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Pension Reform Under Active Discussion
Congress has started public discussions about the administration's pension reform proposal.
The Senate Finance Committee, House Education and the Workforce Committee, and House
Ways and Means Select Revenue Measures Subcommittee held hearings in March. In addition,
the Senate Health, Education, Labor and Pensions (HELP) and Finance Committees conducted a
joint forum to discuss the future of the private pension system. How Do Retirement Plans Affect Employee Behavior?
Recent trends in U.S. private pensions are undeniable. Over the last 25 years, defined benefit
plans — once the centerpiece of the retirement portfolio — have lost considerable ground to defined
contribution plans, which have become the primary vehicle for saving for retirement. Some
analysts claim that traditional defined benefit plans are a dying breed (if not already dead). IRS Proposes Regulations on Designated Roth Contributions to 401(k) Plans
The IRS has issued proposed amendments to the 401(k) and (m) regulations that would provide
guidance on designated Roth contributions under Internal Revenue Code section 402A, added
by EGTRRA. Beginning in 2006, a 401(k) plan may permit employees to designate some or all of
their elective contributions as Roth contributions. New Filing Requirements for U.S. Residents With Canadian Retirement Plans
Under the U.S.-Canada Tax Treaty, U.S. taxpayers with a Canadian Registered Retirement Savings
Plan or Registered Retirement Income Fund can make an election to avoid paying taxes on plan
earnings until they start receiving benefits from the plan. Typically, a U.S. taxpayer who has an
RRSP or RRIF is a U.S. resident who previously lived and worked in Canada.
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