Members of Congress are still hashing through a compromise bill on pension reform, and completed, the final bill may also include a provision on abolishing the estate tax. Once again, Congress missed its mark to hammer out a compromise bill before the July 4 recess, but lawmakers “took some more baby steps” toward a resolution during the break, says Rick Lawson, VP of federal government relations at the Principal Financial Group.
One issue that’s had lawmakers stumped, Lawson says, is how to determine when a defined benefit plan is “at-risk.” The term Congress uses is “at-risk funding,” which signifies that a plan must step up funding. Congress has been debating whether to use a credit rating agency or a plan’s funding status to determine if a DB plan is at-risk. “If you use funding status, how do you define it?” Lawson says. Lawmakers have agreed, however, “they won’t be using credit ratings agencies anymore, just the funding status,” he says. The problem is, Lawson says, it’s hard to tell who agreed. “Is it just the Republican committee chairs? Does it include some of the Democrats who they’ve brought in?”
Another area where Congress is “making progress,” according to Lawson, relates to providing investment advice to plan participants, but it’s hard to tell exactly how. Mark Niziak, managing director of ERISA consulting at NYLIM Retirement Services, said during a recent conference call that plan sponsors are “reluctant to extend advice [to participants] for fear of liability,” but he believes an advice program “should reduce the risk of liability.” To encourage advice, “both the House and the Senate bills would provide that a plan sponsor will not be liable for advice extended assuming the plan sponsor has prudently selected and monitored the advisor,” he added. “Presumably, there would be a roadmap for the sponsor to follow.”