H.R. 1320 -- Legislation to Exempt Multiemployer Pension Plans from Compensation-
Based Limits on Benefits

Introduced by Rep. Pete Visclosky (April 14, 1997)

Cosponsors: Campbell, Abercrombie, Farr, Evans, Doyle, Lipinski, Dellums, Lofgren, Adam Smith, Klink, Kucinich, Blagojevich, Sandlin, Poshard, Kaptur, Quinn

Referred to: House Committee on Ways & Means

Summary:

H.R. 1320 would exempt multiemployer pension plans from the compensation-based limit on benefits contained in Section 415 of the Internal Revenue Code.

Under Section 415, pension benefits from multiemployer pension plans are limited to the average of the retired employee's three highest consecutive years of income. This compensation-based limit makes perfect sense for many types of corporate pension plans, where pensions are based on compensation and income levels are relatively steady and tend to increase over time. But for many participants in multiemployer pension plans, limiting pension benefits in this way is both unfair and inequitable.

Unlike their corporate counterparts, benefits earned under multiemployer pension plans have very little relationship to actual compensation. Rather, benefits are generally based on a worker's years of covered service and the collectively-bargained dollar amount of contributions made into the multiemployer plan. But the compensation-based limits contained in Section 415 override the benefit rates set in the multiemployer plan, often decreasing a retiree's pension benefit well bellow what was negotiated.

Workers in the building and construction industries are particularly disadvantaged by Section 415. Compensation for these workers can fluctuate dramatically from year-to-year, with the availability of work in these mobile, cyclical industries. For workers in these industries, Section 415 often has the effect of driving the compensation-based limit much lower than the worker's average income. What's more, finding the three highest years of consecutive compensation often means basing the benefit limit on a period well before the date of retirement, which can mean a dramatic drop in income and lower standard of living once the worker retires.

Legislation passed by the 104th Congress, P.L. 104-188, which provided a long-overdue increase in the minimum wage, also exempted public employees from the pension benefit limits contained in Section 415. But for reasons that have gone unexplained, P.L. 104-188 did not extend this exemption to multiemployer pension plans.

Multiemployer pension plans are not tax shelters and exempting the plans from Section 415 will not result in an unfair windfall of pension benefits. Instead, my legislation would take a necessary step to ensure that benefits from multiemployer plans are not artificially reduced, and that every retired worker covered by these plans receives the pension benefits that he or she rightly deserves.

Status:

President Clinton's Fiscal Year 1999 budget proposal includes the Section 415 exemption that is contained in H.R. 1320.

In addition, on February 3, 1998, Senator Barbara Boxer introduced a companion bill to H.R. 1320 in the U.S. Senate. Like my bill, S. 1600 would exempt multiemployer pension plans from the compensation limits of Section 415. I am hopeful that the provisions contained in H.R. 1320 and S. 1600 will be approved by the Congress and signed into law by the President before the end of the year.

See more information about H.R. 1320 on THOMAS