Evening star., 1942-04-10
Treasury Pushes New
EmpIoye Pension Plan
To End Tax LoophoIe

~ .uN suN 1VVpsuVIV
Proposed Requirements
For Exemptins Firms
Restoted by PouI
Ey tie Associated Press.
The Treasury today renewed It's
efforts to prevent corporations from
avoiding taxes by means Of employe |
pension funds and insisted that new |
standards 1t recommended would |
not impair the average pension
plan.
Randolph Paul, tax adviser to
Secretary Morgenthau, began q day
long House Ways and Means Com
mittee hearing by restating these
proposed major requirements before
tax exemption would be granted:
/. Seventy per cent of employees
of a company must be covered.
2. Benefits to an individual must
not exceed $500 annually.
3. An employe must receive some
rights to the employers contribu-
tl0n TO the plan when ne attains
the age of 40 and has had Is years
| of participation.
THE present treatment of pen
sion trusts affords a tax subsidy to
those trusts which meet the re-
quirements set forth in the stat
ute," Mr.. Paul told the committee.
! Reasons for Subsidy.
This subsidy is at the expense
of the general body of taxpayers
1t was granted because of the desire
to improve the welfare of employees
by encouraging the establishment
of pension trusts for their benefit.
. Our purpose in presenting our
suggestions was to carry out this
objective of the Congress by sug-
gesting various provisions which
would both make the present statute
more effective in promoting the well
fare of employees through such
trusts and at the same time prevent
utilization of such trusts for tax
avoidance purposes.
Thus, we suggested that only
those trusts which are designed to
benefit large numbers Of employees
should be permitted this favored
treatment. Trusts which cover
only a few favored high-salaried
employees or executives should not
qualify. At the same time, we rec
ognize that such extended coverage
! by itself would be no guaranty that |
the trust is designed for the welfare
of employees generally in view of the
possibility of manipulating the ben
fits under the trust.
Pension Safeguard.
Consequently, we have suggested |
that the benefits must be extended
in non-discriminatory fashion, so
that the higher salaried employees in
the trust cannot be favored at the
expense Of the lower salaried en-
ployes. These suggestions at the
same time would operate to safe
guard the pension provision against |
Its use as tax avoidance device.
"At the present time an employe
who leaves the company's employ,
either voluntarily or involuntarily,
under many trusts forfeits his bene-
fit from the employers contribu-
tions. Our suggestion was designed
to mitigate such hardships by pro-
vlding some benefit in the case of
such employees who had been in the
company's service for some time"
Representatives OF the National
Association of Life Underwriters ex-
pressed opposition in testimony yes
terday to Treasury proposals for q
$4,000 total exemption for estate
tax purposes instead Of the present
$40, 900 life insurance exclusion.
Grant Taggart, Cowley, wyo-,
vice president of the association,
said in a statement that any tar
proposal which tends to discour-
age" building up Of family security
will be harmful to our democratic
way Of life"
I'm considering any tax proposals
affecting life Insurance." he said,
1T is important to recognize that
life insurance in reality is social
institution rather than a financial
institution. And that it is a large
institution only because it is owned
by so many millions of American
people in all income classes.
Benefit Payments Cited.
To-day the life insurance safe
guarding the families of America is
a most important factor in our war
economy. Not only does the un-
ceasing flow Of benefit payments
provide for the care of widows and
children but the family security
that 1t creates helps build morale,
and sound morale is vital to our war
effort. Furthermore, the policy
holder funds which provide this Sc
curity are participating in our war
effort through investment in Gov
ernment bonds and in the securities
of industry and business, helping
produce the sinews of war"
"As a measure of the Importance
of life insurance in times of national
crisis, we have only to look at the
record of the recent depression when
American families collected through
their life insurance $4,000, ,0O0, 900
in the form of benefit payments and
emergency cash, or some $4,000
900 900 mole than the amount paid
by the Federal Government In all
forms OF relief during the same
period. These life insurance dollars
aneviated distress in millions of
American homes"
Representative Of mutual fire,