we
want to make this a critical component of our effort to educate the
American people about the challenges of entitlement reform. For instance,
there's a huge difference between how we treated the White House
Conference on Small Business on the one hand -- lots of high level
involvement, President himself signed off on Chair, Cabinet did lots of
events, President and Vice President participated, White House issued a
report, etc. -- and all sorts of other conferences that we let proceed
along fairly quietly and die a quiet death.
Just for example, if we want to make this a big deal, we would seek out a
Bentsen or someone high profile to head the effort. If not, we could put
this under the aegis of David Strauss and the folks at PBGC.
I do not want to bring in folks from Labor and OPL and get them all ginned
up until we have a sense of how seriuosly we want to take this and how it
fits into our overall strategy on entitlements. My personal preference is
that we do use SAVERS as part of an overall strategy to educate people
about the challenges we face on entitlement reform and preparing for the
baby boom retirement, but my opinion does not count for a whole lot.
Before we make a threshoild decision, I do not want to call in a whole bun
ch of Cabinet staff and give them no direction or a misleading
direction.
RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: Emil E. Parker (CN=Emil E. Parker/OU=OPD/O=EOP OPD
CREATION DATE/TIME:17-DEC-1997 16:54:50.00
SUBJECT: Re: SAVER summit participants
TO: Jonathan A. Kaplan ( CN=Jonathan A. Kaplan/OU=OPD/O=EOP @ EOP [ OPD
READ:UNKNOWN
CC: Jake Siewert ( CN=Jake Siewert/OU=OPD/O=EOP @ EOP [ OPD
READ:UNKNOWN
TEXT:
The only office that actually participated in the internal conference call
yesterday was OPL; I had a very productive discussion with Bill White. He
will be coordinating with Olena and PWBA re: names from outside groups. I
also had a separate conversation with Janet Murguia.
At the meeting with Labor, PBGC and Treasury, we agreed that their
legislative affairs offices would coordinate with WH leg affairs re:
outreach to Congressional Democrats, including the leadership offices. A
follow-up conference call among the legislative people was held today;
apparently it went well. It was also agreed that no promises would be
made to members or staff re: nomination of particular individuals.
The plan for now is to solicit names informally from Congressional
Democrats, rather than alloting them a certain number and/or funneling
their nominations through the leadership offices. A letter will be sent
to the Republicans and they will handle their nominations on their own.
We will ask for nominations from Rs in advance of the January 31 deadline.
We will generally not solicit names from outside groups. The thinking is
that interested groups will submit more than enough names to us, although
it may be necessary to add, for example, women's pension or general
pension rights advocates to the list.
PWBA/Labor will then produce a first cut of Presidential participants,
perhaps in conjunction with Treasury and others. The list will then be
reviewed by other agencies and WH offices, with names added and dropped.
Gene, Rahm and other interested parties at the WH will obviously have the
opportunity to review the list and weigh in at each stage. A finalized
list will then be sent to Presidential personnel for any necessary vetting
and/or last-minute additions.
I have not yet spoken to Jennifer Palmieri. Is it time to send over the
scheduling request, to flag the summit for these guys?
Please let me know if you see any problems with this tentative plan.
Should we talk to Rahm after we speak to Gene? Or will Gene handle that?
Thanks.
Jonathan A. Kaplan
12/16/97 08:06:36 PM
Record Type: Record
To: Emil E. Parker/OPD/EOP
cc: Jake Siewert/OPD/EOP
Subject: Re: SAVER summit participants
How did this conference call/meeting go? Any interest expressed by
anyone? Any offices drop the ball and not participate? Do we need to get
with Gene now, or wait?
Jon
RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: Mark D. Menchik (CN=Mark D. Menchik/OU=OMB/O=EOP [ OMB ])
CREATION DATE/TIME: 8-JAN-1998 19:19:46.00
SUBJECT: What PBGC Needs From Treasury
TO: Emil E. Parker ( CN=Emil E. Parker/OU=OPD/O=EOP@EOP [OPD])
READ:UNKNOWN
Larry R. Matlack ( CN=Larry R. Matlack/OU=OMB/O=EOP@EOP [ OMB ])
READ:UNKNOWN
Mark D. Menchik (CN=Mark D. Menchik/OU=OMB/O=EOP@EOP [ OMB )
READ:UNKNOWN
TEXT:
As you'll recall, the Budget needs an estimate of SAFE's budgetary effects
on PBGC: additional premiums and outlays. Stu, Dave, and I were trying to
work these out. The budgetary effects may be de minimis (less than $500k
for any of ten years) or may not be, but this PBGC estimate must be
consistent with Treasury's tax loss figure.
PBGC thus needs Treasury's rough figures for number of participants (or
number of plans) in various years. And they need the Treasury data soon,
because this part of the budget is on a faster schedule than the tax
provisions. Only with these Treasury numbers can PBGC determine whether
or not the budgetary effects of SAFE are de minimis and, if not, what they
are.
Could you use your good offices to help PBGC get the numbers from Treasury
that they need?
Thanks.
RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: Mark D. Menchik ( CN=Mark D. Menchik/OU=OMB/O=EOP [ OMB ])
CREATION DATE/TIME: 9-JAN-1998 13:35:52.00
SUBJECT: Re: Conference call at 4:00 today
TO: Emil E. Parker ( CN=Emil E. Parker/OU=OPD/O=EOP@EOP [ OPD )
READ:UNKNOWN
CC: david gustafson@326-4085 ( david gustafson@326-4085 @ fax [ UNKNOWN 1)
READ:UNKNOWN
CC: mark iwry@622-0646 ( mark iwry@622-0646 @ fax [ UNKNOWN ])
READ:UNKNOWN
CC: stuart sirkin@326-4085 ( stuart sirkin@326-4085 @ fax [ UNKNOWN ])
READ:UNKNOWN
CC: leslie kramerich@326-4016 ( leslie kramerich@326-4016 @ fax [ UNKNOWN D
READ:UNKNOWN
CC: nell hennessey@326-4016 ( nell hennessey@326-4016 @ fax [ UNKNOWN )
READ:UNKNOWN
CC: vicki judson@622-0236 ( vicki judson@622-0236 @ fax [ UNKNOWN 1)
READ:UNKNOWN
CC: joseph grant@326-4016 (joseph grant@326-4016 @ fax [ UNKNOWN 1)
READ:UNKNOWN
CC: judy schub@326-4016 (judy schub@326-4016 @ fax [ UNKNOWN 1)
READ:UNKNOWN
TEXT:
One of multiemployer proposals raises PBGC's guarantee cap. Its budgetary
effects -- which are outlays only -- are already included in the PBGC
portion of the 1999 Budget.
Stu: PBGC has, I believe, updated that proposal's pricing. As
appropriate to the meeting's outcome, could you double-check that the PBGC
budget folk have employed the updated pricing, not the older numbers?
Thanks.
Emil E. Parker
01/09/98 12:54:27 PM
Record Type: Record
To: See the distribution list at the bottom of this message
cc:
Subject: Conference call at 4:00 today
I distributed a revised draft of the two-page "modifications to SAFE"
paper this morning; it was sent to the same people who received
yesterday's fax (Leslie Kramerich, Meredith Miller, Jane Malloy, Mark
Menchik and Chris Carroll).
We will have a one-hour conference call at 4:00 today to resolve any
outstanding issues concerning SAFE and other elements in the package that
have a budgetary impact.
In particular, it is my understanding that the consensus is to repropose
the multiemployer and PBGC changes. If so, the outlay ($17 million over
five, according to the memo) and revenue impacts ($63 million over five)
must be reflected in the budget. Mark (lwry), can you and/or others at
Treasury check with Karl Scholz on this? Thanks.
The number for the call is the same as yesterday, 757-2104, extension 3939
Thanks to everyone for all the work on this package.
Message Sent
To:
Larry R. Matlack/OMB/EOP@EOP
Mark D. Menchik/OMB/EOP@EOP
Jonathan A. Kaplan/OPD/EOP@EOP
Judy Schub@326-4016 @ fax
Leslie Kramerich@326-4016 @ fax
Olena Berg@219-5526 @ fax
Alan Lebowitz@219-6531 @ fax
Richard Hinz@219-5526 @ fax
Stephen Lee@219-4745 @ fax
MaryAnn Richardson@219-5120 @ fax
Kevin Maroney@219-5120 @ fax
Joseph Grant@326-4016 @ fax
Meredith Miller@219-5526 @ fax
Stuart Sirkin@326-4085 @ fax
Vicki Judson@622-0236 @ fax
Mark Iwry@622-0646 @ fax
Nell Hennessey@326-4016 @ fax
Monica Healy@219-8822 @ fax
David Gustafson@326-4085 @ fax
Jane Malloy@482-0325 @ fax
Melissa N. Benton/OMB/EOP@EOP
Christopher D. Carroll/CEA/EOP@EOP
Morley A. Winograd/OVP@OVP
Charles R. Marr/OPD/EOP@EOP
Barry Barbash@942-9659 @ fax
Debra J. Bond/OMB/EOP@EOP
RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: Charles R. Marr ( CN=Charles R. Marr/OU=OPD/O=EOP [ OPD 1)
CREATION DATE/TIME:20-JAN-1998 11:36:28.00
SUBJECT:
TO: kramerich.leslie ( kramerich.leslie @ pbgc.gov @ inet [ UNKNOWN ])
READ:UNKNOWN
TEXT:
a few inititial questions to test.
