The federal government could help employers weather the current economic crisis by easing Pension Protection Act implementation requirements.
James Klein, president of the American Benefits Council, Washington, and other speakers made that case here today at a press conference.
The benefits council wants the government to soften the transition rules for PPA pension funding requirements.
Under the PPA, any shortfalls will be measured against a 100% funding level, rather than the graduated level permitted under current law, according to Kent Mason, a partner at Davis and Harman L.L.P., Washington.
Benefits council members’ level of concern about the rules has been “really unprecedented,” Mason said.
Failure to loosen the new rules could result in “widespread freezes of retirement plans” and a chilling effect on companies’ growth as they shift assets to fund the retirement plan that would otherwise be invested back into the company, Mason warned.
“This is not just an employer issue,” Mason said. “This is an employer and employee issue.”
If the PPA drafters had foreseen the current crisis, they “would have softened the transition funding rules,” Mason said.
The benefits council also would like to see the government let pension plans “smooth” unexpected asset losses over time, to ease the pain resulting from such losses, and the council would like to see the government make the “savers credit” available to more middle-income workers.
Other welcome changes would be a relaxation of asset distribution requirements for retirees who have reached the mandatory distribution age, to eliminate the pressure for retirees to take out assets at depressed prices, and a move to let workers use retirement plan loans to cover day-to-day expenses, speakers said.