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NEARLY EIGHT YEARS AGO, the Assn. of Private Pension & Welfare Plans, an employer lobbying group, began the drive for pension simplification with a public policy paper recommending many changes to end what the group described as pension gridlock.
After numerous setbacks, many of the group's pension simplification recommendations were incorporated as part of broader legislation Congress passed in 1996.
Those changes, including an easier way to run the basic 401(k) plan non-discrimination tests, are only a first installment in making pension rules fairer and more logical, the APPWP says.
We couldn't agree more. Even after the passage of last year's simplification package, pension rules remain far too complicated and, in many cases, illogical.
The APPWP's new simplification package, which the group released last month (BI, Feb. 24), certainly is a step in the direction of common sense.
Take, for example, the group's recommendation to allow 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.
It would be nice if younger employees-those in their 20s and 30s-could make large contributions to 401(k) plans so the contributions could earn interest over an extended period of time.
But the fact is many younger employees simply don't make enough money or have too many other financial responsibilities, such as paying off loans for their education, to contribute very much to their savings plans.
But, by the time employees reach 50, they often are at their maximum earning power. That is when they may have extra cash and are better able to make higher contributions to their 401(k) plans and ultimately have more savings for their retirement.
The APPWP also recommends that federal rules be amended so that employers can take advantage of technological leaps and be allowed to distribute certain pension plan documents, such as summary plan descriptions, electronically when there is ready access to those technological tools.
That makes perfect sense to us. Paper documents always should be available to those requesting them. But why should employers spend tens of thousands, if not hundreds of thousands of dollars, on paper booklets if employees have immediate access to those kinds of documents through online networks, such as corporate intranets? We'd much rather see companies use dollars on improving benefits than spend a small fortune printing benefit booklets for all employees when alternative-but just as accessible-means of distributing the information are available.
These and other APPWP recommendations will continue the drive for simpler, more logical pension rules. We hope this time, though, it doesn't take Congress seven years to enact them.