ATTACHMENT 1
ATT CREATION TIME/DATE: 0 00:00:00.00
TEXT:
Unable to convert ARMS_EXT:[ATTACH.D45]MAIL47424491R.026 to ASCII,
The following is a HEX DUMP:
END ATTACHMENT
I
Pension Q & A
January 21, 1998
Q:
WHAT WOULD YOUR PACKAGE DO TO INCREASE PENSION SECURITY FOR
WOMEN?
A:
Advancing the goal of greater retirement security for women is a major priority of this
package:
1)
2)
3)
4)
Q:
WHY WOULD A COMPANY ADOPT A SMART PLAN?
A:
Q:
WHAT ARE THE DIFFERENCES BETWEEN SMART AND SAFE?
A:
Q:
WHAT KIND OF A BENEFIT WOULD A TYPICAL WORKER RECEIVE FROM A
SMART PLAN?
A:
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RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: Emil E. Parker ( CN=Emil E. Parker/OU=OPD/O=EOP [ OPD ])
CREATION DATE/TIME:23-JAN-1998 15:21:49.00
SUBJECT: pension documents
TO: clinton.gwen ( clinton.gwen @ pbgc.gov @ inet [ UNKNOWN ])
READ:UNKNOWN
TO: Kramerich.leslie ( Kramerich.leslie @ pbgc.gov @ inet [ UNKNOWN ])
READ:UNKNOWN
TEXT:
Attached are final versions of the documents. As you know, only the
two-plus page document is public, the others are for internal use only.
ATTACHMENT 1
ATT CREATION TIME/DATE: 0 00:00:00.00
TEXT:
Unable to convert ARMS_EXT:[ATTACH.D88]MAIL44236522Y.026 to ASCII,
The following is a HEX DUMP:
END ATTACHMENT 3
THE PRESIDENT'S 1998 PENSION PACKAGE
HELPING MORE AMERICANS ACHIEVE A SECURE AND COMFORTABLE
RETIREMENT
May 2, 2016
THE PRESIDENT PROPOSES, AS PART OF HIS FISCAL YEAR 1999 BUDGET, TO
INCREASE PRIVATE PENSION PLAN COVERAGE, PARTICIPANT PROTECTION
AND PORTABILITY BY:
ENHANCING WORKERS' ABILITY TO MAKE CONTRIBUTIONS TO
-
INDIVIDUAL RETIREMENT ACCOUNTS (IRAs) BY
PAYROLL DEDUCTION.
PROVIDING A TAX CREDIT FOR SMALL BUSINESSES THAT ESTABLISH
-
PENSION PLANS;
CREATING A NEW, SIMPLIFIED DEFINED BENEFIT PLAN FOR SMALL
-
BUSINESSES;
FASTER VESTING OF 401(K) EMPLOYER MATCHING CONTRIBUTIONS;
-
EXPANDING PENSION RIGHT-TO-KNOW PROVISIONS FOR WORKERS
-
AND SPOUSES; AND
SIMPLIFYING PENSIONS AND INCREASING PENSION SECURITY
-
Half of all American workers, more than 50 million people, have no pension coverage at all. The best way for
a worker to enjoy a secure retirement is to have an employer-provided pension, individual retirement savings
and Social Security coverage. The President's proposal is targeted to promoting pension plans among small
businesses, where pension coverage is particularly low. Only 20 percent of workers in firms with fewer than
100 employees have pension coverage, as opposed to 62 percent of workers in firms with 100 or more
employees.
This new pension package builds on earlier Presidential efforts such as the creation in 1996 of the SIMPLE, a
simplified defined contribution plan that is bringing thousands of employers and their workers into the pension
system. The package would also modify 401(k) plans to better suit a mobile workforce, and ensure that workers
and spouses receive the information they need about their pension benefits. These measures would combine
to boost the private pension and individual retirement savings that are essential to a secure and
comfortable retirement.
PAYROLL DEDUCTION IRAs. This proposal would enhance workers' ability to make contributions to
Individual Retirement Accounts (IRAs) by payroll deduction. Under the legislative tax simplification
component of the proposal, these employee IRA contributions would be excluded from taxable income on the
W-2, rather than deducted from income on the individual's tax return. The exclusion would be particularly
helpful for low-income employees, providing tax relief more rapidly than a deduction. This step, in
conjunction with clarifying and publicizing the payroll deduction IRA option currently available to employers,
should encourage firms that now offer no retirement program at all to consider adoption of a payroll deduction
IRA arrangement. The greater convenience of saving through payroll deduction encourages low and moderate-
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wage earners to save more for retirement; witness the rising participation rates in 401(k) plans. Small
businesses establishing such arrangements would be eligible for the new pension program start-up tax credit
(see below).
Cost: Included in small business pension program start-up tax credit estimate.
SMALL BUSINESS PENSION PROGRAM START-UP TAX CREDIT. The President's plan provides a
three-year tax credit to encourage small businesses to set up retirement programs.
The credit would be, for the first year of the plan, 50 percent of up to $2,000 in administrative and
retirement education expenses associated with a defined benefit plan (including the new SMART plan
described below), 401(k), SIMPLE or other pension plan or payroll deduction IRA arrangement. For
each of the second and third years, the credit would be 50 percent of up to $1,000 in such costs.
The credit is intended to increase pension coverage among the more than 20 million small business
employees whose employers currently offer no pension plan.
Cost: $508 million over five years, $945 million over ten (in conjunction with the excludable payroll
deduction IRA proposal described above)
SIMPLIFIED DEFINED BENEFIT PLAN. The Administration's new SMART plan builds on the bipartisan
SAFE proposal, which is the work of Representatives Earl Pomeroy of North Dakota and Nancy Johnson of
Connecticut, among others. The SMART (Secure Money Annuity or Retirement Trust) combines many of the
best features of defined benefit and defined contribution plans.
Another easy-to-administer pension option for small businesses. The SMART plan provides small
businesses another easy-to-administer pension option, in addition to the SIMPLE. Most
nondiscrimination rules and a number of other pension plan requirements would be waived for this new
plan. SMART plans would be an option for most small businesses with 100 or fewer employees that do
not offer a defined benefit or money purchase plan (and did not offer one during the previous 5 years).
Broad coverage. Employers choosing a SMART plan would make contributions for all eligible workers
(over 21 with at least $5,000 in W-2 earnings with the employer in that year and in two preceding
consecutive years).
Guaranteed benefit. Participants would be guaranteed a minimum annual benefit upon retirement, but
could receive a larger benefit if the return on plan investments exceeds specified conservative
assumptions (i.e., a 5 percent rate of return). The SMART benefit would generally be guaranteed by the
Pension Benefit Guaranty Corporation, at a reduced premium.
Cost: $313 million over five years, $570 million over ten
FASTER VESTING OF 401(K) EMPLOYER MATCHING CONTRIBUTIONS Currently employee
contributions to 401(k) plans are immediately vested. Employer matching contributions, however, must vest
after either 5 years (cliff vesting) or 7 years (graded vesting, i.e., phased in over a several-year period). If
employer matching contributions vest after 5 years, an employee who switches jobs after four years loses all of
those employer matching contributions. The vesting requirement has a disproportionately adverse impact on
female employees, who tend to have shorter job tenure.
Under the President's proposal, all employees would be fully vested in the employer's matching
contributions after three years of service, six years if vesting is graded.
Cost: Negligible
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EXPAND PENSION RIGHT-TO-KNOW PROVISIONS FOR WORKERS AND SPOUSES. The
President's pension right-to-know initiative includes the following rights: (1) Spouses would be provided a
description of the forms (i.e., annual payment, lump sum) in which pension benefits can be distributed, to help
them participate in the process of deciding among these options; (2) participants in defined benefit pension
plans would automatically be provided a statement every three years of the benefit payable at retirement if the
individual left that employer as of the date of the statement; and (3) participants in defined contribution plans
would be provided a statement at least annually.
Knowledge of the vested benefit is critically important for retirement planning. It can be quite difficult, in case
of an error by a plan, to obtain the documentation of past earnings or service needed to correct the mistake if
much time has passed. Under current law, participants have the right to request (in writing) a benefit statement
annually, if one is not routinely provided by the employer, but this right is rarely exercised, in part because it is
not well known.
Cost: None
SIMPLIFYING PENSIONS AND FURTHER INCREASING RETIREMENT SECURITY AND
SAVINGS. The package will also include proposals previously made by the Administration, including the
following: (1) the pension audit bill, which would subject more pension assets to meaningful audits; (2) changes
to multiemployer (collectively bargained) plan rules which would increase the level of multiemployer benefits
guaranteed by the PBGC, increase the permitted funding level, and simplify the maximum benefit limitations;
(3) expansion of PBGC's Missing Participant program to defined contribution and multiemployer plans; (4) rule
changes that would ensure greater pension benefits for low and moderate income workers in simplified 401(k)
plans; and (5) further simplification of the definition of highly compensated employees.
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THE PRESIDENT'S 1998 PENSION PACKAGE: Background paper
January 23, 1998
Half of all American workers, more than 50 million people, have no pension coverage at all.
The best way for a worker enjoy a secure retirement is to have an employer-provided pension,
individual retirement savings and Social Security coverage. The President's proposal is targeted
to promoting pension plans among small businesses, where pension coverage is particularly low.
