<nobr>Mar 13, 2007</nobr>

Major Employers Urge House to Reject Senate Deferred Compensation Provisions

ERIC calls provisions ill-conceived and bad policy

FOR IMMEDIATE RELEASE

Washington, D.C. — The ERISA Industry Committee, a trade association comprised of the nation's largest employers, urged the House Committee on Ways and Means to reject revenue-increasing provisions related to deferred and executive compensation that were included in the Senate-passed version of the minimum wage bill (H.R. 2). In a statement submitted for tomorrow's hearing on the subject, ERIC called the provisions both bad tax and bad employment policy.

"Many tens of thousands of hardworking middle managers participate in deferred compensation programs," said ERIC President Mark Ugoretz. "The perception that these plans are abusive and that they benefit only the most senior executives is just plain wrong. Far from being abusive, they benefit both employers and employees."

ERIC's statement cited the plans as recruitment and retention tools for employers and providing needed retirement security for employees. The statement noted that many deferred compensation plans are designed to make-up retirement benefits that are otherwise limited because of the Tax Code's failure to account for inflation. Those plans often require employees to make deferral elections that are then irrevocable.

"The deferred and executive compensation provisions are ill-conceived solutions to a problem that do not exist and whose principal effect will be to harm hundreds of thousands of mid-level employees who earn far less than the Senate Finance Committee's report contends," said Ugoretz.

One example cited by ERIC is a middle manager who participates in her employer's bonus deferral and supplemental employee retirement plans. If the cap had been in place for 2006, her deferrals under those two programs, plus earnings on previous deferrals would have exceeded the limit by $11,000, resulting in an excise tax penalty of $31,000 plus income tax on the deferred amount. The employee would have been required to pay that amount even though she was ineligible to receive any of the income deferred until retirement.

"The deferred compensation limit will cause thousands of the nation's most talented and productive people — scientists, engineers, researchers, and other professionals on whom the nation and our enterprises depend for economic vitality — to be blindsided by an egregious and retroactive tax increase," said Ugoretz. "Coupled with another measure that would impose an 'toll charge' for leaving the United States on foreign employees who have been recruited for their specialized skills and knowledge would greatly hamstring American employers in their effort to remain the centers of technological advancement."

Text Files:

Written Statement

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