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Private Pensions: 'Top-Heavy' Rules for Owner-Dominated Plans

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Report Type Reports and Testimonies
Report Date Aug. 31, 2000
Report No. HEHS-00-141
Subject
Summary:

The federal government has for many years granted tax incentives as a way of encouraging the formation of private pension plans. These pension laws and regulations are intended to ensure that workers benefit equitably from their pension plans. This report identifies (1) key differences between top-heavy rules and the general rules for nondiscrimination and vesting in contributions and benefits, (2) summarizes the most recent data available for GAO analysis on the characteristics of new plans that report being top-heavy, and (3) discusses what is known about the overall effects of top-heavy rules on numbers of plans and participants and on employer costs. New plans reporting top-heavy status tend to be small, defined contribution plans in the service sector of the economy. Little is known about the overall effects of top-heavy rules on plan formation. GAO found no research that has quantified the overall effects of top-heavy rules on the number of pension plans and participants.

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