Only 20 percent of workers in firms with fewer than 100 employees have pension coverage, as
opposed to 62 percent of workers in firms with 100 or more employees.
The President proposes to address this low rate of pension coverage by providing a tax credit to
defray part of the cost to small businesses of establishing pension plans, creating a new,
simplified defined benefit plan for small businesses, and enhancing an existing but rarely used
employer option that allows workers to contribute to Individual Retirement Accounts (IRAs) by
payroll deduction. This new pension package builds on earlier Presidential efforts such as the
creation in 1996 of the SIMPLE, a simplified defined contribution plan for small businesses that
is bringing thousands of employers and their workers into the pension system.
The package would also modify 401(k) plans to better suit a mobile workforce, and ensure that
workers and spouses receive the information they need about their pension benefits. These
measures would combine to boost the private pension and individual retirement savings that are
essential to a secure and comfortable retirement.
PAYROLL DEDUCTION IRAs. This proposal would enhance workers' ability to make
contributions to IRAs by payroll deduction. The greater convenience of saving through payroll
deduction encourages low and moderate-wage earners to save more for retirement; witness the
rising participation rates in 401(k) plans.
Legislative action. Under this progressive tax simplification proposal, employee IRA
contributions would be excluded from wages on the W-2, rather than deducted from income on
the individual's tax return. Providing an exclusion instead of a deduction means that most
employees would not need to take any action on their tax return in order to get the tax
benefit. This would be particularly helpful for low-income employees, providing tax relief more
rapidly than a deduction, which must be claimed on the employee's tax return. Both the
exclusion and the deduction would count against the $2,000 annual limit on tax-favored IRA
contributions.
Administrative action. Employers currently can allow employees to make IRA contributions
through payroll deduction, but few firms provide this option to their workers, in part due to
concern about the administrative costs and risks associated with establishing or maintaining a
formal pension plan.
The Department of Labor will clarify in written guidance that an employer can establish
any of a range of payroll deduction IRA arrangements without incurring fiduciary
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liability.
The Treasury Department and the IRS, in coordination with the Department of Labor,
will make available model forms to be used for payroll deduction IRAs.
These steps should encourage employers who do not offer a retirement program to consider
adoption of a payroll deduction IRA, helping some of the more than 50 million American
workers who currently have no pension coverage.
Cost: Included in small business pension program start-up tax credit estimate
SMALL BUSINESS PENSION PROGRAM START-UP TAX CREDIT. The President's
plan provides a tax credit, in lieu of a deduction, to small businesses that have no retirement
plans to encourage them to set up retirement programs.
The credit would be, for the first year of the plan, 50 percent of up to $2,000 in
administrative and retirement expenses associated with a defined benefit plan (including
the new SMART plan described below), 401(k), SIMPLE or other pension plan or payroll
deduction IRA arrangement. For each of the second and third years, the credit would be
50 percent of up to $1,000 in such costs.
The credit is intended to increase pension coverage among the more than 20 million small
business employees whose employers currently offer no pension plan.
The credit would reduce the cost to the employer of establishing, for example, a new 401(k) or
defined benefit plan, a SIMPLE or payroll deduction IRA arrangement. The new start-up credit
would take effect January 1, 1998 and sunset after 2000.
The tax credit could increase the number of small firms with pension plans, not only directly
through the tax incentive to employers, but also indirectly by providing a marketing tool for
financial institutions and advisors to use in promoting new plan adoption.
Cost: $508 million over five years, $945 million over ten (in conjunction with the legislative
payroll deduction IRA proposal above)
SIMPLIFIED DEFINED BENEFIT PLAN. The Administration's new SMART plan builds
on the bipartisan SAFE proposal developed by Representatives Earl Pomeroy of North Dakota
and Nancy Johnson of Connecticut, among others. The SMART (Secure Money Annuity or
Retirement Trust) combines many of the best features of defined benefit and defined contribution
plans.
The SMART plan would be available to most employers with 100 or fewer employees
who do not offer a defined benefit or money purchase plan (and did not offer one
during the last five years).
Employers electing the SMART would have to cover all eligible workers.
Participants would be guaranteed a minimum annual benefit upon retirement, but could
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receive a larger benefit if the return on plan investments exceeds specified
conservative assumptions (i.e., a 5 percent rate of return).
The benefit would be either I or 2 percent of pay for each year of service. For example, an
employee in a 2 percent SMART plan with 20 years of service (after adoption of the SMART)
and an average salary of $40,000 over that period would be eligible for an annual benefit of at
least $16,000 at retirement and possibly more, depending on the investment return on plan
investments.
The employer would have to contribute enough to keep the benefit fully funded at all
times.
Most non-discrimination rules and a number of other pension plan requirements would be
waived in the case of SMART plans.
The Administration has included a number of provisions to ensure that the tax benefits of the
SMART plan flow primarily to low and middle-income workers.
The SMART benefit would generally be guaranteed by the Pension Benefit Guaranty
Corporation, at a reduced premium.
Cost: $313 million over five years, $570 million over ten
FASTER VESTING OF 401(K) EMPLOYER MATCHING CONTRIBUTIONS. Currently
employee contributions to (k) plans are immediately vested. Employer matching
contributions, however, are subject to the general vesting requirements applicable to defined
benefit pension plans (5 years if vesting has a cliff, i.e., only occurs at the end of a time period;
full vesting after 7 if vesting is graded, i.e., phased in over a several year period). If employer
matching contributions vest after 5 years, an employee who switches jobs after four years loses
all of those employer matching contributions. The vesting requirement has a disproportionately
adverse impact on female employees, who tend to have shorter job tenure.
Under the proposal, all employees would be fully vested in the employer's matching
contributions after three years of service (down from five), six years (down from
seven) if vesting is graded.
Under this proposal, matching contributions for about an additional 1 million workers would be
vested, increasing retirement security for a mobile workforce.
Cost: Negligible
EXPAND PENSION RIGHT-TO-KNOW PROVISIONS FOR WORKERS AND
SPOUSES. The President's pension right-to-know initiative includes the following rights: (1)
spouses would be provided a description of the forms (i.e., annual payment, lump sum) in which
pension benefits can be distributed, to help them participate in the process of deciding among
these options; (2) participants in defined benefit pension plans would automatically be provided a
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statement every three years of the benefit payable at retirement if the individual left that employer
as of the date of the statement; (3) participants in defined contribution plans would be provided a
statement at least annually; and (4) participants in 401(k) plans that use the new safe harbor in
lieu of nondiscrimination rules would be entitled to a description of benefits provided under the
safe harbor.
Knowledge of the vested benefit is critically important for retirement planning. It can be quite
difficult, in case of an error by a plan, to obtain the documentation of past earnings or service
needed to correct the mistake if much time has passed. Individuals in 401(k) plans need to know
what matching formula is used to decide on the level of their contributions (i.e., salary deferrals).
Under current law, participants have the right to request (in writing) a benefit statement
annually, if one is not routinely provided by the employer, but this right is rarely exercised, in
part because it is not well known.
Cost: None
SIMPLIFYING PENSIONS AND FURTHER INCREASING RETIREMENT SECURITY
AND SAVINGS. The package will also include proposals previously made by the
Administration but not enacted, including the following: (1) the pension audit bill, which would
subject more pension assets to meaningful audits; (2) changes to multiemployer (collectively
bargained) plan rules which would increase the level of multiemployer benefits guaranteed by the
PBGC, increase the permitted funding level, and simplify the maximum benefit limitations; (3)
expansion of PBGC's Missing Participant program to defined contribution and multiemployer
plans, to ensure that these workers receive the benefits they have earned; (4) rule changes that
would ensure greater pension benefits for low and moderate income workers in simplified (k)
plans; and (5) further simplification of the definition of highly compensated employees.
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THE PRESIDENT'S 1998 PENSION PACKAGE: Questions and Answers
QUESTION: How would the SMART be simpler than traditional defined benefit plans?
Why would it be appealing to small businesses?
Simpler
SMART takes the advantages of traditional defined benefit pension plans and makes
them available to small employers by:
reducing the regulatory complexity that typically comes with such plans (e.g.,
complex rules meant to avoid discrimination among benefits for the highly paid
versus the lower paid are done away with -- the design of the plan itself achieves
that fairness);
eliminating complex actuarial calculations
making funding contributions more predictable than under a traditional defined
benefit plan -- the employer generally must contribute an amount each year
sufficient to fund the retirement benefit earned during that year (assuming a 5
percent rate of return).
lowering administrative costs; and
reducing PBGC premiums.
Attractive to small businesses
Small business owners are often baby boomers, and not far from retirement age, when their
business matures and is ready to support a pension plan. If the owner and his or her workers
have not been covered by a retirement plan before, then setting up a defined contribution plan at
this stage may be too late to really help them build up adequate retirement savings. A defined
benefit plan makes more significant retirement savings available and offers workers and spouses
a secure and predictable benefit for life. And it is backed up by PBGC insurance.
Everyone who qualifies (any employee with $5,000 in W-2 earnings and two
years previous service at that salary) receives a contribution.
QUESTION: What are the significant differences between the SAFE and the SMART?
SMART provides a guaranteed annual retirement benefit. Under the SAFE, if the
amount in the participant's account at retirement is not sufficient to purchase an
annuity paying the promised benefit, the participant must settle for a smaller
benefit (or take the benefit in another form; e.g., lump sum). Conversely, under
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the SMART the employer is required to contribute the additional funds needed to
purchase the annuity.
