Dear Mr. Chairman:
I share with you a commitment to increasing retirement security for all Americans. You, along with other members of the Finance Committee, are a sponsor of the bipartisan Pension Coverage and Portability Act (S.741) which expands coverage for small business, enhances fairness for women, strengthens pension security and enforcement, reduces red tape, increases pension portability and encourages retirement education. We incorporated these provisions in the Taxpayer Refund and Relief Act of 1999, which, as you will agree, provides the most comprehensive expansion of both private and employer-provided retirement plans in recent years.
Section 303(c) was added as an amendment during floor debate to the Bankruptcy Reform Act. This provision provides that a debtor may waive the exemption of his or her retirement plan assets from creditors in bankruptcy. Current law under the Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code requires that certain retirement plans are not subject to the claims of creditors. Section 303(c) would provide that an individual could waive this exemption from creditors' claims by contract with creditors prior to the initiation of a bankruptcy proceeding. This type of waiver could be included as a term or condition of a credit or loan agreement at the insistence of a lender. If the individual accepts the condition, his or her retirement savings would be included in the bankruptcy estate subject to creditors.
I am concerned about the potential impact that this provision will have on the retirement plans that Americans depend upon for security in the older years. These retirement plans are not vehicles that individuals can use as a way to shelter assets in anticipation of bankruptcy.The current limits on how much a person can contribute to these plans should provide an adequate safeguard to this perceived abuse. Individuals can only contribute an annual maximum of $2,000 to an IRA, $10,500 to a 403(b) plans and $7,500 to a 457 plan, clearly not amounts which can be used to shelter assets. We should not put at risk assets accumulated through long term retirement savings that we are trying to promote through our other legislative efforts.
In addition, this provision is in the jurisdiction of the Finance Committee. Section 401(a)(13) of the Internal Revenue Code does not permit that benefits provided under a tax-qualified plan, such as a pension plan or a 401(k) plan may be assigned or alienated. Yet Section 303(c) permits this anti-alienation provision of the Internal Revenue Code to be waived. Any provision which effectively overturns a provision of the Internal Revenue Code is under the jurisdiction of the Finance Committee and should be addressed in this Committee.
While I appreciate your commitment to reform the bankruptcy code, I urge the conference committee to delete Section 303(c) from the bill.
Sincerely,
William V. Roth, Jr.
cc: The Honorable Orrin G. Hatch
Source: Ranking Member’s News
