The Obama administration can support the idea of giving defined benefit pension plan sponsors a little more time to meet plan funding obligations.
Phyllis Borzi, the assistant secretary in charge of the Employee Benefits Security Administration at the U.S. Labor Department, delivered that message today in a statement on the funding flexibility issue.
The Pension Benefit Guaranty Corp. insures U.S. defined benefit plan pension benefits.
The PBGC requires that the sponsors of the plans it insures meet funding requirements. Congress has tightened the funding rules in recent years, and the 2008 financial crisis hit plan funding levels hard.
Many employers and their groups say applying funding rules too strictly will force them to take big hits to earnings at a time when they are struggling to stay in business and keep employees on the payroll.
Critics of “funding relief” efforts say tinkering with funding requirements will reduce the likelihood that pension plans, and the PBGC, can deliver the pension benefits that plan participants are expecting to get.
Borzi acknowledges in her statement on the controversy that recent investment losses and low rates on secure investments have forced employers to raise pension contributions significantly.
“As many employers continue to struggle in our recovering economy, these increased contributions reduce the amount of capital otherwise available for job creation,” Borzi says in the statement. “The Obama administration supports targeted legislation to give plan sponsors a temporary delay of pension contributions resulting from these unique circumstances.”
But, any pension relief legislation “should not allow employers who take advantage of this relief to use their improved temporary cash flows to put payments to shareholders and executives ahead of the security of workers’ pensions,” Borzi says.
Employers also should tell workers what they are doing, and employers that are unlikely to ever be able to meet their pension obligations should not get funding relief, Borzi says.