NAM: Pension Bill Provides Certainty for Employees
Washington, DC, August 7, 2006--The pension reform bill approved last week by the Senate includes a “mixed bag” of reforms for pension plan sponsors, according to Dorothy Coleman, vice president of tax and domestic economic policy at the National Association of Manufacturers.
“While the bill likely will increase costs for employers that sponsor traditional defined benefit plans, it provides sponsors with certainty for future contributions,” she said.
“The Pension Protection Act of 2006 (H.R. 4) makes it easier for employers to provide retirement benefits and for employees to participate in these plans,” Coleman continued. “The bill clarifies that the hybrid plans are not inherently age discriminatory and contain ‘no inference’ language for plans that made conversions in the past. We also are pleased that the final bill did not contain provisions basing pension contributions on the sponsoring employer’s credit rating.
“At the same time, we are disappointed that the Senate missed another opportunity to extend and strengthen the R&D credit--and significantly reform the death tax,” she said. “We applaud the majority of the Senate that supported efforts to bring the Family Prosperity Act of 2006 (H.R, 5970) to the floor, yet are disappointed that 41 Senators prevented an up or down vote on this important legislation.
“The important role of R&D in the growth of U.S. jobs and innovation cannot be overstated,” Coleman pointed out. “Since the credit expired at the end of 2005, the cost of R&D has increased for the nearly 16,000 companies of all sizes that use the credit, imposing a ‘tax’ on innovation. This lapse, coupled with strong incentives overseas, are factors in the current trend of increasing foreign-based R&D spending.
“The Senate’s failure to remove the onerous burden of the death tax leaves thousands of family-owned manufacturing companies in limbo as they plan for the continuity of the business after the death of a principal shareholder,” Coleman said. “Unless a permanent solution that provides for planning certainty is adopted, the pre-2001 estate tax system and tax rates will resurface in 2011, resulting in more complexity and confusion for small businesses and increased planning costs.”
