Senate Bill Extends COBRA Benefits, Pension Funding Relief

Cardin notes in a prepared statement that the legislation will encourage companies to continue their defined benefit programs by affording them greater flexibility to manage their pension obligations.

“Defined benefit plans are an important part of retirement planning and it is important to ensure the viability of the pension security system and to give retirees the benefits they have been promised,” says Cardin. “This amendment provides temporary support for companies facing difficult economic challenges. And it will ensure that workers have the resources they need in retirement.”

Under the main provision of the amendment, employers would be allowed to choose from two options to spread out their pension obligations. Under the first, employers can repay their pension shortfall over 7 years, but the 7-year amortization would start 2 years late.

During the 2-year delay, the employer would only owe interest on the shortfall. Under the second option, employers could repay their pension shortfall over 15 years.

The amendment also removes a punitive provision that would impose an unfair burden on companies. And it lends flexibility to the funding of benefits for union-managed, multi-employer plans.

“This legislation, as amended, would enable companies to invest in business recovery and job retention instead of contributing enormous amounts on behalf of pension liabilities that will not come due for many years,” says James Klein, president of the American Benefits Council, Washington, a group that represents large benefit plan sponsors.

But Klein says the benefits council remains concerned about the conditions that the Senate bill attaches to single-employer funding relief.

“The council strongly believes more needs to be done to address unpredictability in the funding rules,” Klein says.