If Congress keeps the current laws in place, many employers that sponsor defined benefit pension plans will have to make big contributions to the plans April 1.
The American Benefits Council, Washington, a group that represents large employers, helped organize a press conference today to make the case that temporarily relaxing funding rules could save jobs without seriously harming pension plans’ finances.
Rep. Pat Tiberi, R-Ohio, participated in the call. Tiberi is a sponsor of H.R. 3936, a bill introduced by Rep. Earl Pomeroy, D-N.D., that would temporarily ease the plan funding requirements.
Under current rules, employers must certify their funding status April 1 and make quarterly contributions based on funding status figures April 15, according to the American Benefits Council.
The 2008 investment market meltdown and the low rates now paid on government bonds have hit plan funding levels hard. Mark Warshawsky testified in September 2009 at a House Ways and Means Committee hearing on pension funding rules that the average 2008 regulatory funded status was 96% and that employers had to make about $40 billion in funding payments.
Without any changes, the average funded status would have dropped to 75% in 2009 requiring employers to make $110 billion in funding payments for the 2009 plan year, Warshawsky said. Instead, he said, new laws and regulations increased the average 2009 regulatory funded status to 94%, and reduced required funding payments about $32 billion.
But, if Congress fails to act, the required payments would increase to $94 billion this year and to $146 billion in 2011, Warshawsky said at the hearing.
“These looming obligations will force companies to continue, and in many cases step up, actions to ensure cash on hand which may include cutting jobs and withholding investment in the company,” the benefits council said today in a statement.
If Congress does pass an emergency funding rules change measure but attaches too many requirements, many companies may not be able to take advantage of the measure, according to James Klein, the president of the benefits council.