-
https://clinton.presidentiallibraries.us/files/original/2865f2ce6d23e7dcf849044d34882437.pdf
efd62c8c302a73b893e4a8a9d9058b9d
PDF Text
Text
FOIA Number: 2006-0458-F
FOIA
This is not a textual record. This is used as an
administrative marker by the William J. Clinton
Presidential Library Staff.
Collection/Record Group:
Clinton Presidential Records
Subgroup/Office of Origin:
Communications
Series/Staff Member:
Don Baer
Subseries:
OA/ID Number:
10136
FolderiD:
Folder Title:
Pensions
Stack:
Row:
Section:
Shelf:
Position:
s
90
2
6
3
�DEPARTMENT OF THE TREASURY
WASHINGTON
October 12, 1995
MEMORANDUM FOR PRESIDENT CLINTON
FROM:
LES SAMUELS
1....--
irS
THROUGH: SECRETARY RUBIN ~ ."<.. •
SUBJECT:
c (j()
\<... .
Reversion of Pension Assets and Government Plans
. A. Pension Reversions. In discussions on the Ways and Means proposal to permit employers to
withdraw assets from pension plans, you have asked whether it would be advisable to relax, in a more
limited way than the Ways and Means proposal, the restrictions on employers' ability to remove assetS
from qualified pension plans. We believe the Administration should approach with great caution any
proposed relaxation of these restrictions.
Current Law. Employers may not make use of any pension plan assets unless they terminate the plan,
satisfy all liabilities to plan participants, and pay at least a 20% excise tax. A limited exception,
enacted in 1990 and extended as part of GATT, allows pension assets that generally exceed 125% of
the plan's so-called "current liability" to be redirected toward paying the current year's retiree health
benefits-- without terminating the plan or paying the excise tax. Because this exception is not widely
used-- strict conditions apply (e.g., employers must agree to maintain retiree health benefits for five
years) -- and because its extension in GATT was necessary to satisfy then-Senator Danforth, the
Administration accepted the limited GATT extension in 1994.
Republican Proposal. The Republican proposal would allow companies to withdraw pension assets
from the plan for any purpose, provided that, in general, at least 125% of "current liability" remains
in the plan. No excise tax would apply to withdrawals made prior to July 1, 1996, and only a 6.5%
excise tax would be imposed on withdrawals made through the year 2000.
Concerns With Expanding Corporate Access to Pension Assets. Expanding corporate access to
assets in pension plans could increase the risk to the Pension Benefit Guaranty Corporation (PBGC),
which insures pension benefits. A plan that has an apparent 25% "cushion" of assets in excess of
"current liability" today may be underfunded tomorrow, because the "cushion" (1) may be significantly
overstated as employers use aggressive assumptions in calculating liability, (2) is subject to the
fluctuations of the financial markets, and (3) may erode rapidly when employers experience fmancial
problems.
Permitting employers greater freedom to withdraw pension assets also raises tax policy concerns,
because it allows companies to use retirement savings tax incentives for unrelated purposes. One of
the main tax advantages conferred on qualified pension plans is the tax-free accumulation of the
earnings on pension assets. Under the proposal, employers that withdraw assets would escape all or
most of the excise tax that was designed to recapture this valuable tax benefit.
The Senate Finance Committee is reportedly considering a more limited version of the Ways and
Means proposal. We will carefully consider the Finance Committee proposal, but we believe a very
high standard must be met before pension assets can be withdrawn by employers.
'
I
i
\
�.
- .----·- ----
2
B. State and Local Government Plans. You have also asked how the Ways and Means proposal
would apply to state and local government pension plans and whether the federal government is liable
for funding deficiencies of these plans. Unlike private employers, State and local governments are not
required to set aside pension assets in trust for their employees. However, if they do so, reversions
are generally prohibited. While the Republican reversion proposal, as drafted, is not limited to private
sector plans, it would not raise tax policy concerns with respect to governmental employers; as taxexempt entities, they receive no special benefit from the tax exemption of earnings on pension assets
held in trust, and are exempt from the excise tax on reversions. In addition, withdrawal of assets from
governmental plans would not increase potential PBGC liability because the ~BGC does not insure
these plans.
cc
Laura Tyson
\
\
\
�
Dublin Core
The Dublin Core metadata element set is common to all Omeka records, including items, files, and collections. For more information see, http://dublincore.org/documents/dces/.
Title
A name given to the resource
Don Baer
Creator
An entity primarily responsible for making the resource
Office of Communications
Don Baer
Date
A point or period of time associated with an event in the lifecycle of the resource
1994-1997
Is Part Of
A related resource in which the described resource is physically or logically included.
<a href="http://clinton.presidentiallibraries.us/items/show/36008" target="_blank">Collection Finding Aid</a>
<a href="https://catalog.archives.gov/id/7431981" target="_blank">National Archives Catalog Description</a>
Identifier
An unambiguous reference to the resource within a given context
2006-0458-F
Description
An account of the resource
Donald Baer was Assistant to the President and Director of Communications in the White House Communications Office. The records in this collection contain copies of speeches, speech drafts, talking points, letters, notes, memoranda, background material, correspondence, reports, excerpts from manuscripts and books, news articles, presidential schedules, telephone message forms, and telephone call lists.
Provenance
A statement of any changes in ownership and custody of the resource since its creation that are significant for its authenticity, integrity, and interpretation. The statement may include a description of any changes successive custodians made to the resource.
Clinton Presidential Records: White House Staff and Office Files
Publisher
An entity responsible for making the resource available
William J. Clinton Presidential Library & Museum
Extent
The size or duration of the resource.
537 folders in 34 boxes
Text
A resource consisting primarily of words for reading. Examples include books, letters, dissertations, poems, newspapers, articles, archives of mailing lists. Note that facsimiles or images of texts are still of the genre Text.
Original Format
The type of object, such as painting, sculpture, paper, photo, and additional data
Paper
Dublin Core
The Dublin Core metadata element set is common to all Omeka records, including items, files, and collections. For more information see, http://dublincore.org/documents/dces/.
Title
A name given to the resource
Pensions
Creator
An entity primarily responsible for making the resource
Office of Communications
Don Baer
Identifier
An unambiguous reference to the resource within a given context
2006-0458-F
Is Part Of
A related resource in which the described resource is physically or logically included.
Box 19
<a href="http://www.clintonlibrary.gov/assets/Documents/Finding-Aids/2006/2006-0458-F.pdf" target="_blank">Collection Finding Aid</a>
<a href="https://catalog.archives.gov/id/7431981" target="_blank">National Archives Catalog Description</a>
Provenance
A statement of any changes in ownership and custody of the resource since its creation that are significant for its authenticity, integrity, and interpretation. The statement may include a description of any changes successive custodians made to the resource.
Clinton Presidential Records: White House Staff and Office Files
Publisher
An entity responsible for making the resource available
William J. Clinton Presidential Library & Museum
Format
The file format, physical medium, or dimensions of the resource
Adobe Acrobat Document
Medium
The material or physical carrier of the resource.
Reproduction-Reference
Date Created
Date of creation of the resource.
1/12/2015
Source
A related resource from which the described resource is derived
42-t-7431981-20060458F-019-018-2014
7431981