>The Pension Protection Act (HR 2830) bill also includes an investment advice proposal that has passed the House three times with Democrat support, according to a news release from Education & the Workforce Committee Chairman Representative John Boehner (R-Ohio), a primary backer of the new bill and a longtime activist in the retirement plan advice debate.
>Under the bill, employers will be able to provide workers with access to a qualified investment advisor. The measure also calls for fiduciary and disclosure safeguards to ensure that advice provided to employees is in their best interest, the press release said.
>The advice issue has been a major component of debates in recent years about post-Enron/WorldCom pension reforms to better protect pension participants (See Full House to Take Up Advice Bill ).
“Expanding worker access to quality investment advice is one of the most important pension protections we can provide,” said Boehner, in the news release. “This is a common sense way to encourage employers to provide their workers with access to quality investment advisors while including tough fiduciary and disclosure protections to ensure that workers receive advice solely in their best interests.”
>However, as introduced, the measure does not include finalized cash balance provisions. Boehner also introduced a standalone bill – the Pension Preservation & Portability Act – as a “starting point” for discussion on efforts to resolve the legal uncertainty surrounding cash balance plans, the news release said. Cash balance plans and those converted to cash balance from another form of pension have been hugely controversial in recent years because of allegations they discriminate against older workers.
>The GOP lawmakers unveiled the bills at a Washington, DC news conference Thursday morning. Primary backers of the measure in addition to Boehner are Ways & Means Committee Chairman Bill Thomas (R-California), Employer-Employee Relations Subcommittee Chairman Sam Johnson (R-Texas), and Employer-Employee Relations Subcommittee Vice Chair John Kline (R-Minnesota), according to a Boehner news release.
>Johnson asserted at a news conference that the bill clarifies pension funding expectations. “We are setting realistic new standards for pension funding that are clear and will result in real consequences if pension plans are underfunded,” said Johnson, in the announcement. “Underfunded plans are bad for workers, employers and the American taxpayer.”
>The Pension Protection Act also establishes a structure for identifying troubled multiemployer pension plans, the announcement said. “Multiemployer pension plans were designed for a 1940s workforce that assumed the multiemployer labor base would continue to grow,” said Kline, in the announcement. “In recent years it has become glaringly apparent that this outdated system creates obstacles for employers, thus threatening the retirement security of American workers and putting American taxpayers at risk of being forced to fund a multi-billion dollar bailout.”
>According to materials released Thursday, the Pension Protection Act will:
- provide a permanent interest rate based on a modified "yield curve" for employers to accurately measure current pension liabilities as they come due.
- require employers to make sufficient contributions for plans to meet a 100% funding target.
- require employers to make additional contributions to erase funding shortfalls over seven years.
- trigger accelerated contributions if a plan's funded status falls below 60%.
- prohibit employers from using credit balances if their plans are funded at less than 80%.
- permit employers to make additional maximum deductible contributions of up to 150% of current liability.
- prohibit employers and union leaders from increasing benefits or paying lump-sum distributions if a plan is less than 80% funded.
- prohibit further benefit accruals for plans funded at less than 60%.
- restrict the use of deferred executive compensation arrangements for employers with severely underfunded plans.
- raise premiums employers pay to the Pension Benefit Guaranty Corporation but phase the increase in over time.
- identify underfunded multiemployer pension plans and provide quantifiable benchmarks for measuring a plan's funding improvement.
- require both single and multiemployer plans to include more detailed and specific information on their Form 5500 filings.
- require both single and multiemployer pension plans to notify workers and retirees of the funded status of their plan within 90 days after the close of the plan year.
- require both single and multiemployer pension plans to provide the summary annual report notice to workers and retirees within 15 days of the Form 5500 filing deadline.
>Reaction to the GOP measure came swiftly Thursday after the announcement news conference.
US Senator Mike Enzi, (R-Wyoming), chairman of the Senate Health, Education, Labor and Pensions Committee, praised Boehner for his work in crafting the measure. "There will be many nay-sayers as we go through the process of trying to enact this legislation," Enzi said. "They will attack the particulars of this bill but, in the same breath, they will complain that the legislation does not go far enough. Although I am not certain that Chairman Boehner has reached the perfect balance in his bill, I do think he is close to it."
Secretary of Labor Elaine Chao, who introduced the Bush Administration's reform plan in January (See Chao Releases Administration DB Reform Proposal ) said accurate measurement of pension funding requirements is critical for successful reform. "Any reform package must ensure that pension obligations are measured and reported accurately; smoothing of assets and liabilities, and the use of phantom credit balances, are inappropriate," she said. "If nothing is done, the pension security of 34 million workers and retirees will be more at risk and the financial integrity of the federal insurance system will be compromised."
A representative of one industry group likewise praised the Boehner bill. "It appears that the Boehner bill avoids some of the worst pitfalls proposed in the original Administration approach," added Janice Gregory, ERISA Industry Committee senior vice president.
>More information about the latest Boehner bill is here .
>More information about the Bush proposal is here .