Report: Memorial Day Now Current Pension Reform Deadline

Members of the US House-Senate conference committee trying to settle a laundry list of disputed items in the sweeping pension reform legislation (HR 2830) (See  Enzi Gets Nod as Chair of Congressional Pension Reform Conference Committee ) had said they first intended to wrap up their panel’s work in time for their recently completed Easter break (See Boehner: Expect Pension Compromise after Congressional Break ), BNA reported.

According to the report, d iscussions are underway over whether the effective date of the bill should be moved back a year from January 1, 2007, to January 1, 2008, to give plan sponsors enough time to amend their plans to comply with the new rules and give regulatory agencies time to issue guidance on enacting them. “The deeper you go into the year, the more compelling it is to change the effective date,” one unnamed source close to the negotiations told BNA.

Before the Easter recess adjournment, Senate conferees offered a modest proposal to their House counterparts that was perceived as too similar to the Senate bill to be an acceptable compromise, the report said.

BNA’s source said the Senate offer included:

• extending the amount of time employers would have for smoothing, or averaging, the interest rates used for calculating pension assets and liabilities from 12 months to 15 months;
• adopting modifications to mortality tables used to determine present value used for calculating pension liabilities and distributions that were approved in the House bill;
• requiring underfunded plans with credit balances to first contribute either the greater of their normal plan costs or 50% of the minimum contribution; and
• reducing the maximum deductible contribution from 180% to 175%.

House conferees made a similar, counteroffer to their Senate counterparts before the adjournment but there have been no additional meetings since that time, another source told BNA.

According to a  Joint Tax Committee (JTC) comparison of the House and Senate bills, present value under the House bill would be determined using RP-2000 mortality tables “with improvements in mortality projected to the current year (with the effect of the mortality change phased in over 5 years, except for plans established after 2006).” The Senate bill proposed using the tables that are in effect on the date of enactment “and as revised by Treasury at least every 10 years to reflect pension plan experience and projected trends,” with separate tables that apply for disabled participants.

The JTC comparison noted that the Senate proposal on credit balances was generally the same as the House bill, “except only a prefunding balance applies, based on any credit balance under the funding standard account for the last year before the new funding rules are effective, plus contributions that exceed required contributions under the new funding rules.”

According to a summary by the House Education and the Workforce Committee, the House bill provisions relating to maximum deductible contributions, would permit employers to make additional contributions up to a new higher maximum deductible of up to 150% of a plan’s funding target.