NU Online News Service, April 12, 2004, 5:53 p.m. EDT – President Bush signed a bill Saturday that will help hold down costs for employers that sponsor defined benefit pension plans.[@@]
The bill, H.R. 3108, lets defined benefit plan sponsors temporarily replace the 30-year Treasury rate benchmark with a benchmark based on the rate for investment-grade corporate bonds.
President Bush signed the bill in time for employers to apply it to their first-quarter pension contributions, which are due April 15.
The law based on the bill is set to expire in 2 years. Congress could make the act permanent or come up with another approach for calculating employers’ pension obligations.
Interest rates are much lower now than they were between the early 1970s and the mid-1990s. Because 30-year bonds are popular and the federal government stopped issuing them 2 years ago, yields on 30-year bonds are even lower than rates on other types of notes and bonds.
When the official pension contribution benchmark rate falls, employers must contribute more to their pension plans to meet federal plan funding requirements.