Resolution in Support of Federal Pension Portability Legislation

Resolution in Support of Federal Pension Portability Legislation

Summary

This resolution supports federal legislation designed to improve portability and raise contribution limits to retirement programs such as 403(b), 401(k), 457 and 401(a) plans. This legislation is especially important to public employees, many of whom are not currently able to roll their retirement benefits to other qualified defined contribution plans.

Model Resolution

WHEREAS, under current federal law, employees are prohibited from rolling over retirement benefits from 457 deferred compensation plans into other qualified retirement accounts like 401(k) plans and 401plans; and

WHEREAS, under current federal law employees contributing to 403(b) plans (higher education employees and teachers) also face substantial barriers to rolling over and consolidating their retirement savings; and

WHEREAS, this means that many public employees and teachers who participate in these defined contribution plans must leave their retirement benefits in these accounts or withdraw them with a substantial penalty when they leave public service; and

WHEREAS, this makes it more difficult for public employees to save for retirement, especially in supplemental deferred compensation plans such as 457 plans; and

WHEREAS, IRA contributions are not easily rolled into other qualified retirement plans, which federal pension portability legislation corrects; and

WHEREAS, proposed federal pension reform legislation would address these problems by allowing roll-overs between different types of plans, including 401, section 403(b) and section 457 plans; and

WHEREAS, contribution limits to 457 plans are capped at $8,500 per year compared to $30,000 or 25 percent of salary in 401 plans; and

WHEREAS, this inequity is borne by public employees who may wish to contribute a greater amount towards their retirement in tax deferred defined contribution plans, which is now prohibited by the federal government; and

WHEREAS, proposed federal pension reform legislation would correct this inequity;

NOW THEREFORE BE IT RESOLVED, [insert state here] affirms that Congress should act quickly to enact pension reform legislation to make defined contribution pension benefits fully portable and allow greater tax deferred contributions to these accounts, especially since retirement savings is especially important to providing the public and safe and secure financial future.

 

Approved by ALEC Board of Directors in 2001.

Reapproved by ALEC Board of Directors January 29, 2013.

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