27 type of financial institutions which can serve as plan custodians or trustees. Senate amendment.-No comparable provision. 5. Certain Puerto Rican Pension Plans House bill. A trust which is part of a pension, profit-sharing, or stock bonus plan, all of the participants of which are residents of Puerto Rico, is to be treated (for years after 1973) as though it were an exempt U.S. employee benefit trust if the trust is exempt from income taxes under the laws of Puerto Rico. Senate amendment.-No camparable provision. 6. Deduction for Severance Payments Required by Foreign Law Present law. Contributions to a nonqualified trust are deductible by the employer when the contribution is includable in the income of the participant, but only if separate accounts are maintained under the plan for each participant. House bill.-The House bill provides that for years after 1973 the employer may deduct contributions for severance payments for nonresident alien employees, even though separate accounts are not maintained (and even though the contributions which are included in income by the aliens are not subject to U.S. tax) if three conditions are satisfied: (1) The employer is engaged in a trade or business in a foreign country; (2) The employer is required by foreign law to make the severance payments, based on periods of service; (3) The employer establishes a U.S. trust to fund these payments. Senate amendment.-The Senate amendment contains no comparable provision. 7. Remedial Retroactive Plan Amendments House bill.-Retroactive plan amendments which correct a plan that does not meet the requirements for tax qualification are allowed to cure a new plan or to cure an amendment to an existing plan. Such retroactive changes can be made within the time for filing the employer's tax return for the year in which the plan was put into effect or in which the amendment was adopted (or such later time designated by the Secretary of the Treasury). Senate amendment.-Same as the House bill. 8. Rules for Certain Negotiated Plans Present law. Present law provides special rules for contributions to a plan established before 1954 under an agreement between a union and the United 249 249 (A-125) 258 638 (A-135) 351 28 States Government. Under this provision, contributions are not deductible under the general deferred compensation provisions of the code but are deductible solely as general trade or business compensation expenses. Such a plan must provide both welfare and pension benefits. House bill.-In order to facilitate conversion of the pension benefits plan into a regular tax-qualified pension plan, the House bill would provide the following amendments: (1) people who technically were self-employed individuals before July 1, 1974, are permitted to have their service under the plan credited as though they were regular employees; (2) no such self-employed individual is permitted to establish a separate H.R. 10 plan for service covered under the regular plan; (3) people who were plan participants before July 1, 1974, are to be treated as employees of participating employers even though in some circumstances those employers do not officially become participating employers until July 1, 1975; and (4) a code provision relating to deductions incurred by certain membership organizations in transactions with members is not to apply to the trust described above. These provisions generally are to apply to taxable years ending on or after June 30, 1972. Senate amendment.-The Senate amendment has no comparable provision. 1084 Labor Day, 1974 PRESIDENTIAL DOCUMENTS: GERALD R. FORD, 1974 Statement by the President. September 2, 1974 I salute the working men and women of America on the 80th anniversary of labor's special day. Their strength of mind, heart, and hand continues to guide our destiny. As American society has changed in modern times, the role and needs of labor have also changed. A need for organization arose and was filled. Today, therefore, we salute not only the 93 million men and women in the labor forces but also the organizations which represent labor so well. The goals of those organizations were eloquently summed up by Samuel Gompers 81 years ago, when he said that labor wants "more school houses and less jails; more books and less arsenals; more learning and less vice; more constant work and less crime; more leisure and less greed; more justice and less revenge; in fact, more of the opportunities to cultivate our better natures... The organized efforts of America's working men and women have been instrumental in helping move this Nation a long way towards those goals. Today, the Nation needs their support in a new struggle for productivity— for more purchasing power and less inflation. I am confident that the men and women of the American labor movement know that the struggle against inflation is a joint venture by all segments of the American people and that they will do their part, On this Labor Day, I say to my fellow Americans who have provided us with so much in the past and from whom we expect even more in the future-thank you. Committee on Education and Labor, .nd the Senate Committee on Labor and Public Welfare. I think it is indicative of the kind of cooperation that can be achieved between labor and management. I know how hard and how long many people in the labor movement and management have worked to make sure that we came up with the right kind of legislation. I think it is a good reflection on the relationship between the executive branch on the one hand and the legislative branch on the other. So, when you add it all up, even though this is an extremely complicated piece of legislation, it has been the long labors of many, many people that have produced the kind of result that is good for America and, primarily, for those who will be the ultimate beneficiaries of the legislation. This legislation will alleviate the fears and the anxiety of people who are on the production lines or in the mines or elsewhere, in that they now know that their investment in private pension funds will be better protected, they have a vested right. They are certain, obviously, of better management of those funds. It certainly will give to those 30-plus million American workers a greater degree of certainty as they face retirement in the future. I do want to extend