Rep. Earl Pomeroy, D-North Dakota, introduced a bill Tuesday, October 27, that would give businesses some breathing room from the strict funding rules imposed by a landmark pension reform bill than went into effect last year.
Pomeroy urged his House and Senate colleagues to pass a relief bill this year despite a legislative calendar dominated by health care. The House Education and Labor Committee has approved its own measure but there is no bill in the Senate.
“This is a very time-sensitive piece of legislation,” Pomeroy said at a Capitol Hill press conference. “There simply must be floor action on a number of items that are not tied up with the health care bill, and this is one of them.”
The Pension Protection Act, signed into law in 2006, significantly tightened defined-benefit funding rules and required companies to meet 100 percent of their obligations within seven years, beginning in 2008.
Last year’s economic collapse made the timing horrible, Pomeroy said. Pension relief that Congress approved in December helped for this year, but he said that more needs to be done.
“Without additional action, January 1, 2010, will bring to bear very significant additional funding requirements,” said Pomeroy, a member of the House Ways and Means Committee. “This is going to put extraordinary pressure on companies to freeze their pension plans.”
Pomeroy’s bill would allow employers to extend the amortization to nine years, with the first two years consisting only of interest payments on 2008 losses. Alternatively, they could follow a 15-year payment schedule. With either option, they would have to continue offering retirement benefits and comply with other conditions.
The measure would allow multi-employer plans to repay recent losses over a 30-year time frame, extend funding improvement deadlines and ease fund mergers.
The bill, which has been circulated for weeks in draft form, also would expand asset smoothing from 10 percent of fair market value to 20 percent for 2009 and 2010 while also easing credit balance and accrual restrictions.
The 2006 law was prompted by a series of huge airline and steel company pension defaults that sent the deficit of the federal pension insurance agency soaring.
Pomeroy said his bill would not lead to pension defaults. He maintained it simply recognizes that companies don’t have to “top off” their funds during a recession because all the money won’t be paid out at once anyway.
“It makes no sense,” Pomeroy said. “It’s an extraordinarily conservative reserving posture.”
Rep. Pat Tiberi, R-Ohio and co-sponsor of the bill, said that its impact will extend far beyond company actuarial tables.
“It’s about the economy; it’s about jobs,” said Tiberi, a member of the House Ways and Means Committee.
Barbara Ann Crane, president of the National Federation of Nurses, warned that 2,800 nurses in New York City are eligible to retire in January and will be watching the pension relief legislation carefully.
“We’re going to be compelled to retire rather than settle for a lesser payout,” Crane said.
Union representatives at a September 30 hearing on pension funding, however, criticized the bill because it provides relief to companies that have frozen their plans.
At the Tuesday press conference, Pomeroy defended his approach. “The issue is jobs,” he said. “We think this package is a fair one.”
Melding the House bills as well as whatever emerges in the Senate and pushing the measure through this year will require presidential leadership, according to Pomeroy.
“I hope the administration can help facilitate the coming together of the various relief measures,” he said.