A Senate Finance Committee tax-reform working group hasrecommended extensive amendments to current retirement and savingstax policy.

The Savings and Investment Working Group, one of five groupsassigned to review various areas of tax reform, was assignedjurisdiction over capital gains taxes, financial products, definedbenefit pension plans, and private retirement savings accounts.

But because it was specifically charged with developing“consensus, bipartisan policy solutions,” the group, co-chaired bySen. Mike Crapo, R-ID, and Sherrod Brown, D-OH, only producedrecommendations relative to private retirement savings.

That bodes well for advocates of legislative action relative toretirement policy and suggests a continuation of the bipartisanspirit legislative watchers say has traditionally accompaniedretirement policy.

That is not to say that amid the report’s consensus there wasnot some difference.

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Specifically, the question of whether or not retirementlegislation should be a part of tax reform or stand-alonelegislation was noted as an area of dissent in the report.

Nonetheless, the current retirement system, a “success story” asseen by the group, has “many clear shortcomings” identifiable tomembers of both parties.

Namely, the often-cited questions of increasing access totax-deferred workplace plans, increasing participant and deferralrates, and addressing plan leakage were areas focusing thebi-partisan group’s attention.

On multiple-employer plans, the paper cites previouslyintroduced legislation that would remove the existing “nexus”requirement for small business to pool assets into one plan.

As is, non-affiliated small businesses can pool participants andassets into one plan, but they must share an industry association,such as membership in a trade organization.

By removing that requirement, Congress could encourage more MEPparticipation from smaller businesses that don’t offer retirementplans, and promote more competition among providers to smallplans.

The working group also is supportive of increasing the taxcredit for small business that starts new qualified plans.

As is, a $500 tax credit for three years is offered to defraythe costs of initiating a plan. Proposals by Sen. Orrin Hatch, R-UT, would up thatto $5,000, and proposal from the White House would up the total taxcredit to $4,500 for new plans, and an additional $1,500 credit forsmall employers with an existing plan that add an auto enrollmentcomponent.

Sen. Susan Collins, R-ME, and Sen. Ben Nelson,D-FL, have proposed legislation that would increasesafe harbor employer matches to 10 percent, from 6 percent, andprovide a new tax credit equal to the increased match.

In its paper, the bipartisan group did not recommend eitherspecific proposal but endorsed their consideration.

They also recommend Congress consider extending plan enrollmentto part-time workers, only 37 percent of whom have access to aplan, in part because existing law requires 1,000 hours of annualservice to be eligible. A proposal from the White House wouldreduce the threshold to 500 hours for employees with at least threeyears of service.

The group also supports some portion of annuity payments inretirement to be excluded from retirees’ taxable gross income,though the paper did not suggest how much of annuity payments couldbe received tax-free.

Proposals to extend the period for which a hardship loan can berepaid should also be considered, to protect workers withoutstanding 401(k) loans in the event they lose their jobs.

Also, the group supports allowing participants with a loan tocontinue contributing to retirement plans. Under currentregulations, participants are prohibited from contributing toplans, and receiving matches, for six months after a loan is takenout.

The working group also supports consideration of proposals toincrease the savers’ credit for contributions to tax-deferredretirement plans, and new legislation that would promotechurch-plan participation and encourage small businesses to offeremployee stock option plans.