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CCH® PENSION — 03/03/10

Pension funding relief, stripped from Senate jobs bill, may resurface later

Pension funding relief for single- and multiemployer pension plans, which had originally been included as part of a jobs bill offered by the leadership of the Senate Finance Committee, was dropped from the bill by Senate Majority Leader Harry Reid (D-NV) on February 11, 2010. Reid scaled back the Senate Finance Committee bill, stating that it contained proposals not directly linked to job creation. White House Press Secretary Robert Gibbs dismissed criticism of Reid's decision to split up the jobs bill. At a press briefing, Gibbs said that he expects there will be other vehicles for advancing some of the measures dropped from the legislation.

The Senate Finance Committee bill would have provided temporary targeted funding relief for single-employer and multiemployer plans that suffered significant losses in asset value due to the steep market decline in 2008. The bill would have allowed, for eligible plan years, plan sponsors to elect one of two special amortization schedules ("2 plus 7" amortization, under which plan losses could be amortized over nine years and the first two years of the nine-year amortization period would be interest-only, or 15-year amortization). Eligible plan years for relief under the bill would have included 2008, 2009, 2010 or 2011. The bill also contained provisions applying extended amortization periods to plans subject to prior law funding rules and contained special lookback provisions. Special relief rules for multiemployer plans were also included.

The bill would have also extended the 65% COBRA premium subsidy for terminated workers through May 31, 2010.

Move to drop pension funding provisions draws fire from employer groups

In a statement released on February 12, 2010, Mark Ugoretz, president of the ERISA Industry Committee (ERIC), said that the failure to include pension funding relief in the jobs bill is "both disappointing and short sighted."

The ERIC president contended that pension funding relief had broad bipartisan support and a direct impact on jobs. "Employers are not asking for a financial bailout or to be relieved of their pension obligations -- only for more time to meet the pension funding increases that resulted from the recession," Ugoretz said. "Most employers were well on their way to meet the increased funding demands of the 2006 Pension Protection Act when they got slammed by the market fallout in 2008," he added.

This view was echoed by James A. Klein, president of the American Benefits Council. "By eliminating defined benefit pension funding relief from jobs legislation," said Klein, "Congressional leadership is wasting a golden opportunity to save jobs and promote economic recovery at no cost to the federal government." He added that "immediate relief is essential to the preservation of thousands of American jobs."

Both groups urged lawmakers to include funding relief in the jobs package. "Failure to include relief," Ugoretz said, "will only further delay the economic recovery and put retirement security at risk."

Source: ERIC news release, February 12, 2010; American Benefits Council news release February 15, 2010.

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.

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