SMART provides fairer benefit distribution among owners and rank and file
workers.
SMART plans are insured by the PBGC.
QUESTION: What does SMART stand for?
Secure Money Annuity or Retirement Trust. There are two models for SMART programs. In
general, under the annuity model an annuity is purchased while the participant is active, whereas
under the trust model the accumulated funds in the participant's account may be used to purchase
an annuity at retirement. The benefit is secure because it is fully funded at virtually all times,
vests immediately, and is guaranteed by the PBGC.
QUESTION: What information would workers and spouses receive under your right-to-
know initiative?
Why do they need
more information?
Under the President's pension right-to-know proposal, each participant in a
defined benefit pension plan would receive, at least every three years, a statement
of the annual benefit payable at retirement if the individual left that employer as of
the date of the statement.
Enjoying a secure retirement takes careful financial planning, and knowledge of pension benefits
earned to date is essential for such planning. For example, it is difficult for a worker to decide on
an appropriate level of 401(k) and/or IRA contributions without knowing the size of the annual
retirement benefit, if any, that will be provided under a defined benefit plan. Information about
defined benefit plan payments may increase appreciation for such plans among workers and
consequently encourage employers to preserve or adopt defined benefit plans. The benefit
statements would also help ensure that participants receive the benefits they have earned. If
much time has passed, it can be quite difficult, in case of an error by a plan, to obtain the
documentation of past earnings and service needed to correct the mistake.
The President's right-to-know proposal would also provide for benefit statements
at least annually in the case of 401(k) and other defined contribution plans.
Under current law, participants have the right to request (in writing) a benefit statement annually,
if one is not routinely provided by the employer, but this right is rarely exercised, in part because
it is not well known.
The proposal would also require that spouses be provided a description of the
forms (i.e., annual payment, lump sum) in which pension benefits can be
Automated Records Management System
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distributed, to help them participate in the process of deciding among these
options.
Finally, under the right-to-know proposal, participants in 401(k) plans that use the new safe
harbor in lieu of nondiscrimination testing would be entitled to a description of these safe harbor
rules.
QUESTION: What would your package do to increase pension security for women?
Advancing the goal of greater retirement security for women is a major priority of this package.
1. It provides greater protection for workers in 401(k) plans by vesting employees in their
employers' matching contributions more quickly.
Women are less likely than men to work for the same employer for more than five
years. They need to earn benefits that they won't forfeit if they have to change
jobs.
2. It provides workers without an employer pension plan with the means to save more easily by
enabling them to make IRA contributions through payroll deduction.
Women earn less than men and, for this and other reasons, have more difficulty
saving for retirement. The ability to use a payroll deduction system to make
modest IRA contributions would make IRAs more effective retirement vehicles
for low- and moderate-wage workers who find it difficult to write a check for
thousands of dollars at tax time.
3. It provides a new simple defined benefit pension plan which small businesses could establish.
Currently, more than 10 million women work for small firms that do not offer
pension plans. Because the SMART would make it easier and more appealing for
small businesses to offer pensions, the SMART could broaden pension coverage
for female employees.
4. It provides workers and their spouses with an enhanced "right to know" what they can
anticipate receiving from an employer's pension plan.
Women often derive much of their retirement income from their husband's
pension plan. Under this proposal, workers would receive regular statements
telling them what benefit at retirement they have earned under the pension plan.
And spouses would receive notice of the forms in which that retirement benefit
can be paid -- for example, lump sum, annuity, etc. -- to help them make informed
choices about their options.
QUESTION: How does the President's 1998 pension package promote portability of
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retirement benefits?
The proposal accelerates vesting of employer matching contributions under 401(k) plans
(and other qualified pension plans). Matching contributions would be fully vested after
an employee has completed three years of service (or would vest gradually from the
second through the sixth year of service).
Vesting means that when employees leave a job, they take their retirement benefits with them
rather than forfeiting them. Accelerated vesting therefore increases pension portability. This is
important given the mobile nature of today's workforce, particularly of working women.
Under this proposal, matching contributions for about an additional 1 million workers
would be vested.
Since the proposal applies only to matching contributions, it would not affect vesting under a
traditional defined benefit plan. Under the SMART, benefits are fully vested immediately (no
five or seven-year vesting period).
Background. Generally, employer matching contributions on behalf of an employee under a
section plan (or other type of pension plan) must either be fully vested after the employee
has completed five years of service, or must become vested in increments of 20% for each year
beginning after the employee has completed three years of service, with full vesting after the
employee has completed seven years of service.
QUESTION: Why don't more employers permit employees to contribute to IRAs through
the use of payroll deduction? How would your proposal address this low
level of participation?
Many employers do not know that they can use their payroll deduction system as a low-cost
means of encouraging voluntary retirement savings by employees, without establishing a formal
retirement plan.
Our proposal contains two initiatives that would encourage the use of payroll deduction systems
for making contributions to IRAs. First, we will publish new guidance, clarifying the
circumstances under which employers can use their payroll deduction systems for voluntary IRA
contributions without incurring the administrative cost and responsibility associated with
establishing and maintaining a formal pension plan, and we will develop model forms to
facilitate employer and employee use of the payroll deduction process. Second, we will propose
legislation to enable payroll deduction IRA contributions to be made on a pre-tax basis, thereby
increasing employees' incentive to make these contributions on a regular basis.
More than 50 million American workers have no pension coverage at all. For them, even a basic
option such as the payroll deduction IRA would represent a vast improvement.
QUESTION: Isn't the tax credit too small to make a difference?
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A SIMPLE, the new simplified defined contribution plan created by the Administration and
Congress in 1996 which is proving very popular, can be established for as little as $350, while a
standard 401(k) plan can be established for no more than $1,000. Starting a defined benefit plan
may cost as little as $1,500. The credit under the President's proposal would be 50 percent of up
to $2,000 of expenses for the first year and 50 percent of up to $1,000 in expenses for each of the
second and third years.
Our message to small employers is simple: if you adopt a pension plan, the Federal government
will be your partner, covering, through the tax credit, half the cost of establishing and
maintaining the plan (including retirement education expenses) for the first three years.
There are more than 20 million small businesses employees whose employers offer no pension
plan at all; we hope that the small business tax credit will help to reduce that number.
QUESTION: How much will the President's 1998 pension package cost?
The five-year revenue cost of the pension package is just under $1 billion, and the ten-
year cost is about $1.9 billion.
This package is fully paid for in the President's balanced FY 1999 budget.
Most of the revenue cost comes from the 3-year small employer tax credit for new plans,
the new exclusion from taxable income for payroll deduction IRAs, and the new
simplified defined benefit pension plan for small businesses.
Background. The five-year cost of the new simplified defined benefit pension plan for small
businesses is about $300 million, and the five-year combined cost of the new exclusion for
payroll deduction IRAs and the three-year small employer tax credit is about $500 million.
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RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: Emil E. Parker (CN=Emil E. Parker/OU=OPD/O=EOP [ OPD ])
CREATION DATE/TIME:19-FEB-1998 12:44:59.00
SUBJECT: Presidential call to Sen. Graham re: pensions
TO: Gene B. Sperling CN=Gene B. Sperling/OU=OPD/O=EOP @ EOP [ OPD
READ:UNKNOWN
TO: Virginia N. Rustique ( CN=Virginia N. Rustique/OU=WHO/O=EOP @ EOP [ WHO ])
READ:UNKNOWN
TO: Janet Murguia ( CN=Janet Murguia/OU=WHO/O=EOP @ EOP [ WHO
READ:UNKNOWN
CC: Sally Katzen ( CN=Sally Katzen/OU=OPD/O=EOP @ EOP [ OPD )
READ:UNKNOWN
CC: Russell W. Horwitz CN=Russell W. Horwitz/OU=OPD/O=EOP @ EOP [ OPD ])
READ:UNKNOWN
CC: Jonathan A. Kaplan ( CN=Jonathan A. Kaplan/OU=OPD/O=EOP @ EOP [ OPD )
READ:UNKNOWN
CC: Peter A. Weissman (CN=Peter A. Weissman/OU=OPD/O=EOP @ EOP [ OPD
READ:UNKNOWN
CC: Charles R. Marr ( CN=Charles R. Marr/OU=OPD/O=EOP @ EOP [ OPD 1)
READ:UNKNOWN
CC: Jessica L. Gibson ( CN=Jessica L. Gibson/OU=WHO/O=EOP @ EOP [ WHO
READ:UNKNOWN
TEXT:
Last Friday staff from the Administration ,S pension working group (which
includes Labor, PBGC, Treasury, Commerce, CEA, OMB and NEC) met with
Russell Sullivan, Senator Bob Graham ,S legislative director, and other
staff from the Senator ,S office to discuss pension issues.
After a fairly affable meeting, Sullivan concluded by expressing in no
uncertain terms the Senator ,S dissatisfaction with the lack of White
House recognition for his efforts in the pension area, which Sen. Graham
has made one of his priority issues. Sullivan noted that Sen. Graham was
not mentioned when the President touched on pension issues at the
Democratic unity event last Thursday, and also pointed out the omission of
the Senator ,S name from the fact sheet that accompanied the
Administration ,S pension announcement.
NOTE: Members were mentioned in the fact sheet only in the context of the
simplified defined benefit plan. Representatives Pomeroy and Johnson, the
members referred to in the document, are the ones most closely identified
with the SAFE, the proposal on which the Administration ,S simplified
defined benefit plan, the SMART, is based.
