NU Online News Service, Oct. 8, 2003, 5:20 p.m. EST – The U.S. House voted 397-2 today to approve H.R. 3108, a bill that seeks to save sponsors of defined benefit plans billions of dollars by replacing the old benchmark interest rate used in pension calculations with a temporary benchmark based on a blend of corporate bond index rates.
The Senate is still debating H.R. 1776, a bill that would provide a permanent replacement for the old pension benchmark rate, the 30-year Treasury bond rate.
James Klein, president of the American Benefits Council, Washington, put out a statement welcoming House passage of the temporary replacement bill and calling for Congress to come up with a permanent benchmark replacement based on a corporate bond rate blend.
“The council has consistently recommended the use of a corporate bond rate blend as the ideal solution,” Klein says in the statement.
But, in the short run, Klein says, “H.R. 3108 requires no further changes to the defined benefit regulatory system and provides a highly accurate and transparent method of funding these plans for the next two or three years.”
The United States began using the 30-year Treasury bond rate as a benchmark back when huge budget deficits forced the government to issue huge quantities of 30-year bonds every year.