The U.S. House Education and the Workforce Committee may vote on a key pension bill in the next 2 weeks, before Congress recesses for the July Fourth holiday.[@@]
Although the committee’s Employer-Employee Relations Subcommittee has approved the Pension Reform Act bill, H.R. 2830, by a voice vote, the bill could run into turbulence in the full committee.
The American Council of Life Insurers, Washington, and other life insurance and financial services groups are praising inclusion of a provision that would give employers explicit permission to offer investment advice to 401(k) plan participants.
“This provision has tough fiduciary standards and disclosure protections,” says Rep. Sam Johnson, R-Texas, chairman of the Employer-Employee Relations Subcommittee. “This proposal has passed the House 3 times in the last 4 years with significant Democratic support.”
But some Democrats are calling inclusion of the investment advice provision a gift to Wall Street.
“Information is important, and we certainly agree that people shouldn’t be getting investment advice from their next door neighbor or someone at the coffee shop,” says Rep. Robert Andrews, D-N.J., the ranking Democratic member of the Employer-Employee panel.
But investors on Wall Street already have run into advisors with a “dual agenda…which is not the agenda of the consumer,” Andrews says.
Meanwhile, the American Benefits Council, Washington, an influential group that represents many large employers on pension issues, has problems with provisions in H.R. 2830 that would change the funding rules for defined benefit pension plans.
Advocates for the changes, including many Republican members of Congress, say they will make employers more accountable for backing up pension promises and do a better job of discouraging employers from dumping pension responsibilities onto the shoulders of the Pension Benefit Guaranty Corp.
But the ABC says some provisions would be unfair to responsible to responsible employers.
One proposed change in use of “credit balances,” for example, could end up classifying very well-funded plans as underfunded plans, the ABC says.
Another provision, which deals with smoothing of interest rate assumptions from year to year, would limit pension plan sponsors’ ability to smooth rates. H.R. 2830 would phase a new smoothing regime in over 3 years.
The new approach “introduces unnecessary complexity into the law,” the ABC says. “The very marginal increase in ‘economic accuracy’ is outweighed by the administrative complexities.”