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AICPA testifies at hearings on pension benefit protection.

The American Institute of CPAs urged Congress to remove tax disincentives that prevent business from funding their pension plans fully. Harvey Coustan, chairman of the AICPA tax executive committee, told the House Ways and Means Committee that while the Retirement Protection Act of 1993 (HR 3396) "addresses some of the issues protecting plan funding, additional important steps can and should be taken to ensure the necessary funds are put aside by plan sponsors to pay the benefits promised to American workers."

Coustan told the Journal "There are parts of the bill that w applaud, but we are opposed to others." In particular, the AICPA opposes the elimination of cross-testing, in which a complex set of rules to test for discrimination in defined-benefit plans also are used for defined-contribution plans. "Cross-testing treats all employees equally," Coustan said, "from the beginning to the end of employment."

The AICPA also opposes a 150% full-funding limitation that disallows deductions for employer contributions over and above 150% of current liabilities. In his testimony, Coustan pointed out that the term full funding as used in the bill did not mean a plan had enough funds on hand to pay all benefits when they come due. Rather, he said, full funding was based on an artificial assumption that a plan terminates today, with a 150% cap on today's liabilities.

In addition, Coustan said, the AICPA opposes the 50% reversion penalty. Under certain circumstances, an employer withdrawing funds from an overfunded pension plan must pay a 50% penalty tax on the reverted funds, even if they are used to enhance the security of other employee benefit programs.
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Publication:Journal of Accountancy
Article Type:Brief Article
Date:Jul 1, 1994
Words:269
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