Summary of a few things Bush/Congress did/plans to do when it returns.

The House Tax Reconciliation -a $56 billion tax cut - H.R. 4297, passed by a 234 to 197 vote and includes a two-year extension - to 2010 - of the 15 percent rate on capital gains and dividends. It does not include an extension of the alternative minimum (AMT) “patch.” On December 7, the House had approved an AMT patch in a separate bill, H.R. 4096. H.R. 4297 also contains a two-year extension of the Saver’s Credit. The House approved Tax cuts in the the tax reconciliation bill, the AMT patch, and a hurricane-related tax cut bill total some $130 billion, with only $70 billion protected under the budget law’s procedural rules so any tax cuts over that amount face a 60-vote threshold in the Senate giving the Democratic Party some power in the next Feb. conferences.


For our rich friends with deferred compensation, the IRS has suspended 409A Reporting Requirements in Notice 2005-94, as to the Form W-2 and Form 1099-MISC reporting and wage withholding requirements of IRC Section 409A (deferred compensation rules), until further notice. Of course taxes will still be due - it is just that the IRS will not know about the income.

For those that could not believe how much more than real people those CEO's are making, the new SEC rules may be ready as soon as next month to require companies to add salary, bonus, stock and option awards, and all benefits into one single compensation figure. Current rules allow executive compensation details to be reported in different parts of the proxy statements distributed to shareholders, so the extreme CEO compensation the CEO's friends on the Board have voted is hidden.

The Senate Filibuster caused the renewal of the Patriot Act to be limited to 30 days as the Congress tries to find agreement on the 14 expiring provisions of the law. The hang ups include both the law's requirement that requires banks and other businesses, and others (e.g., libraries), to make individuals’ records available to law enforcement (despite the rejected conference report including new procedural safeguards -approval by a special court - to protect individual civil rights that opponents said were still too intrusive of Americans’ right to privacy), and the idea of making permanent 12 of the 14 "sunsetted" provisions, with the other 2 approved for 4 more years.

VP Cheney's vote passed the $40 B "Deficit Reduction Bill" that while screwing the poor so as to preserve tax cuts has a provision to lift the moratorium on the Medicaid-based Long-Term Care Partnership program, allowing individuals to protect from Medicaid spend-down rules assets equal to the level of benefits provided by a qualified long-term care insurance policy (QLTCi). The House will need to repass the bill as amended by the Senate. The Deficit Reduction Bill also increases PBGC (defined benefit plan "insurance") premiums so as to save $3.5 billion over 10 years with the first new premiums for calendar year plans will come due on February 28, 2006 at a rate that was raised $19 to $30 per plan participant and is now indexed to wage inflation. A premium of $1,250 per plan participant will be imposed on plans terminated by companies while in bankruptcy, with the premium payable for three years after the company emerges from bankruptcy. The flat-rate premium for multiemployer plans goes from $2.60 to $8 per plan participant. It is possible the $30 PBGC rate will be increased yet again in the pension reform bills conference committee action.

In yet another tax cut attempt,the House Judiciary Committee’s Subcommittee on Commercial and Administrative Law approved H.R. 4019, a bill that would prevent states from subjecting certain nonresidents’ pensions to income tax. The bill, approved by voice vote, amends a 1996 law that prevents states from taxing pension income of people who moved out of the state after earning their pensions in the state seeking to tax that pension income. Generally, the law prohibits states from taxing nonresident retirement income if it is annuity or pension income that is distributed in equal payments over a period of at least 10 years or over the life expectancy of the recipient. This new bill adds protection to nonresidents who were self employed or who were partners in their firms during their working years.

Health rules that really only affect the more well off amongst us may be improved as Ways & Means member and GOP Whip Representative Eric Cantor (R-VA-7) introduced H.R. 4511, a bill that would remove certain limitations on the use of health savings accounts (HSAs). Speaker of the House Denny Hastert (R-IL-14) appeared with Representative Cantor when he announced his new bill, to show GOP leadership support for the HSA legislation. The Cantor bill would allow owners of HSAs to contribute the maximum amount (in 2006: $2,700 for individuals; $5,400 for families) to their HSAs, even if their high deductible health plan (HDHP)deductible is less than that maximum. Current law limits the HSA contribution to the lesser of the state maximum or the HDHP’s actual deductible - for example, if an individual has an HDHP with a deductible of $2,000, that person can contribute only $2,000 to his or her
HSA. Under the Cantor bill, that person could contribute the maximum $2,700. HSAs are tax-free savings accounts from which individuals can pay for health expenses on a taxfree basis. Coverage under an HDHP is required in connection with HSAs. If an HSA owner does not use the entire amount in the HSA prior to age 65, the money in the account can be converted to retirement income. Taxes plus penalty taxes are due on pre-retirement HSA withdrawals if the withdrawals are used for anything other than health expenses. Taxes are also due if money is withdrawn for other than health expenses from HSAs after reaching age 65, but not penalty taxes. H.R. 4511 would also permit HDHP/HSAs to be used in conjunction with flexible spending accounts (FSAs) and health reimbursement arrangements (HRAs). Under current law, HDHP/HSAs may not be used if a person has any other form of health coverage, including FSAs and HRAs. However, the overall cap on contributions to any combination of these accounts could not exceed the HSA maximum.

