NEWS RELEASE

December 23, 2008
PR-08/30
For additional information:
Jason Hammersla
202-289-6700

Enactment of pension relief measure “a critical first step”

WASHINGTON, D.C. — “The American Benefits Council applauds the signing into law of the Worker, Retiree, and Employer Recovery Act (H.R. 7327) and congratulates the members of Congress who worked to save millions more dollars and jobs from being claimed by the economic crisis,” said American Benefits Council President James A. Klein today, upon President Bush’s final approval of the bill.

“This measure will help defined pension plan sponsors as they attempt to weather this economic storm,” Klein said. “The “smoothing” clarification in particular is important because it validates Congress’ original intent in passing the Pension Protection Act of 2006 (PPA), and is especially crucial given recent market volatility. Also, the PPA transition rules will help companies avoid the cliff effect of sudden and unexpected funding obligations if the plan misses a funding target by as little as one percent,” Klein noted. The Council’s December 10 News Release listed the key provisions for pension plan sponsors and participants.

“The provisions signed into law today are an important first step, but Congress must immediately turn its attention to additional measures next month,” Klein said. Additional reforms recommended by the Council include:

Permit full asset smoothing. The Pension Protection Act (PPA) only allowed unexpected gains and losses to be smoothed out to a very limited extent, so that the smoothed value must stay within a 10 percent “corridor” of fair market value. For 2009, smoothing should be permitted with a greater percentage limitation.

Extend the amortization of 2008 plan losses. For funding purposes, losses incurred in 2008 would be amortized over nine years, instead of seven years. Moreover, for the first two years (i.e., 2009 and 2010), the amortization payments would be interest only. Then regular seven year amortization of the 2008 losses would begin in 2011.

Enact other funding changes to prevent overburdening pension plan sponsors as a result of the current financial market volatility. This could include using a plan’s 2008 funding status to determine the 2009 contribution requirements.

Keep employees whole by limiting the reach of plan benefit restrictions. During 2009, all benefit restrictions should be applied based on the plan’s 2008 funded status (i.e., the rule currently applicable to the 60 percent benefit accrual rule should be extended to all benefit restrictions).

“The Council’s member companies look forward to working with the new Congress and the new administration in 2009 to pursue these efforts to stabilize pension plan funding,” Klein said. “An emphasis on the principles of security and predictability will benefit plan participants, plan sponsors and the economy as a whole.”

To arrange an interview with a member of the Council staff, please contact Jason Hammersla, Council director, communications, at jhammersla@abcstaff.org or by phone at (202) 289-6700.

The American Benefits Council is the national trade association for companies concerned about federal legislation and regulations affecting all aspects of the employee benefits system. The Councils member's represent the entire spectrum of the private employee benefits community and either sponsor directly or administer retirement and health plans covering more than 100 million Americans.

http://www.americanbenefitscouncil.org/issues/retirement/pension.cfm