Senate Leaves Town with Pension Aid Bill Untouched

November 21, 2008 ( - The U.S. Senate adjourned for its Thanksgiving break this week without taking up a new pension aid proposal put forward by four Senators on Wednesday.

A Washington Post report said an aide to Senator Charles Grassley (R-Iowa) indicated Grassley and co-sponsors Max Baucus (D-Montana), Edward Kennedy (D-Massachusetts) and Mike Enzi (R-Wyoming) would bring up the bill again if Congress reconvenes in December.

The bill wouldwaive a requirement that companies immediately fully fund their pension plans if they fail to meet certain benchmarks, even if their pensions have suffered big losses (See  New U.S. Senate Legislation Would Help Pensions ).  S ome of the nation’s largest companies have been lobbying Congress to ease rules that were strengthened two years ago with the passage of the Pension Protection Act (PPA) (see  Groups Urge DB Legislation to Help with Current EconomyABC Unveils 10-Point Reform Plan ).

Under the old system, companies could legally go years without contributing to their defined benefit plans. But the more stringent funding requirements in the PPA call for companies to bring their pension plans, on a phased-in schedule, to 100% funding.  Each year the companies must meet a certain funding benchmark until it reaches 100%. For 2008, the target funding percentage is 92% percent; if they don’t meet that benchmark, they are forced to fully fund their pensions (see  Moving the Goal Posts ).

The four senators’ proposal would require companies that fail to meet the target funding percentage for a particular year to cover their plans only up to that target percentage. For example, if a company failed to fund 92% of its pension plan this year, it would have to come up with the money to reach that 92%, not 100%.

The senators dealt with other retirement issues in their proposal, including a law that mandates retirees older than 70 1/2 to take a required minimum distribution from their defined contribution plans, proposing a one-year moratorium on the rule, effective for 2009.