Congress has to come up with a permanent method for supplying the interest rate benchmarks that employers use in pension calculations.[@@]
Larry Zimpleman, president of the retirement services unit at the Principal Financial Group Inc., Des Moines, Iowa., made that argument this week at a Senate Finance Committee hearing on pension reform.
Settling on a permanent pension rate system would a good way for Congress to start helping employers deal with the uncertainties that are hurting the U.S. defined benefit pension system, Zimpleman testified, according to a written version of his remarks.
“The best way to protect pensions for future retirees and working Americans is for Congress to enact permanent rules that lead to a fair and stable system,” Zimpleman said.
Zimpleman was testifying at one of 3 hearings Congress scheduled this week to examine the problems plaguing American retirement programs.
Congress came up with the current, temporary interest rate fix last year in an effort to postpone dealing with a class between a dispute about the best way to replace the 30-year Treasury bond benchmark. The U.S. Treasury Department stopped selling the bonds in 2001.
Lawmakers also are talking about Bush administration proposals and other proposals for increasing the stability of the Pension Benefit Guaranty Corp., a federal pension benefit guarantee program that now has a $23 billion deficit.
“The unexpected termination of the 30-year Treasury bond in 2001, and the subsequent temporary fixes to the interest rate used for pension calculations have made it impossible for employers to project future pension contributions,” Zimpleman said.
The uncertainty has “significantly compromised” employers’ ability to make new capital investments, hire new employees, invest in research or take other actions that “ensure the future of U.S. business, Zimpleman said.
Zimpleman spoke on behalf of the American Council of Life Insurers, Washington, and the American Benefits Council, Washington, as well as the U.S. Chamber of Commerce, Washington.
In addition to asking for a permanent interest rate benchmark, Zimpleman asked Congress to clear up uncertainty about the status of the “pay as you go” cash balance defined benefit pension plans.
“Affirming the legality of these plans, which cover more than 7 million Americans, is a necessary step to a vibrant defined benefit system,” Zimpleman said.
The American Benefits Council, Washington, presented similar arguments at 2 pension reform hearings organized by the House Education and the Workforce Committee and the House Government Reform Committee’s Government Management, Finance and Accountability Subcommittee.