The Gregg bill, The Pension Stability Act (S 1550) calls for plans figuring their minimum-funding rate to use 105% of the corporate bond rate (defined as conservative, high-yield corporate bonds rated AAA or AA ) for 2004 and 2005 and 100% of the corporate rate for 2006 to 2008. The minimum funding rate reverts to 105% of the 30-year Treasury at the end of the period, according to Gregg’s bill.
“The five-year period is considered essential both
for collective bargaining and corporate financial
planning purposes. This longer period is necessary as
well as in order to give Congress time to address the
very many long term problems with defined benefit system.
It is anticipated that a permanent solution to the
funding, lump sum, and other issues will be enacted
before the expiration of this temporary fix,” a Gregg
news release indicates.
The bill also provides for a rate for lump sum distributions through a utilization of the 100% composite corporate rate after a phase in on the following schedule :
- 2004, 30-year Treasury rate
- 2005, 30-year Treasury rate
- 2006, 20% of composite corporate rate
- 2007, 40% of composite corporate rate
- 2008, 60% of composite corporate rate
Gregg’s bill provided for an independent commission: to review all outstanding issues, including smoothing, yield curve, mortality tables, and then to report to Congress one year before the temporary fix expires. Members of the commission, appointed by the President and chairmen and ranking members of the relevant committees in the House and Senate, will be drawn from government, business, labor, and pension rights groups.
“The bill I have introduced is urgently needed, is fiscally responsible, andis designed to ensure the long term stability of the pension system. It establishes a five-year window of stability for pension funding and distributions, and it creates a bi-partisan, blue ribbon commission to develop legislative and regulatory solutions that will ensure that definedbenefit plans remain the safest retirement savings program for workers,” Gregg said in a statement. “”The Pension Stability Act gets us through the current pension funding crisis by shifting to a more stable benchmark for determining pension funding obligations. The bill provides the same two years of funding relief as proposed by the Bush Administration, and then lowers the interest rate to a more sustainable level for the remainder of this temporary fix. I believe this is the fiscally responsible thing to do.”
>Full text of the bill can be found at: http://www.eric.org/forms/uploadFiles/2CAB00000002.filename.FRA03_309.pdf