Masonry Magazine January 1973 Page.36
Taxes
(Continued from page 24)
monthly wage in the highest 5 years but not more than $750 a month. The $750 figure will be adjusted upward as the social security wage base is increased. The insurance will apply to vested benefits earned prior to, as well as on, and subsequent to the effective date of the Act.
The employer would be given an option of eliminating employer liability in certain circumstances under the termination insurance program. Where employer liability is eliminated the employer pays an increased annual premium type tax. The employer would pay an annual premium tax of 50¢ for each participant in the pension plan who is covered by the insurance. However, if the employer elects to eliminate employer liability except where the plan termination involves a merger or where the employer remains in business, he would have to pay a 70¢ per participant premium tax.
PORTABILITY
Another aspect of the new pension plan bill that has far-reaching effects is the establishment of a portability fund. The Pension Benefit Guaranty Corporation, that would be established to administer the termination insurance program, would also be authorized to establish a central portability fund to receive deposits of sums representing an employee's vested rights when he is separated from a firm prior to reaching retirement age.
In this way an employee's interest in the portability fund can then either be transferred to his next employer's qualified plan or retained in the portability fund until he retires, when it would be either paid out to him or used to purchase an annuity from an insurance company for him.
It should be noted that amounts accumulated in H.R. 10 plans by self-employed persons, in corporate plans by proprietary employers, and in individual retirement plans are not eligible for transfer to the portability fund.
To insure that employees will actually receive the plan benefits to which they are entitled when they retire, the Social Security Administration will keep records regarding the vested rights of employees which will be reported by employers at the time that employees terminate their employment.
UNJUST DIFFERENCES
Under the present law there is almost no practical limit on the amount of pension contributions that closely held corporations can make to qualified plans on behalf of owner-employees. On the other hand, pension contributions made by self-employed persons on their own behalf are limited to 10% of earned income up to $2,500 a year.
The Committee in its bill proposes the following three changes which should be regarded as one package: (A) Any individual (including an employee or a self-employed individual) who is not a participant in a qualified retirement plan or government plan may take tax deductions of up to $1,000 a year of earned income which is set aside for his own retirement. Alternatively, the employer of any
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masonry • Nov./Dec., 1973