Institute, SIA Jointly Urge State Officials to Make Tax Code Changes

Washington, DC, March 14, 2002 - The Institute and the Securities Industry Association (SIA) are sending joint letters to state officials in Arizona, Arkansas, California, Georgia, Hawaii, Indiana, Iowa, Kentucky, Maine, Massachusetts, North Carolina, South Carolina, and Wisconsin urging their state legislatures to adopt promptly changes to their state tax codes in order to bring their retirement security and education savings provisions into conformity with the changes made to the Internal Revenue Code, as amended by the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA).

The letter notes that if the state does not adopt conformity legislation, state residents cannot take full advantage of the savings opportunities available under EGTRRA. The consequences of non-conformity are particularly severe in the context of tax-qualified retirement plans. For example, the letter describes the administrative burdens upon employers who elect to offer their employees enhanced savings opportunities in non-conforming states, and the confusion faced by employees in preparing, and ultimately paying, their taxes under separate federal and state regimes. In light of the added costs of plan administration, recordkeeping and employee communications, the Institute and the SIA argue that employers may elect not to offer the enhanced retirement savings opportunities under EGTRRA to their employees unless the state tax code conforms with the Internal Revenue Code.

In December 2001, the Institute and other associations representing the retirement plan industry wrote a letter to the California state legislature urging enactment of legislation that fully conforms the California Revenue and Taxation Code with the savings provisions contained in EGTRRA.