Deferred-comp reforms enacted in Washington
By SHERRY HALBROOK
It’s 400 miles from Albany to Washington, but the distance between the two capitals seemed a lot shorter in June when PEF was able to convince leaders in Congress to enact deferred-compensation reforms that the union’s members have sought for years.
The reforms, which began their way through this session of Congress in legislation known as the “Portman-Cardin” bill, took many precarious turns before they finally came to President George Bush who signed them into law in June as an amendment to his controversial $1.35 trillion Tax-Cut Bill.
“This is a huge victory for PEF and our ability to move proposals at the federal level,” says PEF President Roger Benson. “It illustrates perfectly how PEF’s political reach has expanded over the past four years and how we have used that to get better retirements for our members.
“My congratulations to all the PEF leaders and staff who were involved in this latest retirement success,” Benson says, “and my deepest thanks to our friends, both Democrats and Republicans, in the House and Senate and at the American Federation of Teachers who delivered for us.”
Benson also praises the efforts of PEF Vice Presidents Joe Fox and Ken Brynien. The reforms to the federal tax law raise the maximum of tax-free income you can invest in Section 457 deferred-comp plans each year and allow you to roll over that investment into an IRA (individual retirement account) or other eligible plan when you leave state service.
That gives you more flexibility in how and when you reap the benefits of your investment and may allow you to save on the taxes you must pay when you access those benefits.
PEF staff are now in touch with members of the state Deferred Compensation Board to make sure the changes are implemented.
“All of the key players involved with this in Washington know that it was PEF that took the lead in identifying the need for these changes, in getting legislation introduced and in pushing it through the final twists and turns of Washington politics,” Benson says.
“Our Region 8 Political Action Committee raised the profile of this issue five years ago, and it gained momentum as PEF’s influence with federal legislators increased,” Benson says. “Especially responsive were Sen. Charles Schumer, former US Representative Gerald Solomon and US Representatives John Sweeney and Michael McNulty. They all played major roles in the final week, assuring that the legislation remained
in the final Senate
bill and survived the Joint Conference Committee
negotiations.”“Sen. Schumer told me that we would need the help of Sen. Max Baucus of Montana to keep this language alive in the conference report,” Benson says. “I immediately reached out to a fellow member of the AFT Executive Board — Jim McGarvey, who had just been elected president of the Montana AFL-CIO.
“And Jim opened the door for Joe Fox to talk directly with Max Baucus, who was then ranking minority-party member on the Senate Finance Committee and is now its chair. As a member of the Joint Conference Committee for the House and Senate, Baucus played a pivotal role in preserving the provisions PEF sought both in the Senate bill and the negotiated legislation signed by Bush,” Benson says. “Meanwhile John Sweeney and Gerry Solomon worked to clear the way on the Republican side of the Conference Committee.
“Years of effort by PEF came down to this intense period of high-level lobbying in late May. What we achieved will benefit public employees in PEF and throughout the country,” Benson says.
Public employees
enrolled in a Section 457 deferred-compensation plan will
be able to:• Roll their investment tax-free into individual retirement accounts (IRAs), Section 403(b) plans or other qualified plans when they leave or retire from public service, or use the funds to pay for any pension service credits they may be eligible to buy.
• Avoid Section 457 rules requiring an irrevocable election of benefits at the time they leave public service by rolling their money into an IRA where it can be withdrawn as needed.
• Invest up to $11,000 tax free in 2002, $12,000 in 2003, $13,000 in 2004, $14,000 in 2005, $15,000 in 2006, and indexed thereafter.
And in 2002, provisions are eliminated that subject many taxpayers with multiple tax-favored retirement plans to IRS audit.
PEF is reviewing details of the legislation to determine exactly when each of the new provisions will take effect. Check the PEF website at www.pef.org for any updates.