Sullivan contrasted what the Senator views as rather shabby treatment by
the Administration with the solicitousness displayed by Finance Chairman
Roth.
A brief call from the President to Senator Graham, or a word to the
Senator at an event, acknowledging his past contributions in the pension
area and expressing a strong desire to work with him in the future, might
quell his discontent. The President could note that Senator Graham is
doing a fine job filling the shoes of the President ,S good friend Senator
Pryor, who was especially active regarding pension issues during his time
on the Finance Committee.
This could in turn perhaps dissuade Sen. Graham from, for example,
supporting or even advancing Republican-driven proposals to drastically
scale back the top-heavy rules, which ensure that small business pension
plans benefit workers as well as owners.
Background. Senator Graham ,S Retirement Security for the 21st Century
Act, a bipartisan effort introduced last year, includes provisions along
the lines of key elements of the Administration ,S 1998 pension package,
such as proposals to facilitate contributions to Individual Retirement
Accounts through payroll deduction and to create a simplified defined
benefit-type plan (Rep. Pomeroy ,S SAFE proposal is included in the Graham
bill). The SMART, the easy-to-administer defined benefit plan in the
Administration ,S package, has, however, been designed so as to be
considerably more progressive than the SAFE. Sen. Graham ,S bill and the
Administration ,S 1998 package also both call for faster vesting of
employer 401(k) matching contributions and for providing participants in
defined benefit plans with a statement of their accrued benefits at least
every three years.
Items that could be counted among Senator Graham ,S achievements in the
pension area are provisions to reduce the paperwork burden on pension
plans and to promote the use of new technologies that were included in his
bill and were enacted as part of the Taxpayer Relief Act of 1997.
Attached (at the top) is the fact sheet on the Administration's 1998
pension package.
ATTACHMENT
1
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Unable to convert ARMS_EXT:[ATTACH.D76]MAIL475118941.026 to ASCII,
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END ATTACHMENT
1
THE PRESIDENT'S 1998 PENSION PACKAGE
HELPING MORE AMERICANS ACHIEVE A SECURE AND COMFORTABLE
RETIREMENT
May 2, 2016
THE PRESIDENT PROPOSES, AS PART OF HIS FISCAL YEAR 1999 BUDGET, TO
INCREASE PRIVATE PENSION PLAN COVERAGE, PARTICIPANT PROTECTION
AND PORTABILITY BY:
ENHANCING WORKERS' ABILITY TO MAKE CONTRIBUTIONS TO
-
INDIVIDUAL RETIREMENT ACCOUNTS (IRAs) BY
PAYROLL DEDUCTION.
PROVIDING A TAX CREDIT FOR SMALL BUSINESSES THAT ESTABLISH
-
PENSION PLANS;
CREATING A NEW, SIMPLIFIED DEFINED BENEFIT PLAN FOR SMALL
-
BUSINESSES;
FASTER VESTING OF 401(K) EMPLOYER MATCHING CONTRIBUTIONS;
-
EXPANDING PENSION RIGHT-TO-KNOW PROVISIONS FOR WORKERS
-
AND SPOUSES; AND
SIMPLIFYING PENSIONS AND INCREASING PENSION SECURITY
-
Half of all American workers, more than 50 million people, have no pension coverage at all. The best way for
a worker to enjoy a secure retirement is to have an employer-provided pension, individual retirement savings
and Social Security coverage. The President's proposal is targeted to promoting pension plans among small
businesses, where pension coverage is particularly low. Only 20 percent of workers in firms with fewer than
100 employees have pension coverage, as opposed to 62 percent of workers in firms with 100 or more
employees.
This new pension package builds on earlier Presidential efforts such as the creation in 1996 of the SIMPLE, a
simplified defined contribution plan that is bringing thousands of employers and their workers into the pension
system. The package would also modify 401(k) plans to better suit a mobile workforce, and ensure that workers
and spouses receive the information they need about their pension benefits. These measures would combine
to boost the private pension and individual retirement savings that are essential to a secure and
comfortable retirement.
PAYROLL DEDUCTION IRAs. This proposal would enhance workers' ability to make contributions to
Individual Retirement Accounts (IRAs) by payroll deduction. Under the legislative tax simplification
component of the proposal, these employee IRA contributions would be excluded from taxable income on the
W-2, rather than deducted from income on the individual's tax return. The exclusion would be particularly
helpful for low-income employees, providing tax relief more rapidly than a deduction. This step, in
conjunction with clarifying and publicizing the payroll deduction IRA option currently available to employers,
should encourage firms that now offer no retirement program at all to consider adoption of a payroll deduction
IRA arrangement. The greater convenience of saving through payroll deduction encourages low and moderate-
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wage earners to save more for retirement; witness the rising participation rates in 401(k) plans. Small
businesses establishing such arrangements would be eligible for the new pension program start-up tax credit
(see below).
Cost: Included in small business pension program start-up tax credit estimate.
SMALL BUSINESS PENSION PROGRAM START-UP TAX CREDIT. The President's plan provides a
three-year tax credit to encourage small businesses to set up retirement programs.
The credit would be, for the first year of the plan, 50 percent of up to $2,000 in administrative and
retirement education expenses associated with a defined benefit plan (including the new SMART plan
described below), 401(k), SIMPLE or other pension plan or payroll deduction IRA arrangement. For
each of the second and third years, the credit would be 50 percent of up to $1,000 in such costs.
The credit is intended to increase pension coverage among the more than 20 million small business
employees whose employers currently offer no pension plan.
Cost: $508 million over five years, $945 million over ten (in conjunction with the excludable payroll
deduction IRA proposal described above)
SIMPLIFIED DEFINED BENEFIT PLAN. The Administration's new SMART plan builds on the bipartisan
SAFE proposal, which is the work of Representatives Earl Pomeroy of North Dakota and Nancy Johnson of
Connecticut, among others. The SMART (Secure Money Annuity or Retirement Trust) combines many of the
best features of defined benefit and defined contribution plans.
Another easy-to-administer pension option for small businesses. The SMART plan provides small
businesses another easy-to-administer pension option, in addition to the SIMPLE. Most
nondiscrimination rules and a number of other pension plan requirements would be waived for this new
plan. SMART plans would be an option for most small businesses with 100 or fewer employees that do
not offer a defined benefit or money purchase plan (and did not offer one during the previous 5 years).
Broad coverage. Employers choosing a SMART plan would make contributions for all eligible workers
(over 21 with at least $5,000 in W-2 earnings with the employer in that year and in two preceding
consecutive years).
Guaranteed benefit. Participants would be guaranteed a minimum annual benefit upon retirement, but
could receive a larger benefit if the return on plan investments exceeds specified conservative
assumptions (i.e., a 5 percent rate of return). The SMART benefit would generally be guaranteed by the
Pension Benefit Guaranty Corporation, at a reduced premium.
Cost: $313 million over five years, $570 million over ten
FASTER VESTING OF 401(K) EMPLOYER MATCHING CONTRIBUTIONS Currently employee
contributions to 401(k) plans are immediately vested. Employer matching contributions, however, must vest
after either 5 years (cliff vesting) or 7 years (graded vesting, i.e., phased in over a several-year period). If
employer matching contributions vest after 5 years, an employee who switches jobs after four years loses all of
those employer matching contributions. The vesting requirement has a disproportionately adverse impact on
female employees, who tend to have shorter job tenure.
Under the President's proposal, all employees would be fully vested in the employer's matching
contributions after three years of service, six years if vesting is graded.
Cost: Negligible
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EXPAND PENSION RIGHT-TO-KNOW PROVISIONS FOR WORKERS AND SPOUSES. The
President's pension right-to-know initiative includes the following rights: (1) Spouses would be provided a
description of the forms (i.e., annual payment, lump sum) in which pension benefits can be distributed, to help
them participate in the process of deciding among these options; (2) participants in defined benefit pension
plans would automatically be provided a statement every three years of the benefit payable at retirement if the
individual left that employer as of the date of the statement; and (3) participants in defined contribution plans
would be provided a statement at least annually.
Knowledge of the vested benefit is critically important for retirement planning. It can be quite difficult, in case
of an error by a plan, to obtain the documentation of past earnings or service needed to correct the mistake if
much time has passed. Under current law, participants have the right to request (in writing) a benefit statement
annually, if one is not routinely provided by the employer, but this right is rarely exercised, in part because it is
not well known.
Cost: None
SIMPLIFYING PENSIONS AND FURTHER INCREASING RETIREMENT SECURITY AND
SAVINGS. The package will also include proposals previously made by the Administration, including the
following: (1) the pension audit bill, which would subject more pension assets to meaningful audits; (2) changes
to multiemployer (collectively bargained) plan rules which would increase the level of multiemployer benefits
guaranteed by the PBGC, increase the permitted funding level, and simplify the maximum benefit limitations;
(3) expansion of PBGC's Missing Participant program to defined contribution and multiemployer plans; (4) rule
changes that would ensure greater pension benefits for low and moderate income workers in simplified 401(k)
plans; and (5) further simplification of the definition of highly compensated employees.