House Pension Reform Bill H.R. 2830 includes Tax Benefits for Pensions, LTC, FSAs, and was approved on December 15, by a vote of 294 to 132, by the House. The bill modifies the rules for funding DB plans, adds some defined contribution (DC) plan provisions (including tax incentives for employers who use the auto enrollment format for their 401(k) plans), and includes a $36.8 billion (over five years) tax package. The tax package makes permanent the 2001 EGTRRA pension and IRA provisions - including higher contribution and funding limits and catch-up contribution authority. It also creates a new tax benefit for qualified long-term care insurance. Under the terms of the bill, life insurers could make tax-free charges against life insurance and annuity cash values to pay for qualified longterm care insurance. It provides for a permanent Saver’s Credit and modifies the flexible spending account (FSA) use-it-or-lose-it rules to allow FSA health account holders to rollover up to $500 in unspent health FSA account money into the next year. Meanwhile the Senate approved S. 1783 by a 97 to 2 vote, so in February a House-Senate Conference Committee will reconcile the two versions. The UAW forced change to the House bill was in the area of H.R. 2830's imposed restrictions on benefit increases and benefit accruals when plans are underfunded. These restrictions can be avoided if a pension plan relinquishes credit balances to meet the 60 percent funding threshold for restrictions on benefit accruals or 80 percent funding threshold on benefit increases. The change agreed to adds some flexibility to the use of prior law credit balances by stating that the employers must relinquish their credit balances to avoid the restrictions “unless the credit balances are not sufficient to cover the full amount necessary to satisfy them,” keeping the five-year transition period when the credit balance subtraction rule will not be applied to “very well funded” pension plans. Likewise retained from prior versions of the bill is the new, permanent calculation for the interest rate (replacing the temporary fix that expires 12/31/05) that is used to determine the amount of required annual contributions to DB plans. The interest rate is based on a yield curve that takes into account plan participants’ years of service and years before retirement in determining plan liabilities. It also makes clear on a prospective basis, that cash balance (and other hybrid) plan designs are legal, allows for employer-provided investment advice (by affiliated advisors, subject to certain plan participant protections), increases Pension Benefit Guaranty Corporation (PBGC) premiums, and imposes certain notice and disclosure requirements on plan sponsors, particularly those whose plans are underfunded. The bill also prohibits funding of nonqualified deferred compensation arrangements by certain plan sponsors whose plans are significantly underfunded (the Academy of Actuaries was able to get this in as part of their continuing attempt to eliminate discrimination in funding levels of higher paid versus lower paid).

The Congress Enacted the the Terrorism Risk Insurance Extension Act (TRIEA), S. 467 with Bush expected to milk it for max PR by signing it just prior to the expiration on 12/31/05 of the old bill. The bill extends TRIA program for two years with a few modifications, paying claims arising from a terrorist attack through 12/31/2007 with federal payments limited to 90 percent of losses from a terrorist attack above $50 million in 2006 and 85 percent of losses above $100 million in 2007; with increased private insurance retentions - the retention amount is set at $25 billion in 2006 and $27.5 billion in 2007; and increased insurer deductibles of 17.5 percent of direct earned premiums paid to an insurer in 2005 for 2006 and 20 percent of direct earned premiums paid to an insurer in 2006 for 2007. The extended TRIA program excludes group life insurance, domestic terrorism, and losses related to chemical, nuclear, biological or radioactive terrorism. The extended TRIA would also exclude commercial auto, burglary and theft, surety, professional liability and farm owners multiple peril insurance. S. 467 also requires Treasury to certify terrorist attacks that result in damage that would qualify for the federal payments. The final bill also dropped both the controversial House provision that would have prevented life insurers from denying life insurance to individuals who travel or plan to travel to locations deemed troublesome or dangerous, and the House provision that would have created a public-private commission, replacing it with a presidential working group that will study ways to remove the federal government from terrorism risk insurance. The working group is tasked with reporting to Congress by the end of fiscal year 2006 on the long-term availability and affordability of terrorism risk insurance, including group life insurance and coverage for nuclear, biological, chemical and radiological events. Finally, the bill codifies existing Treasury Department regulations that require prior approval of any litigation settlements and applies them to any cause of action that arises in connection with a Treasury determination that an act of terrorism has occurred.


The latest "task force" suggested Social Security plan (via Jeffrey Liebman, a former economic aide to Democratic President Bill Clinton; Maya MacGuineas, a former economic aide to the 2000 presidential campaign of Senator John McCain (R-AZ); and Andrew Samwich, a former economic advisor to President Bush) is dead on arrival. The plan’s recommendations include:

• Private Accounts: The private accounts - which are not structured to be carve-outs from the current Social Security payroll tax revenue - would be funded with three percent of a worker’s earnings, partially from the Social Security trust fund and partially by a new 1.5 percent payroll tax that would be in addition to the current 12.4 percent of compensation that funds traditional Social Security benefits.

• Increased Cap on Compensation Subject to Payroll Tax: The increase in the cap on earnings subject to the payroll tax would be structured to maintain the current ratio at which Social Security benefits replace earnings.

• Acceleration of Currently-Scheduled Increases in Retirement Age: Increases in retirement age would start phasing in immediately, rather than in 2017, as dictated by current law.

• Indexing: Benefits would no longer be indexed to wages, as the White House has urged.

• Mandatory Annuitization: The plan includes mandatory annuitization of private accounts, with no ability for account holders to pass on any account benefits to heirs.

The plan’s authors pointed to the fact that one side’s concerns are the other side’s solutions - meaning there is as much in the plan for either side to oppose as there is for either side to support.

especially regarding that social security nonfix.

I can't believe they're still trying to flog that dead horse.

This is pure desperation, trying to ram that dog through before they lose Congress. Those assholes.

The first thing a Dem controlled congress would need to do is overturn any social security legislation this bunch passe, then work on overturning every single damn thing this gang of thieves has rammed through Congress. Every stinking bill has got to go.

That's how much better off we were 5 years ago than we are now.

n/t

The DoL is still wrestling with how to devise a default option to override state anti-garnishment laws, necessary to take auto-pilot programs nationwide.