An employer benefit lobbying group on Wednesday, October 22, urged federal legislators to take a series of steps, including easing rules on pension plan funding to avoid widespread benefit freezes and damage to the nation's economy.
As part of a 10-point plan, the Washington-based American Benefit Council recommends delaying requirements in a 2006 federal law that gradually require employers over the next few years to fully fund their pension plans, up from a prior 90 percent funded target.
For example, this year, plans that are at least 92 percent funded are considered fully funded, with employers whose plans are funded to at least that level not required to kick in more money, while in 2009 the funding target moves up to 94 percent.
The council is recommending that the 92 percent funding level target be extended through 2009 and that other transitional relief be extended to plans falling below that level.
Other recommendations include giving employers more time to recognize losses in the value of plan assets and more flexibility in valuing plan liabilities.
Those recommendations come as the huge drop in the equities market has resulted in many pension plans becoming underfunded, forcing employers to kick in more money or—if their plans fall below 80 percent funded—stopping future benefit increases.
"The benefits system has never seen this level of concern before. Unless something is done—quickly—massive funding obligations will trigger benefit freezes on an unprecedented scale," the American Benefit Council warned.
Additionally, since freezing doesn't eliminate current funding shortfalls, companies will be forced to "direct huge resources to their plans, which will cost many jobs and prevent companies from making essential investments in their businesses," the council said.
Filed by Jerry Geisel of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.
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