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RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: Emil E. Parker (CN=Emil E. Parker/OU=OPD/O=EOP [ OPD
CREATION DATE/TIME: 3-MAR-1998 12:13:49.00
SUBJECT: Presidential call to Sen. Graham re: pensions
TO: Virginia N. Rustique (CN=Virginia N. Rustique/OU=WHO/O=EOP @ EOP [ WHO ])
READ:UNKNOWN
TEXT:
Did the President ever get a chance to make nice with Sen. Graham re:
pensions?
Forwarded by Emil E. Parker/OPD/EOP on 03/03/98
12:13 PM
Emil E. Parker
02/19/98 12:44:46 PM
Record Type: Record
To: Janet Murguia/WHO/EOP, Gene B. Sperling/OPD/EOP, Virginia N.
Rustique/WHO/EOP
cc: See the distribution list at the bottom of this message
Subject: Presidential call to Sen. Graham re: pensions
Last Friday staff from the Administration ,S pension working group (which
includes Labor, PBGC, Treasury, Commerce, CEA, OMB and NEC) met with
Russell Sullivan, Senator Bob Graham ,S legislative director, and other
staff from the Senator ,S office to discuss pension issues.
After a fairly affable meeting, Sullivan concluded by expressing in no
uncertain terms the Senator ,S dissatisfaction with the lack of White
House recognition for his efforts in the pension area, which Sen. Graham
has made one of his priority issues. Sullivan noted that Sen. Graham was
not mentioned when the President touched on pension issues at the
Democratic unity event last Thursday, and also pointed out the omission of
the Senator ,S name from the fact sheet that accompanied the
Administration ,S pension announcement.
NOTE: Members were mentioned in the fact sheet only in the context of the
simplified defined benefit plan. Representatives Pomeroy and Johnson, the
members referred to in the document, are the ones most closely identified
with the SAFE, the proposal on which the Administration ,S simplified
defined benefit plan, the SMART, is based.
Sullivan contrasted what the Senator views as rather shabby treatment by
the Administration with the solicitousness displayed by Finance Chairman
Roth.
A brief call from the President to Senator Graham, or a word to the
Senator at an event, acknowledging his past contributions in the pension
area and expressing a strong desire to work with him in the future, might
quell his discontent. The President could note that Senator Graham is
doing a fine job filling the shoes of the President ,S good friend Senator
Pryor, who was especially active regarding pension issues during his time
on the Finance Committee.
This could in turn perhaps dissuade Sen. Graham from, for example,
supporting or even advancing Republican-driven proposals to drastically
scale back the top-heavy rules, which ensure that small business pension
plans benefit workers as well as owners.
Background. Senator Graham ,S Retirement Security for the 21st Century
Act, a bipartisan effort introduced last year, includes provisions along
the lines of key elements of the Administration ,S 1998 pension package,
such as proposals to facilitate contributions to Individual Retirement
Accounts through payroll deduction and to create a simplified defined
benefit-type plan (Rep. Pomeroy ,S SAFE proposal is included in the Graham
bill). The SMART, the easy-to-administer defined benefit plan in the
Administration ,S package, has, however, been designed so as to be
considerably more progressive than the SAFE. Sen. Graham ,S bill and the
Administration ,S 1998 package also both call for faster vesting of
employer 401(k) matching contributions and for providing participants in
defined benefit plans with a statement of their accrued benefits at least
every three years.
Items that could be counted among Senator Graham ,S achievements in the
pension area are provisions to reduce the paperwork burden on pension
plans and to promote the use of new technologies that were included in his
bill and were enacted as part of the Taxpayer Relief Act of 1997.
Attached (at the top) is the fact sheet on the Administration's 1998
pension package.
Message Copied
To:
Jessica L. Gibson/WHO/EOP
Jonathan A. Kaplan/OPD/EOP
Charles R. Marr/OPD/EOP
Russell W. Horwitz/OPD/EOP
Peter A. Weissman/OPD/EOP
Sally Katzen/OPD/EOP
ATTACHMENT
1
ATT CREATION TIME/DATE: 00:00:00.00
TEXT:
Unable to convert ARMS_EXT:[ATTACH.D5JMA1L49682516T.026 to ASCII,
The following is a HEX DUMP:
END ATTACHMENT
I
THE PRESIDENT'S 1998 PENSION PACKAGE
HELPING MORE AMERICANS ACHIEVE A SECURE AND COMFORTABLE
RETIREMENT
May 2, 2016
THE PRESIDENT PROPOSES, AS PART OF HIS FISCAL YEAR 1999 BUDGET, TO
INCREASE PRIVATE PENSION PLAN COVERAGE, PARTICIPANT PROTECTION
AND PORTABILITY BY:
ENHANCING WORKERS' ABILITY TO MAKE CONTRIBUTIONS TO
-
INDIVIDUAL RETIREMENT ACCOUNTS (IRAs) BY
PAYROLL DEDUCTION.
PROVIDING A TAX CREDIT FOR SMALL BUSINESSES THAT ESTABLISH
-
PENSION PLANS;
CREATING A NEW, SIMPLIFIED DEFINED BENEFIT PLAN FOR SMALL
-
BUSINESSES;
FASTER VESTING OF 401(K) EMPLOYER MATCHING CONTRIBUTIONS;
EXPANDING PENSION RIGHT-TO-KNOW PROVISIONS FOR WORKERS
-
AND SPOUSES; AND
SIMPLIFYING PENSIONS AND INCREASING PENSION SECURITY
-
Half of all American workers, more than 50 million people, have no pension coverage at all. The best way for
a worker to enjoy a secure retirement is to have an employer-provided pension, individual retirement savings
and Social Security coverage. The President's proposal is targeted to promoting pension plans among small
businesses, where pension coverage is particularly low. Only 20 percent of workers in firms with fewer than
100 employees have pension coverage, as opposed to 62 percent of workers in firms with 100 or more
employees.
This new pension package builds on earlier Presidential efforts such as the creation in 1996 of the SIMPLE, a
simplified defined contribution plan that is bringing thousands of employers and their workers into the pension
system. The package would also modify 401(k) plans to better suit a mobile workforce, and ensure that workers
and spouses receive the information they need about their pension benefits. These measures would combine
to boost the private pension and individual retirement savings that are essential to a secure and
comfortable retirement.
PAYROLL DEDUCTION IRAs. This proposal would enhance workers' ability to make contributions to
Individual Retirement Accounts (IRAs) by payroll deduction. Under the legislative tax simplification
component of the proposal, these employee IRA contributions would be excluded from taxable income on the
W-2, rather than deducted from income on the individual's tax return. The exclusion would be particularly
helpful for low-income employees, providing tax relief more rapidly than a deduction. This step, in
conjunction with clarifying and publicizing the payroll deduction IRA option currently available to employers,
should encourage firms that now offer no retirement program at all to consider adoption of a payroll deduction
IRA arrangement. The greater convenience of saving through payroll deduction encourages low and moderate-
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wage earners to save more for retirement; witness the rising participation rates in 401(k) plans. Small
businesses establishing such arrangements would be eligible for the new pension program start-up tax credit
(see below).
Cost: Included in small business pension program start-up tax credit estimate.
SMALL BUSINESS PENSION PROGRAM START-UP TAX CREDIT. The President's plan provides a
three-year tax credit to encourage small businesses to set up retirement programs.
The credit would be, for the first year of the plan, 50 percent of up to $2,000 in administrative and
retirement education expenses associated with a defined benefit plan (including the new SMART plan
described below), 401(k), SIMPLE or other pension plan or payroll deduction IRA arrangement. For
each of the second and third years, the credit would be 50 percent of up to $1,000 in such costs.
The credit is intended to increase pension coverage among the more than 20 million small business
employees whose employers currently offer no pension plan.
Cost: $508 million over five years, $945 million over ten (in conjunction with the excludable payroll
deduction IRA proposal described above)
SIMPLIFIED DEFINED BENEFIT PLAN. The Administration's new SMART plan builds on the bipartisan
SAFE proposal, which is the work of Representatives Earl Pomeroy of North Dakota and Nancy Johnson of
Connecticut, among others. The SMART (Secure Money Annuity or Retirement Trust) combines many of the
best features of defined benefit and defined contribution plans.
Another easy-to-administer pension option for small businesses. The SMART plan provides small
businesses another easy-to-administer pension option, in addition to the SIMPLE. Most
nondiscrimination rules and a number of other pension plan requirements would be waived for this new
plan. SMART plans would be an option for most small businesses with 100 or fewer employees that do
not offer a defined benefit or money purchase plan (and did not offer one during the previous 5 years).
Broad coverage. Employers choosing a SMART plan would make contributions for all eligible workers
(over 21 with at least $5,000 in W-2 earnings with the employer in that year and in two preceding
consecutive years).
Guaranteed benefit. Participants would be guaranteed a minimum annual benefit upon retirement, but
could receive a larger benefit if the return on plan investments exceeds specified conservative
assumptions (i.e., a 5 percent rate of return). The SMART benefit would generally be guaranteed by the
Pension Benefit Guaranty Corporation, at a reduced premium.
Cost: $313 million over five years, $570 million over ten
FASTER VESTING OF 401(K) EMPLOYER MATCHING CONTRIBUTIONS. Currently employee
contributions to 401(k) plans are immediately vested. Employer matching contributions, however, must vest
after either 5 years (cliff vesting) or 7 years (graded vesting, i.e., phased in over a several-year period). If
employer matching contributions vest after 5 years, an employee who switches jobs after four years loses all of
those employer matching contributions. The vesting requirement has a disproportionately adverse impact on
female employees, who tend to have shorter job tenure.