to all of you my congratulations and compliments. I do not think I have had a happier day than the opportunity today to see so many people who have worked so long on legislation of such great significance, and to have it happen on Labor Day is a tribute to the American process, a process which is good for all of Pension Reform Bill The President's Remarks at the Bill Signing Ceremony at the White House. September 2, 1974 Mr. Speaker, my former colleagues in the Congress, Secretary Brennan, Secretary Dent, distinguished leaders in the labor movement, distinguished leaders in business: It is a great privilege and pleasure for me to have the opportunity of participating in the signing of that massive bill. I think this is really an historic Labor Day-historic in the sense that this legislation will probably give more benefits and rights and success in the area of labormanagement than almost anything in the history of this country. I think it is historic, too, because that tremendous document is indicative of the kind of cooperation between the House and Senate, the House Committee on Ways and Means, and the Senate Committee on Finance, the House Pension Reform Bill Statement by the President Upon Signing the Employee Dramatic growth in recent years has thrust private pension plans into a central role in determining how older Americans live in their retirement years. From 1960 to 1970, private pension coverage increased from 21.2 million employees to approximately 30 million workers. During this same period, assets of these private plans increased from $52 billion to $138 billion. And they are now increasing at a rate of $12-15 billion a year. It will not be long before such assets become the largest source of capital in our economy. Volume 10-Number 36 PRESIDENTIAL DOCUMENTS: GERALD I. FORD, 1974 Yet, this same growth in pension plans has brought with it a host of new problems. Many workers have ultimately lost their benefits even after relatively long service-because when they left jobs, they thereby gave up rights to hard-earned pension benefits. Others have sustained hardships because their companies folded with insufficient funds in the pension plan to pay promised pensions. In addition, some pension funds have been invested primarily for the benefit of the companies or plan administrators, not for the workers. It is essential to bring some order and humanity into this welter of different and sometimes inequitable retirement plans within private industry. Today, with great pleasure, I am signing into law a landmark measure that may finally give the American worker solid protection in his pension plan. Under this law, which is entitled the Employee Retirement Income Security Act of 1974, the men and women of our labor force will have much more clearly defined rights to pension funds and greater assurances that retirement dollars will be there when they are needed. Employees will also be given greater tax incentives to provide for their own retirement if a company plan is unavailable. It is certainly appropriate that this law be signed on Labor Day, since this act marks a brighter future for almost all the men and women of our labor force. There are seven essential parts to this legislation: ---first, it establishes major standards for employee participation in private retirement plans, standards which encourage earlier participation by workers, and longer periods over which benefits can be earned; --second, and perhaps most important to those already under private pension plans, the new law establishes equitable standards for the "vesting" of retirement benefits. The standards under this law will assure to the greatest possible extent that a worker who participates in a plan actually receives some benefits from that plan and does not lose them because of punishing forfeiture standards or inadequate pension fund resources; -third, the act requires that the fiduciaries who control the pension funds act as reasonable and prudent men, discharging their duties solely in the interests of protecting the beneficiaries of the fund; -fourth, the law will impose a high standard upon the operation of plans by making mandatory full disclosure of all information concerning the operations of the employer's retirement plan; -fifth, the tax laws will be revised to provide more nearly equal treatment to different kind of plans. The new law will encourage the self-employed to provide for their retirement by raising the limits on the amount of their income which may be contributed on a deductible basis to a retirement fund. It will also allow the one-half of American employees not covered by private pension plans to enjoy equivalent tax advantages if they set up individual retirement accounts; 1085 -sixth, as a final backstop to private pension plans, a federally sponsored, privately financed Pension Benefit Guaranty Corporation will be set up to pay an adequate retirement benefit to those whose private pension funds have foundered and are not adequate for the beneficiaries; and, -seventh, the act will establish a limited form of portability of pension benefits by allowing workers to transfer some of their pension benefits to other plans or to their individual retirement accounts. Together these seven points add up to a better deal for American workers than they have ever known before in private pension plans. I believe this act is a model of what can be done by the Government to improve the lives of Americans within the private sector without harming the dynamics of our free enterprise system. I also believe that its passage is a model of cooperation and hard work between the executive and the legislative branches. The act has its genesis in a message to the Congress by President Nixon on December 8, 1971. The legislation was and is extraordinarily complicated. It was worked on relentlessly by four congressional committees: House Ways and Means, House Education and Labor, Senate Labor and Public Welfare, and Senate Finance, Individual members have devoted enormous effort to this bill. I believe we can all be proud that the Government has now taken action to make workers' lives more secure. NOTE: As enactual, the bill (H.R. 2) is Public Law 93-406, approved September 2, 1974. Volume 10 Number 36 U. S. GOVERNMENT PRINTING OFFICE 1976 O-25-028 (Vol. III) |