1

353

(2) The last sentence of section 404 (c) is amended

2

by striking out "This subsection" and inserting in lieu

3

thereof "The first and third sentences of this subsection".

4

(c) EFFECTIVE DATE.-The amendments made by this 5 section shall apply to taxable years ending on or after 6 June 30, 1972.

Passed the House of Representatives February 28, 1974.

Attest:

W. PAT JENNINGS,

Clerk.

[From the Congressional Record-Senate, Mar. 29, 1974]

PENSION REFORM

Mr. JAVITS. Mr. President, the Congressional Research Service at the Library of Congress has completed a comparative analysis of the Senate-passed and House-passed versions of H.R. 2, the pension reform bill. In view of the tremendous interest in this legislation I ask unanimous consent that the text of the Congressional Research Service analysis be printed in the Record.

There being no objection, the analysis was ordered to be printed in the RECORD, as follows:

"PRIVATE PENSION REFORM LEGISLATION, 93D CONGRESS, MARCH 1974-COMPARISON OF SENATE-PASSED AND HOUSE-PASSED VERSIONS OF H.R. 2

"(By Peter Henle, Senior Specialist, Labor Economics Division; Raymond Schmitt, Analyst in Social Legislation, Education and Public Welfare Division; and Ann M. Marley, Analyst in Taxation and Fiscal Policy, Economics Division)

INTRODUCTION

"The following tabulation compares the major provisions of the Senate-passed and the House-passed versions of H.R. 2, private pension reform legislation. "Action on this legislation was taken first in the Senate, culminating with passage of H.R. 4200 on September 19, 1973. This bill was the product of joint effort by the Labor and Public Welfare and Finance Committees. The Labor and Public Welfare Committee had reported out S. 4, on April 18, 1973 while the Finance Committee had reported out S. 1179 on August 21, 1973. A compromise bill worked out by the two committees was introduced on the floor of the Senate September 18 as a substitute for S. 4, the pending measure. Following the adoption of several amendments, the bill was passed 93-0 and its text incorporated in H.R. 4200, a minor House-passed bill to continue certain servicemen's and former servicemen's survivor annuity benefits.

"On the House side, the Education and Labor Committee had before it H.R. 2 which was reported out of committee on September 25, 1973. The Ways and Means Committee, to whom the Senate-passed H.R. 4200 was referred, considered pension reform legislation beginning in October and reported out a new bill, H.R. 12481, on February 5, 1974. Subsequently, as the two committees worked to develop conforming bills, the Education and Labor Committee on February 19, 1974 approved the text of a new bill which was introduced the following day as H.R. 12906; similarly, the Ways and Means Committee reported out a new bill (H.R. 12855) on February 21, 1974.

"On February 26, 1974 the bills from the two House committees were joined as a substitute for the text of H.R. 2, the pending House business. The Education and Labor Committee bill, H.R. 12906, became Title I and the Ways and Means Committee bill, H.R. 12855, became Title II. Few amendments were adopted, and the House passed H.R. 2 on February 28, 1974 by a vote of 376-4.

"Subsequently, on March 4, 1974, the Senate passed H.R. 2, after substituting for its text the language of the previously passed H.R. 4200."

[The comparison of the bill H.R. 2 as passed by the Senate and as passed by the House, follows:]

PRIVATE PENSION REFORM LEGISLATION-COMPARISON OF SENATE-PASSED AND HOUSE-PASSED VERSIONS OF H.R. 2

Generally, most of the titles of the Act
would be jointly administered by the Labor
and Treasury Departments although the roles
would vary. The Labor Department would
have the principal role in administering re-
porting, disclosure, and fiduciary standards
as well as the plan termination insurance and
portability programs. The Treasury Depart-
ment, on the other hand, would be largely
responsible for vesting and funding. The
Treasury Department would exclusively ad-
minister the tax provisions relating to re-
tirement savings, increases in the present
deductions under plans for the self-employed
(Keogh plans), and limitations on benefits
and contributions.

HOUSE: TITLE I Short Title

Employees Benefit Securtly Act of 1974.

HOUSE: TITLE II

Participation and vesting
Coverage

All private pension plans established or
maintained by employers or employee orga-
nizations affecting or engaged in commerce.
However, all government and church plans
are exempt. (sec. 201).