Under the President's proposal, all employees would be fully vested in the employer's matching
contributions after three years of service, six years if vesting is graded.
Cost: Negligible
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EXPAND PENSION RIGHT-TO-KNOW PROVISIONS FOR WORKERS AND SPOUSES. The
President's pension right-to-know initiative includes the following rights: (1) Spouses would be provided a
description of the forms (i.e., annual payment, lump sum) in which pension benefits can be distributed, to help
them participate in the process of deciding among these options; (2) participants in defined benefit pension
plans would automatically be provided a statement every three years of the benefit payable at retirement if the
individual left that employer as of the date of the statement; and (3) participants in defined contribution plans
would be provided a statement at least annually.
Knowledge of the vested benefit is critically important for retirement planning. It can be quite difficult, in case
of an error by a plan, to obtain the documentation of past earnings or service needed to correct the mistake if
much time has passed. Under current law, participants have the right to request (in writing) a benefit statement
annually, if one is not routinely provided by the employer, but this right is rarely exercised, in part because it is
not well known.
Cost: None
SIMPLIFYING PENSIONS AND FURTHER INCREASING RETIREMENT SECURITY AND
SAVINGS. The package will also include proposals previously made by the Administration, including the
following: (1) the pension audit bill, which would subject more pension assets to meaningful audits; (2) changes
to multiemployer (collectively bargained) plan rules which would increase the level of multiemployer benefits
guaranteed by the PBGC, increase the permitted funding level, and simplify the maximum benefit limitations;
(3) expansion of PBGC's Missing Participant program to defined contribution and multiemployer plans; (4) rule
changes that would ensure greater pension benefits for low and moderate income workers in simplified
plans; and (5) further simplification of the definition of highly compensated employees.
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RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: Emil E. Parker (CN=Emil E. Parker/OU=OPD/O=EOP [ OPD
CREATION DATE/TIME: 4-MAR-1998 17:22:16.00
SUBJECT: Re: Duplicates
TO: Jonathan A. Kaplan ( CN=Jonathan A. Kaplan/OU=OPD/O=EOP @ EOP [ OPD 1)
READ:UNKNOWN
TEXT:
According to PWBA there are in fact 10 duplicates. Labor's leg office has
proposed offering one more slot to both Daschle and Gephardt. I tend to
agree, particularly since 1) Gephardt's priority guy Bachmann is on the
Rep list; and 2) the Rep list includes six Georgia and five Mississippi
residents, as opposed to one SD person on our list.
That would leave us with eight more slots. We have received two
non-duplicates from WH offices so far, and Labor would like to add back
someone dropped earlier plus another fellow who is also supported by
Daschle and PBGC, which would leave four.
Jonathan A. Kaplan
03/04/98 04:44:25 PM
Record Type: Record
To: Emil E. Parker/OPD/EOP, Jake Siewert/OPD/EOP
cc:
Subject: Duplicates
Do we know who they are? We should take a look at who the 10 are soon.
Jake raises a good point about the fact that we lose the credit with them.
RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: Emil E. Parker ( CN=Emil E. Parker/OU=OPD/O=EOP [OPD])
CREATION DATE/TIME: 5-MAR-1998 15:34:34.00
SUBJECT: Re: SAVER list
TO: Jonathan A. Kaplan ( CN=Jonathan A. Kaplan/OU=OPD/O=EOP @ EOP [ OPD ])
READ:UNKNOWN
TEXT:
I forgot about Milton Ervin, an African American financial services guy (I
believe) strongly supported by Daschle's office and PBGC; we should add
him if at all possible, possibly instead of Bentley or Heather Lamm.
RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: Emil E. Parker (CN=Emil E. Parker/OU=OPD/O=EOP [OPD])
CREATION DATE/TIME: 9-MAR-1998 11:21:37.00
SUBJECT: Re: Revised PBGC testimony--comments due by 11:30 a.m. TODAY
TO: Melissa N. Benton ( CN=Melissa N. Benton/OU=OMB/O=EOP @ EOP [ OMB D
READ:UNKNOWN
TEXT:
I have no comments on the revised version of the testimony.
RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: Melissa N. Benton ( CN=Melissa N. Benton/OU=OMB/O=EOP [OMB])
CREATION DATE/TIME:12-MAR-1998 12:28:16.00
SUBJECT: FYI--Upcoming PBGC testimony before Senate Labor and Human Resources
TO: [email protected]@INET@LNGTWY [email protected]@INET@LNGTWY[UNKNC
READ:UNKNOWN
TO: [email protected] ( [email protected] @ inet [ UNKNOWN])
READ:UNKNOWN
TO: Emil E. Parker (CN=Emil E. Parker/OU=OPD/O=EOP@EOP OPD
READ:UNKNOWN
TO: KCLARK@PR_L=PAE399@MRP@OPUS@VAXGTWY
PR_U=KCLARK@PR_L=PAE399@MRP@OPUS@VAXGTWY[_UNKNOWNJ
READ:UNKNOWN
TO: [email protected] ([email protected] @ inet [ UNKNOWN])
READ:UNKNOWN
TO: Alexander T. Hunt ( CN=Alexander T. Hunt/OU=OMB/O=EOP@EOP OMB )
READ:UNKNOWN
TO: Christopher D. Carroll ( CN=Christopher D. Carroll/OU=CEA/O=EOP@EOP [CEA])
READ:UNKNOWN
CC: Mark D. Menchik ( CN=Mark D. Menchik/OU=OMB/O=EOP@EOP [ OME )
READ:UNKNOWN
CC: Janet R. Forsgren (CN=Janet R. Forsgren/OU=OMB/O=EOP@EOP [OMB])
READ:UNKNOWN
TEXT:
FYI (and in case you weren't already aware), the Pension Benefit Guaranty
Corporation has been asked to testify before the Senate Labor and Human
Resources Committee at a 3/17 hearing on Retirement Security. PBGC plans
to deliver the same testimony they gave to the Oversight Committee of
House Ways and Means this past Tuesday. The testimony is identical to
that which was cleared earlier this week, with the exception of a few
non-substantive conforming changes.
We do not intend to circulate PBGC's testimony through the clearance
process again, but will request that PBGC provide a copy of their final
testimony for everyone's reference.
Please call if you have any questions (395-7887). Thanks!
RECORD TYPE: PRESIDENTIAL (NOTES MAIL)
CREATOR: Emil E. Parker (CN=Emil E. Parker/OU=OPD/O=EOP [ OPD ])
CREATION DATE/TIME:13-MAR-1998 22:13:57.00
SUBJECT: Pension stuff
TO: Charles R. Marr ( CN=Charles R. Marr/OU=OPD/O=EOP @ EOP [ OPD 1)
READ:UNKNOWN
TEXT:
Attached are the memo to Gene on the Pomeroy event and the draft
section-by-section on the bill; do not show either document to Treasury.
Treasury reviewed the section-by-section, but with my editorial comments
omitted.
Iwry is out next week; call Don Wellington (622-1332) or Harlan Weller
(622-1001) for help in general and for the Q and As in particular.
Iwry wanted me to tell you to chastise PBGC because David Strauss didn't
defend the SMART sufficiently (relative to the SAFE) in his testimony
before W and Means oversight. I wouldn't bother if I were you.
Good luck; see you week after next.
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May 2, 2016
TO:
GENE SPERLING
FROM:
EMIL PARKER
SUBJECT:
Pomeroy portability event
This press conference is now scheduled for 11:00 Thursday, March 19 in the Longworth House
Office Building. I am leaving a message for Rep. Pomeroy's staffer that you intend to
participate, but that your attendance is subject to last-minute schedule changes.
The plan is for you to endorse the overall goal of promoting pension portability and praise Rep.
Pomeroy for focusing on the issue, without explicitly endorsing his bill. For example, while you
can and should speak positively about facilitating rollovers between different types of plans, you
should avoid endorsing the provision in his legislation that would allow rollovers between 457
(State and local government) defined contributions plans and 401(k)s or 403(b)s (non-profit and
public school plans). Treasury, as discussed in the attached document, is uncomfortable with that
provision, for reasons that do not strike me as particularly compelling.
While the other members of the pension group (Labor, PBGC and CEA, to be specific) are quite
supportive of the bill, Treasury is unenthusiastic, viewing most of the provisions as somewhat
problematic. Nonetheless, Treasury has no objections to your appearing at the press conference
with Pomeroy, provided you do not endorse either the bill as a whole or any of the particular
items Treasury staff find less than optimal (see attached section-by-section).
The section-by-section includes only the Treasury position because, as noted above, the other
pension group agencies support or expressed no opinion about the various provisions.
Talking points
The Administration believes strongly that we must not only expand pension coverage but
make pensions more portable, to fit the dynamic workforce of the 21st Century. We
applaud Representative Pomeroy for the time he has devoted to this important issue.
The President's 1998 pension package included not only measures to promote adoption of
pension plans, especially in the small businesses sector where coverage rates are lowest,
but also a proposal to accelerate vesting of employer matching contributions (e.g.,
401(k)).
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Under current law "cliff" vesting, employer matching contributions vest after 5 years; an
employee subject to cliff vesting who switches jobs after four years loses all employer
matching contributions. The proposal in the President's package would allow more
employees to take valuable matching contributions (which are often presented as a major
fringe benefit) with them when they go. We are extremely pleased to see that Rep.
