Treasury Proposes Fix For Pension Liability Calculations

The Treasury Department contends that using a rate based on the timing of a pension plan’s liabilities “is easy and simple” and “can be done using a simple spreadsheet.”

Some pension and actuarial groups have questioned whether the Treasury Department should make employers use a yield-curve approach to computing pension liabilities.

Ron Gebhardtsbauer, a senior pension fellow at the American Academy of Actuaries, Washington, testified in June at a House subcommittee hearing that a regulation requiring use of yield-curve rates instead of absolute rates would make computing liabilities more complicated and more expensive without necessarily doing much to change the results of liability calculations.

“Congress might want to delay the requirement to use a yield curve until it has been thoroughly discussed by all parties,” Gebhardtsbauer testified, according to a written version of his remarks.

A second section of the Treasury Department statement suggests that sponsors of plans with asset shortfalls of at least $50 million ought to have to publish information about the plan underfunding.

A third section proposes that the government should put tight limits on employers with “junk bond credit ratings” and severely underfunded plans. In many cases, shaky employers end up passing their pension benefit promises on to the federal pension insurance system, the Treasury Department notes.

The text of the Treasury Department proposal is posted at http://www.treas.gov/press/releases/js529.htm