NACo signs on to pension portability legislation

NACo has thrown its support behind a bill that allows workers to take their retirement benefits with them when they change jobs.

The Retirement Account Portability (RAP) Act is a bipartisan bill, introduced recently by Reps. Earl Pomeroy (D-N.D.) and Jim Kolbe (R-Ariz.).

The proposed legislation would broaden individual retirement account (IRA) rules so the accounts could become a more effective vehicle for keeping retirement benefits portable.

In a provision of particular importance to local government employees who move between states and districts, the legislation allows these workers to use the savings in their 403(b) and 457 plans to accrue greater pension benefits in the state in which they conclude their careers.

Also, for the first time, workers could roll tax-deductible IRA funds and any after-tax contributions from a prior workplace plan into their new retirement plan. This would include moving funds between a variety of plans (such as for-profit 401(k)s, nonprofit 403(b)s and local government employers 457s) when a person changes jobs between these sectors.

Another key element of the bill would help workers build retirement benefits more quickly. Employer-matched contributions would be vested either 100 percent after three years or in increments over six years.

In addition to NACo, some of the other organizations supporting the bill include the American Association of Retired Persons, the Government Finance Officers Association, the International Personnel Management Association and the National Conference on Public Employee Retirement Systems.

The bill is expected to be introduced soon in the Senate, possibly by Sens. Jim Jeffords (R-Vt.) and Jeff Bingaman (D-N.M.) on the Labor Committee and Sens. Orrin Hatch (R-Utah) and Bob Graham (D-Fla.) on the Finance Committee, according to an aide to Pomeroy.

Hearings on the bill should begin sometime this spring.