About 300 insurers, business groups, employers and union chapters are pleading with House Ways and Means Committee leaders for help easing Pension Protection Act funding requirements.
Sticking to the current requirements will make the effects of the current turmoil on employers with defined benefit pension plans even worse, the signers of the letter contend.
The letter is addressed to House Ways and Means Committee Chairman Charles Rangel, D-N.Y., and Rep. Jim McCrery, R-La., the highest ranking Republican member of the committee.
The signers are protesting implementation of rules affecting the way pension plan sponsors calculate how well the plans are funded and how much they must contribute to support the plans.
The new rules would require plan sponsors to “smooth” pension plan investment losses over 24 months.
Plan sponsors want to continue to have 48 months to smooth investment losses.
If the 24-month smoothing limit stays in force, plan sponsors will have to make drastic cuts in pension plans, or deep cuts in the number of workers they employ, signers of the letter warn.
“The drop in the value of pension plan assets, coupled with the current credit crunch, has placed defined benefit plan sponsors in an untenable position,” the signers of the letter write. “At a time when companies desperately need cash to keep their businesses afloat, the new funding rules will also require huge, countercyclical contributions to their pension plans. Consequently, many companies will divert cash needed for current job retention, job creation, and needed business investments and instead contribute the cash to their pension plans to fund long-term obligations due many years after the current market conditions return to normal.”
The groups describe a company that would have to increase pension contributions 2,100%, and another that would have to increase contributions 6,000%.
“We are in no way advocating an overhaul of the PPA funding changes,” the groups write. “Rather, we urge Congress to consider making technical corrections to the PPA that we believe implement Congressional intent, and adopting temporary provisions that deal with the financial crisis facing us today.”
In addition to allowing for a longer smoothing period, the signers of the letter are asking for full “smoothing” of unexpected losses, removing restrictions on asset smoothing, and allowing for automatic Internal Revenue Service approval for certain funding elections to maintain plan viability.
The groups call for similar changes to be made to the rules governing multi-employer defined benefit plans.
The letter appears to be similar to a letter that a smaller coalition of insurance and benefits groups sent to Ways and Means leaders in October.