Federal government.

This is admittedly a far-reaching

proposal. However, we candidly view the jurisdictional problems of ERISA as only a symptomatic part of the overall problem, and we consider such a consolidated "super-agency" as essential to resolution of the overall problem.

H.R. 4340 and S. 3017 are comparable in their respective concepts of consolidation. However, there are certain

PBGC would be melded into

the EBC.

Responsible only for em

ployee benefit plans sub-
ject to ERISA.

EBC would not have authority
over excise taxes, but
Treasury would no longer

have authority to administer excise taxes as they relate to employee benefit plans covered by ERISA.

Transfers ERISA Title I and

Title IV functions, plus

specified functions relating

to certain sections of the

Internal Revenue Code covering

employee benefit plans subject to ERISA.

ERISA Advisory Council continued, with designated representation of employers

maintaining small employer benefit plans.

A basic concept that we support is that laws relating to employee benefit plans should be administered and enforced by an agency whose primary concerns are with protection of the rights of participants and beneficiaries and

with encouraging the viability and growth of the private

employee benefit system. stered and enforced by an agency with a primary concern of raising revenues. As noted, we would prefer a cabinet level agency or administration with overall responsibility over all private and public employee benefit plans. We would support either an independent commission or a separate agency within an existing department of the Executive Branch. Recommendations:

Such laws should not be admini

1. We recommend that the approach of H. R. 4340 be followed in transferring broad functions relating to all employee benefit plans.

2. We recommend that the excise tax provisions be repealed, leaving only civil and criminal enforcement penalties for abuse of the prohibited transaction provisions.

3. We recommend that the PBGC be retained as a separate entity within the new agency or commission.

4. Assuming an agency or commission below the Cabinet level, we recommend that Special Liaison officers of the Departments of Treasury and Labor serve on the Board of Directors of the agency or commission.

5. Assuming an agency or commission below the Cabinet level, we recommend the five member Board of Directors contemplated by S.3017. Furthermore, we recommend that the membership of the Board of Directors be balanced politically. All appointees should be subject to Senate confirmation.

6.

We recommend retention of an Advisory Council, with a designated representative of employers maintaining small plans.

7. Assuming an agency or commission below the Cabinet level, we recommend that the chief executive officer of such agency or commission also serve as Chairman of the Board of

Directors.

would terminate jurisdiction of the Securities Exchange

Commission over employee benefit plans (as opposed to the underlying assets held in such plans).

2. Retroactive Disqualification.

ERISA should be amended to prohibit disquali

fication of employee benefit plans based on innocent administrative error that can be corrected by retroactive allocation or adjustment. (See Ludden v. Commissioner, 68 T.C. No. 7 (8/31/77); Forsyth Emergency Services v. Commissioner, 68

T.C. No. 77 (9/12/77); Section 307 of S. 3017).

ERISA should be amended to expand and expedite

the existing declaratory judgment procedure by removing administrative impediments and by extending jurisdiction to

United States District Courts.

(See S. 901).

VI. INCENTIVES FOR PLAN FORMATION AND IMPROVEMENT.

We believe the major growth in private pension

coverage will come in the small employer/small plan area. Obviously plans are adopted for a number of reasons, but the basic economic incentive of a current tax deduction plus income deferral must be recognized as a primary motivation. At the same time, the influence of various segments of the private pension industry in aggressively promoting the establishment of new plans must also be recognized. To the extent that clear economic incentives are available, and are readily explainable to employers, employers will be encouraged to adopt plans.

Recommendations

1. New Plans. We recommend that additional tax incentives, in the form of additional, "early year" deductions or credits, be given to employers who adopt new plans. Section 304 of S. 3017).

(See

2. Improved Plans. To encourage the expansion of coverage and benefits, we recommend that additional tax incentives be given to employers who adopt "expanded" or "improved" plans. For example, if a plan meets the minimum standards embodied in ERISA, the normal deduction for contributions would be granted. As participation, vesting, coverage, and other minimum standards were expanded beyond the minimum, "points" would be given, on a graded basis as expanded, which would convert to additional deductions, up to a maximum of 125%/130% of the current contribution. The concept is somewhat similar to the additional investment tax credit awarded to TRASOPS, and to H.R. 356 (Goldwater).

(See Section 305 of S. 3017.)