Sens. Rob Portman, R-Ohio and Ben Cardin, D-Md., members of the Senate Finance Committee, introduced legislation Thursday to protect workers in closed defined benefit plans from having their benefits frozen by Jan. 1, 2020.
Portman and Cardin said that The Retirement Security Preservation Act of 2019 (RSPA) — which is included in the Setting Every Community Up for Retirement Enhancement (Secure) Act of 2019, that’s tied up in the Senate — amends and modernizes the pension nondiscrimination rules that apply to these single-employer pension plans.
The most recent estimate from the American Benefits Council finds that at least 450,000 Americans are at risk of losing future pension benefits by Jan. 1, 2020, if a solution is not reached, the senators noted.
“Some plans have already been forced to freeze due to Washington’s inaction,” they said.
The senators “are pleased that the legislation is included in the Secure Act, but we are introducing it as a standalone bill as well to send a message about its urgency,” Portman said. “Older workers in these affected closed defined plans deserve relief before it’s too late.”
Added Cardin: “While I maintain my belief that the Senate should pass the Secure Act now, we have an obligation to act immediately to prevent a further loss of benefits for workers affected by this provision. Congress must act immediately to give workers, especially those closer to retirement, the certainty they need to make decisions and plan their lives — be it passing the Secure Act or passing this standalone bill.”
The senators explained that some companies that have moved from defined benefit plans to defined contribution plans have elected to grandfather existing employees by closing their traditional DB plans (also known as “soft freezing”); other companies have “hard frozen” their traditional DB plans but assisted existing employees in other ways, such as through enhanced DC plan contributions.
“When a plan closes, existing participants or a subset of participants continue to earn benefits under the traditional DB plan,” the senators said. “When a plan is ‘hard frozen,’ employees earn no new benefits under the plan.”