4 COST AND CONFUSION OR THE RESULT OF OUR WORK WILL BE THE THE PROVISIONS OF THESE TWO BILLS ARE COMPLEX AND EXTENSIVE. I APPLAUD THE BIPARTISAN, HOUSE-SENATE STAFF TASK FORCE WHICH WORKED SO HARD TO DEVELOP THIS LEGISLATION. SPECIAL RECOGNITION IS DESERVED BY PHYLLIS BORZI AND RUSS MUELLER. BUT NOW IT IS TIME FOR MEMBERS TO WORK THEIR WILL AND OF EVERY MAN AND WOMAN IN AMERICA: A COMFORTABLE AND SECURE Mr. CHANDLER. Thank you, Mr. Chairman. And we thank you for your testimony. Mr. FALLOW. No. I have no questions. Mr. CLAY. The next witnesses will consist of a panel. Amy Shannon, a research associate at Pension Rights Center, accompanied by Karen Ferguson. And Jack Guildroy, a member of the National Legislative Council of the American Association of Retired Persons. Mr. Henry Duffy, president of the Air Line Pilots Association was scheduled to testimony this morning. But he's in negotiations. And without objection his entire statement will be included in the record at this point. [Prepared statement of Henry Duffy follows:] PREPARED STATEMENT OF CAPT. HENRY A. DUFFY, PRESIDENT, AIR LINE PILOTS ASSOCIATION The Air Line Pilots Association appreciates the opportunity to present this statement to the Subcommittee on Labor-Management Relations of the Committee on Education and Labor. ALPA represents 34,000 pilots, who fly for 47 airlines, for purposes of collective bargaining under the Railway Labor Act. As such, ALPA oversees literally hundreds of retirement benefit plans covering 40,000 or more active workers, retirees and survivors. ALPA heartily commends the Subcommittee on its continuing and exhaustive efforts to shape and reform this country's retirement policy. I. H.R. 3594, The Retirement Income Policy Act. 1 We are particularly encouraged to see this retirement policy legislation originating in this Committee, rather than in the tax committees. In this decade, ALPA and the benefits community at large have been hit annually with piecemeal revisions in the benefits tax law which have undermined the comprehensive and cohesive scheme established by ERISA. We believe, therefore, that the establishment of national retirement policy is both a worthy and timely legislative goal. Maximum Limitations on Contributions and Benefits (Code Section 415). The bill proposes several amendments to the contribution and benefit limitations prescribed by Code Section 415. The defined benefit dollar limit at age 62 would be revised from its present-law level of $90,000 to twice the Social Security taxable wage base. ALPA supports the concept of tying the dollar limit to the taxable wage base. However, we would suggest a modification to assure that the proposed limit could not result in a reduction from the present-law level. The present-law level of $90,000 includes a costof-living increase to be effective January 1, 1988. Assuming an increase of six percent at that time, the dollar limit in 1988 would be $95,400 at age 62. However, under the proposal, the 1986 taxable wage base of 842,000 would have to increase at least four percent each year from now through 1989, the first year to which the proposal would apply, in order for the proposed dollar limit to exceed that which would apply under present law (assuming a six percent costof-living increase in 1988). In order to avoid the possibility that the proposed dollar limit formula could reduce the dollar limit in 1989 from the limit in effect in 1988, we suggest a modification to the proposed formula to preserve, if it is higher, the limit in effect prior to the deferred effective As this Subcommittee is aware, pilots are required by Federal Aviation Regulations to retire at age 60. Thus, it is not possible for a pilot to accrue a benefit with respect to service from age 60 to age 62. Therefore, we urge that the defined benefit dollar limit which is applied to other employees at age 62 be applied to pilots at age 60. Technically, this could be accomplished by substituting "60" for "62" wherever it appears in Section 415(b), with respect to pilots. We believe this change is equitable, in view of the mandatory pilot retirement age of 60. Under the proposal, the defined contribution limits would be entirely redefined, with additional, special limits placed on both 401(k) plans and nonretirement savings plans. The defined contribution limit applicable to a participant in a retirement plan would be the lesser of fifty percent of the taxable wage base or twenty percent of his compensation. ALPA supports use of the taxable wage base as the factor to determine the dollar limit, but would preserve, if higher, the dollar limit in effect under present law. ALPA strongly opposes the proposal to reduce the percentage-ofcompensation limitation from twenty-five percent to twenty percent. This proposal will have a substantial adverse impact on negotiated pilot retirement plans. The effect of the reduction would be especially severe where an ESOP or profit sharing plan is established for pilots who already participate in a money purchase plan with a significant contribution rate. In such cases, the pilots would be effectively precluded from participating in the supplemental plan. |