Sen. Tom Harkin, D-Iowa, chairman of the Senate Health Education Labor & Pensions (HELP) Committee, introduced legislation Tuesday that would make it easier for charities and cooperatives to continue to offer pensions to their employees.
The bipartisan bill, the Cooperative and Small Employer Charity Pension Flexibility Act of 2013 (S. 1302), co-sponsored by Sens. Patty Murray, D-Wash.; Lisa Murkowski, R-Ark.; and Al Franken, D-Minn., would ensure that charitable and cooperative associations are not swept into the Pension Protection Act of 2006 (PPA) funding rules, “which would require them to divert funds from critical services and jeopardize their ability to provide pension benefits to their workers,” Harkin said.
Harkin introduced the bill at a hearing titled Pooled Retirement Plans: Closing the Retirement Plan Coverage Gap for Small Businesses. He explained that many charities and co-ops provide their employees with retirement benefits through defined benefit multiple-employer pension plans (CSEC plans), which allow small, community-focused employers to pool their resources to achieve economies of scale otherwise only available to large employers.
Pooled retirement plans are also known as multi-employer plans.
Harkin noted that although CSEC plans have operated successfully for decades, they are poised to become subject to PPA, “which would threaten the ability of many nonprofit employers to continue to offer pension benefits.”
Since enactment of PPA in 2006, “it has become increasingly apparent that the PPA funding rules remain inappropriate for the unique structure of CSEC plan,” Harkin said.
When Congress passed PPA, which fundamentally changed the way most pension plans are funded in order to protect participants and the Pension Benefit Guaranty Corp., Harkin continued, “it recognized that the new rules were not necessarily appropriate for rural cooperative multiple employer defined benefit plans because, by design, the plans pose little risk that they will be unable to pay benefits.”
Consequently, Congress granted the plans a temporary exemption from PPA, which was later broadened to include eligible charities by the Pension Relief Act of 2010. “Without congressional action, the temporary exemption will expire and CSEC plans will be forced to comply with PPA funding rules,” he said. “That will result in many small, nonprofit employers being unable to continue to provide pension benefits to middle-class families.”