U.S. Rep. Pat Tiberi (R-OH) and U.S Sen. Rob Portman (R-OH) introduced legislation last week that would amend nondiscrimination rules for retirement plans to protect older, longer-service beneficiaries.
The Retirement Security Preservation Act (RSPA) would preserve the retirement benefits of older retirees after retirement plans are closed or frozen, and it would establish anti-abuse rules related to closed and frozen plans.
“The Retirement Security Preservation Act will give certainty to longer-serving employees who have worked hard to plan and save for their retirement years,” said Tiberi, a senior member of the House Ways and Means Committee.
As companies have shifted from traditional defined benefit plans to newer retirement models like defined contribution plans, many have grandfathered existing employees by closing their traditional plans. Other companies have “hard frozen” traditional defined benefit plans but helped employees in other ways like more contributions to direct contribution plans.
Because grandfathered employees in closed plans are often more highly compensated, however, closed plans frequently violate IRS nondiscrimination testing rules.
“This is a necessary fix that will prevent them from unfairly losing their pension benefits due to the IRS’s nondiscrimination rules,” Tiberi said of the legislation.
Portman added, “This important bill will help protect the retirement security of hundreds of thousands of dedicated working families who are counting on their pension benefits in their retirement.”
Strong bipartisan support for the Retirement Security Preservation Act exists in both the House and Senate, said Portman, a member of the Senate Finance Committee. U.S. Sen. Ben Cardin (D-MD) joined Portman in introducing the bill in the Senate, while U.S. Rep. Richard Neal (D-MA) helped introduce it in the House.
The updated legislation is based on H.R. 5381 and S. 2855, which were introduced in the 113th Congress.