Pomeroy has also included this faster vesting proposal in his bill.
Representative Pomeroy's bill would promote the Administration's goal of portability by
also allowing workers to transfer funds among the different types of defined contribution
plans found in the public, private and not-for-profit sectors.
For example, under this legislation, a worker who left a job with a for-profit employer offering a
401(k) plan to take a position with a non-profit that has a 403(b) plan could simply transfer funds
from one plan to the other, rather than having to roll the 401(k) dollars over to a separate
individual retirement account (IRA). [Treasury, as noted in the attached document, is concerned
about transfers into Section 457 plans, which are not subject to the restrictions on withdrawals
before retirement age that apply to other plans.]
This legislation would also facilitate transfers between plans of the same type -- i.e., from
one 401(k) plan to another.
This would be accomplished through relaxation of the 411(d)(6) anti-cutback rules, which
require that the receiving defined contribution plan offer the same distribution options (e.g., lump
sum, annual payment) as the sending DC plan. Relaxing these rules will facilitate transfers.
Promoting pension portability as one of the major elements of our ongoing effort to
assure workers retirement security by building on past Administration initiatives,
including the Retirement Protection Act of 1994 and the Retirement Savings and Security
Act of 1996 that have increased pension coverage, made those pensions more secure and
simplified administration of pension plans. We must continue our efforts to expand
coverage among groups such as small business workers and women with relatively low
levels of pension coverage.
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SUMMARY OF REPRESENTATIVE POMEROY'S
RETIREMENT ACCOUNT PORTABILITY ACT OF 1998 (RAP)
Sec. 2. Rollovers allowed among various types of defined contribution plans, i.e., 401(k),
457 and 403(b) plans.
Current law does not permit rollovers of plan benefits among 401(k), section 457 (State
and local government) and section 403(b) (tax-exempt organization and public school)
plans.
The proposal would allow rollovers among all three types of plans (nongovernmental 457
plans, which are not trusteed, would not be included in the rollover family).
This proposal is in legislation introduced by Senator Gregg (S. 883).
Treasury concern: Section 457 plans are not subject to the prohibition on distributions
before retirement age (59 ½, or 55 if the participant terminates) that generally apply to
401(k) and 403(b) plans, nor are they subject to the 10 percent additional tax on pre-
retirement age withdrawals that applies to other qualified plans. Individuals who roll
balances from the other types of defined contribution plans into 457 plans could then
withdraw the funds before retirement age without incurring any penalty.
Notwithstanding Treasury's points, it seems unlikely that a worker would take a position
with a State or local government primarily, or even in part, to make an early withdrawal
from a defined contribution plan.
Sec. 3. Rollovers of IRAs into certain defined contribution plans.
Current law allows rollovers from IRAs to defined contribution plans only if the IRA is a
conduit IRA (i.e., contains only benefits attributable to a qualified plan).
The proposal would permit rollover of IRA, including non-conduit IRA, benefits to a
defined contribution plan. This provision would allow workers to consolidate their
retirement savings -- i.e., by moving IRA funds into their employer's defined contribution
plan.
This provision is not in any other pending legislation.
Treasury concern: There may be advantages to retirement savings diversification.
Moreover, the funds may be safer on average with an IRA provider than an employer; a
firm owner could mismanage or abscond with the dollars. Treasury suggested to
Pomeroy's staffer that the rollover be limited to employer defined contribution plans with
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a trustee qualified to be an IRA trustee; this change may be made.
Lesser Treasury concern: Current law prohibits IRA owners from receiving loans from
their IRAs. The proposal would permit IRA owners to rollover amounts in their IRAs
into defined contribution plans and then obtain loans of such amounts from the plans. Of
course, an IRA owner can simply cash out the IRA if he or she is willing to absorb the 10
percent early withdrawal penalty. Relative to that possibility, the option of taking a plan
loan does not seem particularly problematic.
Sec 4. Rollovers of after-tax contributions.
Existing law does not permit the rollover of after-tax pension plan contributions from one
pension plan to another or from a pension plan to an IRA.
The proposal would permit the rollover of such after-tax pension contributions to either
another pension plan or an IRA.
This provision is not in any other pending legislation.
Treasury concern: Under the provision, individuals would have to track their deductible
and after-tax (nondeductible) contributions separately or face double taxation on the after-
tax contributions; IRA providers would be neither required or inclined to handle this
tracking. Treasury has suggested to Pomeroy's staffer that they (and pension plans) be
required to do so under this provision, but they think it unlikely this change will be made.
Sec. 5. Faster vesting for employer matching contributions.
Current law requires that employer contributions be (1) 100% vested after completion of
no more than 5 years of service or (2) vested gradually over 7 years (at least 20% after 3
years of service plus an additional 20% for each additional year of service thereafter).
Only 5% of plan participants are in plans that use 7 year graded vesting for employer
contributions.
The proposal would require that employer matching contributions be (1) 100% vested no
later than upon the completion of 3 years of service or (2) vested gradually over 6 years
(20% after 2 years of service with an additional 20% per year of service thereafter).
The same provision is in the Administration's 1998 pension package.
Sec. 6. Missing participants.
PBGC rules require the plan administrator of a terminating defined benefit plan covered
by the PBGC to: (1) transfer the missing participant's designated benefit to the PBGC or
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purchase an annuity from an insurer to satisfy the benefit liability; and (2) provide the
PBGC with information and certifications with respect to the benefits or annuity as the
PBGC may specify.
The proposal would expand the PBGC's program for missing participants to defined
benefit plans not covered by the PBGC and to defined contribution plans.
This proposal is in the Gejdenson, Daschle and Graham bills, H. R. 2290 (introduced by
Rep. Shays and Rep. Payne), and the Administration's Retirement Savings and Security
Act and Pension Security Act.
Sec. 7. Waiver of 60-day rollover period.
Rollover of pension plan (defined benefit or defined contribution) or IRA benefits must
be made within 60 days from the date of distribution in order to avoid taxation (regular
and, in cases of distribution before retirement age, the 10 percent additional tax).
Under procedures provided by the Secretary of Treasury, the proposal would provide an
exception to the 60-day rollover period in cases of hardship -- i.e., persons in a Federally
declared disaster area or a combat zone. These would be categorical exemptions; the IRS
would not make case-by-case determinations.
A similar provision is in the Gregg bill.
Sec. 8. Rationalize the restrictions on distributions from certain defined contribution plans.
Current law precludes defined contribution plan distributions prior to a participant's
"separation from service." A plan may not, for example, make a distribution to a
participant who continues to work at the "same desk" after the employer sponsoring the
plan is sold to a new entity.
The proposal would allow amounts in 401(k) plans, 403(b) contracts and 457 plans to be
distributed after: (1) severance from employment (currently, after separation from
service); or (2) a plan termination (currently, a plan termination, a disposition of assets, or
a disposition of a subsidiary).
Treasury concern: The proposal gives employees who continue to work in the same job
but for a different employer earlier access to their retirement funds than they would
otherwise enjoy.
A similar provision is in the Gejdenson, Graham, and Daschle bills.
Sec. 9. Transferee defined contribution plan need not have the same distribution options as
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transferor defined contribution plan.
Currently, a plan that accepts a transfer of a participant's benefit must preserve the
optional forms of benefit that would have been available to the participant from the
transferring plan.
The legislation would establish the circumstances in which a defined contribution plan
will not be treated as eliminating an optional form of benefit merely because the plan
receiving the transferred benefits does not provide some of the optional forms of
distribution (e.g., lump sum, annuity) previously available under another defined
contribution plan.
This provision would facilitate the transfer of pension benefits when a worker changes
jobs.
The Gejdenson, Daschle, Graham, and Gregg bills all contain this provision.
Treasury concern: Treasury staff support this provision.
Sec. 10. Allowance of employers to disregard rollovers for purposes of cash-out amounts.
Plans may not make a distribution without the consent of a participant if the participant's
plan benefit has a value greater than $5,000 and, in determining whether the $5,000 limit
has been met, all plan assets, including any rollovers, must be taken into account.
This proposal would permit plans to disregard the value of a participant's benefit that is
attributable to a rollover contribution (and any earnings) in determining whether a
distribution may be made without obtaining participant consent. This proposal might
have the effect of removing savings from the retirement system. It is a bit odd to include
a provision that would encourage more cash-outs in a "pension portability" bill.
This provision is in the Gregg bill.
Treasury concern: They view this proposal as ill-advised, due to concerns about
complexity and leakage of funds from the retirement system, but not terribly harmful.
Sec 11. Purchase of past service credit for State and local government employees
This provision would allow funds to be transferred from a 401(a), 403(b) or 457 defined
contribution plan to a State or local government defined benefit plan, to purchase a larger
benefit.
Treasury concern: These State and local government defined benefit plans could use this
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provision to indirectly shift pension costs to employees by reducing the employer
contribution and inviting employees to make up the difference by transferring defined
contribution balances.
This does not seem to be a particularly plausible concern.
Sec. 12. Increased flexibility on distributions from section 457 plans
Under current law, any amount of compensation deferred under a section 457 plan is
taxable when paid or otherwise made available to the participant or beneficiary.
The proposal would provide that the total amount payable to a participant under a plan
would not be treated as made available, and, consequently, taxable, merely because the
participant has flexibility in determining the amount and frequency of distributions under
a plan.
This proposal is not in any other pending legislation.
Treasury concern: See Section 2. This provision may be dropped.
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