Chamber Opposes H.R. 2989, the Transportation, Treasury, and General Government Appropriations Act of 2004
October 23, 2003
To the Members of the United States Senate:
As the Senate begins consideration this week of H.R. 2989, the Transportation, Treasury, and General Government Appropriations Act of 2004, the U.S. Chamber urges you to reject any amendment that would prohibit the Internal Revenue Service (IRS) from using funds to regulate cash balance retirement plans or which would otherwise limit the ability of employers and workers to utilize this legitimate employee benefits program.
Much of the opposition to these plans is based on an assumption that cash balance plans, or conversions to cash balance plans, are inherently age-discriminatory and comes on the heels of a highly controversial court decision. However, a federal court, in that same district, has previously ruled that cash balance plans do not violate age discrimination laws. In addition, no federal agency with jurisdiction over pension and discrimination issues – the Department of Treasury, Internal Revenue Service, Department of Labor, and the Equal Employment Opportunity Commission – has determined that cash balance plans, or conversions to them, violate federal age discrimination, ERISA, or tax laws. On the contrary, in December 2002, the IRS issued proposed regulations clarifying that cash balance plans are not inherently agediscriminatory under ERISA. After receiving public comments supporting this view, the IRS had indicated that it would issue final regulations to this effect by the end of the year.
This area of the law is extremely complex, and has involved countless hours of study and analysis by experts from each federal agency. Prohibiting the IRS from continuing its work, as such an amendment would do, would cause great harm to the employer-sponsored pension system, leaving them in a state of suspended uncertainty. Such an outcome would not be in the best interests of employees or employers who offer retirement plans.
Further, any restrictions on the use of cash balance plans would jeopardize a significant retirement benefit for millions of workers. Cash balance plans, which are a type of defined benefit plan, allow employers to provide a guaranteed retirement benefit that responds to the changing demographics and mobility of the workforce. Under a cash balance plan, benefits accrue evenly over a worker's career and therefore such plans can provide a greater benefit than under a traditional pension plan. Most importantly, in a cash balance plan, contributions are primarily made by the employer, all the investment risk stays with the employer, and the benefits are insured by the Pension Benefit Guarantee Corporation. Thus, workers are able to receive a secure and fixed retirement benefit that rewards them for all phases of their careers.
Accordingly, the U.S. Chamber urges Senators to vote NO on any amendment to H.R. 2989, the Transportation, Treasury, and General Government Appropriations Act, that would hinder the IRS from regulating cash balance plans or would otherwise restrict the ability of employers and workers to utilize this legitimate employee benefits program.
R. Bruce Josten
Executive Vice President, Government Affairs
U.S. Chamber of Commerce