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ADDITIONAL PENSION SIMPLIFICATION

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WASHINGTON-A benefits lobbying group is beginning a new effort to persuade Congress to further simplify pension laws and regulations.

Last week, the Washington-based Assn. of Private Pension & Welfare Plans unveiled a 26-page proposal detailing changes it thinks should be made to the nation's employer-sponsored pension plan system.

Those changes would be in addition to a pension simplification package the APPWP first advanced in 1989 and that Congress enacted last year.

"Last year's measure was only a first installment. There truly is a long way to truly simplify the retirement system and to encourage its expansion," said APPWP President James Klein.

Mr. Klein thinks there is a good chance Congress will enact at least some of the group's recommendations. "Pension simplification is one of a few areas that enjoy bipartisan support in an otherwise partisan environment," he said.

APPWP's recommendations include:

Allowing employees at least 50 years old to make an additional $5,000 in annual contributions above the current $9,500 limit to 401(k) or other salary reduction plans.

Such a change, the APPWP notes, is especially important to members of the Baby Boom generation, whose oldest members now are turning 50.

"This opportunity (to contribute more) would be available at a point in their lives when they are more likely to have the assets and the commitment to retirement savings," the group says in its paper.

Reduce reliance on rigid mechanical tests to prove to government regulators that pension plans-especially those sponsored by companies with different or separate lines of business-do not discriminate in favor of highly paid employees.

Non-discrimination tests for employers operating on a separate lines of business basis are excessively complicated and impose what the APPWP describes as "onerous" recordkeeping.

A better approach than rigid, complicated mechanical tests, the benefits lobbying group says, would be to substitute a more general facts and circumstances test. "Mechanical tests can play an important role in ensuring non-discrimination, but they cannot be the only answer," the group says.

Taking advantage of technological innovations. Employers should be allowed to distribute certain pension plan documents, such as summary plan descriptions, electronically when there is ready access to those technological tools.

"For companies where many employees have desktop computers, the use of intranets and the Internet for employee communication.*.*.can provide more timely and immediate information and, again, can generate significant savings," the benefits lobbying group said.

Encourage more small employers to offer retirement plans.

Last year, as part of the pension simplification package, Congress gave employers with fewer than 100 employees a new pension plan option. Dubbed the SIMPLE plan, this pension plan offers significantly reduced reporting requirements.

But SIMPLE plans, unlike more complex but highly popular 401(k) plans, limit annual salary reduction contributions to $6,000.

This lower contribution limit to SIMPLE plans should be eliminated with contributions allowed on the same basis as other plans, the APPWP says.

"Limits on SIMPLE retirement plans that make them substantially less attractive than other qualified plans are unjustified and only act to reduce overall plan coverage and retirement security," the APPWP says.

Eliminate the current rules that restrict employers' ability to fund their pension plans. Under current rules, employers cannot make contributions to their defined benefit plans once the plans are 150% funded for current liabilities. Current liabilities are benefit obligations that would be due if a plan were terminated.

This limitation, in effect, disrupts the even accumulation of funds needed to pay for retirement benefits, the group says.

The 150% limitation restrains companies with younger workforces from funding the plan to be able to meet future benefit promises as their workers become older and become entitled to greater benefits, the APPWP says.

Mr. Klein says Congress imposed the limitation to raise revenues, not for public policy reasons.

Ensure a fairer system of enforcement. Although rarely enforced, the Internal Revenue Service has the authority to revoke the tax-favored status of a pension plan.

The potential for inadvertent errors in administering pension plans is significant. For example, a programming error can result in the wrong notices being sent to employees.

Disqualification should not be a weapon for the IRS to use in situations where an employer corrects inadvertent mistakes in a timely fashion after they are uncovered, the group says. APPWP defines timely as correction of mistakes before the IRS audits a plan.