Employer groups are warning Congress that many corporate pension plans could be frozen or terminated unless the pension funding requirements of the 2006 Pension Protection Act are delayed at least through next year. The funding rules started phasing in January 1.
“The drop in the value of pension plan assets coupled with the current credit crunch has placed plan sponsors in an untenable position,” a coalition of employer groups said in a Tuesday, October 28, letter to House Ways and Means Committee Chairman Charles Rangel, D-New York, and Rep. Jim McCrery, R-Louisiana, the ranking Republican member of the committee. “At a time when companies need cash to keep their businesses afloat, they are also required to make unexpectedly large contributions to their plans in order to meet funding requirements.
“These large funding obligations will, if not modified, divert assets away from job retention, job creation and needed business investments, thus increasing the number of Americans who are unemployed and slowing our economic recovery,” the letter said.
The coalition includes the American Benefits Council, the National Association of Manufacturers and the U.S Chamber of Commerce.
Even if a company freezes its plan, the company would still be forced to meet the Pension Protection Act’s full funding requirements, said Judy Schub, managing director of the Committee on the Investment of Employee Benefit Assets. The committee, which represents major corporate defined-benefit pension plans, did not sign the coalition’s letter but is also planning to lobby for Pension Protection Act relief, Schub said.
“Money is awfully tight,” she said. “You need every dollar for operations.”
Jason Hammersla, an American Benefits Council spokesman, said employer groups want lawmakers to include the pension funding relief in a fiscal stimulus package that might be considered by Congress in a possible post-election session.
“We’re looking for whatever legislative vehicle we can to get this done as soon as possible,” Hammersla said.