"Sunset Clause"

[Guest gkaley]

A few weeks ago, Brian Graff of ASPA gave a very brief overview about WHY the sunset clause was included in the most recent pension legislation - having to do with the number of votes needed to pass a piece of legislation of such a large tax reprieve.

Can someone provide a more detailed explanation?

[david rigby]

See

http://benefitslink.com/boards/index.php?showtopic=10294

[MGB]

Pax's reference is to my earlier explanation on the subject.

I'd like to add one more thing:

The "10 years" that is used to score a reconciliation bill is not the whole story. Actually, changes can only be within the 10 years, it does not have to stretch out to the full 10 years.

If they had used the full 10 years, the sunset would have been in 2012, not 2011.

Why did they sunset it a year earlier? The numbers were too big. In 2011, the full effects of the estate tax repeal will kick in (along with a lot of other items that are phased in). The total tax reduction would have been closer to $2 trillion over 10 years instead of the reported $1.35 trillion. That would have even been bigger than what Bush was asking for at $1.6 trillion.

So, to keep the number small enough to sound good to the press, the sunset was moved forward one year. That means that the current 10-year scoring (a calculation of the change in revenue) includes a huge amount of tax revenue in the 10th year when all provisions revert...offsetting the first 9 years tax reduction which is actually larger than $1.35 trillion.

There is absolutely no doubt in my mind many reductions/provisions will be rescinded before 2011 or else we will be in bigger deficits than what we had in the past. That could include some pension provisions (although they were peanuts compared to other provisions).

[Guest gkaley]

Thanks to both of you. This information is not only very interesting, but also very helpful.

Thank you again!

-gk