Two Senate committees reconcile differences on defined benefit plan legislation
The leadership of two Senate committees last week reached an agreement that clears the path for passage of defined benefit pension legislation that also includes language on corporate-owned life insurance.
Sen. Charles Grassley, R-Iowa, and Sen. Max Baucus, D-Mont., chairman and ranking member, respectively, of the Senate Finance Committee, along with the chairman and ranking member of the Health, Education, Labor and Pensions Committee, Sen. Mike Enzi, R-Wyo., and Sen. Edward Kennedy, D-Mass., reached an agreement on the differences between their two bills, both of which were passed by their respective committees. The legislation, known as the Pension Security and Transparency Act, will now move to the full Senate, which is expected to vote on the measure in the next two weeks.
“Not long ago, workers used to be pretty sure of a good pension plan. That’s not the case anymore,” said Grassley. “There are a lot of reasons for that, some within Congress’s control and some not in our control. We need to fix the problems within our control.”
Kennedy noted that many workers are concerned that their pension benefits will not be there when they retire. “Now more than ever, workers deserve the support of Congress to preserve their hard-earned pensions,” he added. “This bipartisan legislation will do just that and I am proud that we have reached an agreement that is now ready for full Senate consideration.”
Under the Senate bill, companies with underfunded pension plans will have to bring their plans to full solvency in 7 years, except for airlines, which are allowed 14 years. The bill also changes how companies whose credit ratings have fallen below investment grade are to calculate their pension values, including lump sum payments or early retirement programs. The changes are designed to make shortfalls more apparent and companies operating under these “at risk” rules would still be required to bring their pension plans into solvency within 7 years.
The legislation also includes provisions offering guidance on the use of corporate-owned life insurance, known as COLI, that taxes the benefits of a COLI policy unless the covered employee is notified in writing prior to the contract being purchased and gives consent, or is a director or is among the highest paid employees in the company.