Participation Requirement

Plan may not require as a condition to be eligible to participate, a period of service of more than three years, or the attainment of age 25 and one year of service, whichever comes first. However, a defined benefit plan may exclude any employee who commences employment at an age within 5 years of the normal retirement age under the plan. (sec. 202).

All private plans seeking to obtain or re-
tain their, tax qualification status. However,
all government and church plans are exempt.
(sec. 1011).

Same as Title I. (sec. 1011).

PRIVATE PENSION REFORM LEGISLATION-COMPARISON OF SENATE-PASSED AND HOUSE-PASSED VERSIONS OF H.R. 2-Continued

Employees must be vested in at least 25
percent of his accumulated benefits, by the
end of the fifth year of service. This mini-
mum percentage would then increase 5 per-
centage points in each of the next five years
(at least 50 percent vested by the end of the
tenth year of service) and by 10 percentage
points in each of the following 5 years (so
that the employee must be fully vested not
later than the completion of his 15th year of
service). Once an employee becomes eligible
to participate, up to five years of participa-
tion service are to be credited to years of serv-
ice for vesting eligibility. (sec. 221).

HOUSE: TITLE I

Definition of Year of Service

To be defined primarily by regulations de-
veloped jointly by Secretaries of Labor and
Treasury but subject to guidelines set forth
in the bill-including guidelines for seasonal
employees. Year of service to take into ac-
count the customary working period (such as
hours, days, weeks, months, or years) in any
industry where, by the nature of the employ-
ment, the work period is substantially dif-
ferent from industry generally. (sec. 206).
Vesting Requirement

These alternatives are provided: (1) Em-
ployee must be vested in at least 25 percent
of his accumulated benefits by the end of
the fifth year of service; the minimum per-
centage to increase 5 percentage points in
each of the next 5 years (at least 50 per-
cent vested by the end of the tenth year
of service) and by 10 percentage points in
each of the following 5 years (so that the
employee must be fully vested not later than
the completion of his 15th year of service).

(2) Fully vested (100 percent) by the end of the 10th year of service.

(3) Rule of 45-that is, at least 50 percent vested when age plus service equal 45 years (provided that there is at least 5 years of service); the minimum percentage to increase by 10 percentage points in each of the following 5 years. (sec. 203). Application of vesting requirement to service prior to effective date of Act

PRIVATE PENSION REFORM LEGISLATION-COMPARISON OF SENATE-PASSED AND HOUSE-PASSED VERSIONS OF H.R. 2-Continued

SENATE

With certain exceptions, service prior to
effective date is included, both for calcu-
lating the years of service required to qualify
for vesting and for determining the years of
accumulated benefits to be vested. (sec 221).

In computing years of service to apply the
vesting standard, only three of the five years
of service need be consecutive. Generally
service before and after breaks are to be ag-
gregated for vesting and participation. (sec.
221).

No provision.

HOUSE: TITLE I

With certain exceptions, service prior to
the effective date is included, both for cal-
culating the years of service required to qual-
ify for vesting and for determining the years
of accumulated benefits to be vested. How-
ever, service by an employee prior to Janu-
ary 1, 1969, is required to be taken into ac-
count only if the employee has served at
least 5 years with that employer (or under
a multiemployer plan) after December 31,
1968. (sec. 203).

Treatment of Breaks-in-Service

In determining an individual's participa-
tion and vesting status after a break in serv-
ice, a plan may exclude prior service of an
employee who has a break in service of 1 or
more years until the individual completes up
to 1 year of work upon returning. However,
where a rehired employee had completed at
least 4 consecutive years of service before the
break, his prior years of service must be taken
into consideration for purposes of computing
his years of service unless the break is for 6
years or more.

However, if a rehired employee acquired a
nonforfeitable right to at least 50 percent
of his accrued benefits prior to the break in
service, all his prior service must be taken
into consideration in computing his years of
service, regardless of the duration of the
break. (sec. 206).

Transition Rules for Existing Plans

Plans in effect on January 1, 1974 would be required to provide only 50 percent of the otherwise applicable vesting requirement during the first year that the bill's vesting standards become effective, with this percentage rising by 10 percent annually until the full requirement has to be provided after five years. (sec. 203).

HOUSE: TITLE II

Same as title I. (sec. 1012).