Too often, pension plan legislation seems to be written with the large (several thousand participant) plan sponsor in mind, while paying little regard to the thousands of small plan sponsors. This can result in ridiculous administrative burdens placed on small plan sponsors and their advisors. Case in point: employer election rules, which require the defined benefit plan sponsor to elect which actuarial assumptions he or she wants reflected in the plan valuation. Small plan sponsors have enough to do (i.e. – keep their business thriving) without having to make confusing elections about actuarial assumptions.
The proposed Small Business Pension Promotion Act of 2011, if passed, would help eliminate or modify for the small plan sponsor some “large plan” rules, including:
- Offering the possibility of relief from Required Minimum Distributions in times of general economic decline (which would help older participants retain more tax-sheltered retirement savings).
- Including pension and IRA deductible contributions in the calculation of net earnings for self-employed individuals.
- Providing benefit restriction relief in certain cases for small defined benefit plans that have “advance funded” contributions in past years.
- Repealing the tax on nondeductible contributions to qualified plans.
- Offering the possibility of flexibility and relief from the burden of required interim plan amendments to qualified plans.
- “Grandfathering” certain plans to allow for earlier normal retirement age definitions.
So what are the chances of passage? Less than 1%, according to the prognosticators at GovTrack.us. And even with passage of this proposed bill, numerous “large plan” rules would continue to apply to the small plan sponsor (note that the employer elections of actuarial assumptions aren’t touched in this proposal). Oh, well. It’s nice to know that someone’s at least trying to look out for the little guy this time.