An announcement from the office of Senator Benjamin L. Cardin (D-Maryland) who co-authored the amendment with Senator Johnny Isakson (R-Georgia), said that under the main provision of the amendment, employers would be allowed to choose from repaying their pension shortfall over nine years, with only interest on the shortfall owed in the first two years, or repaying over 15 years.
According to the announcement, the amendment also removes a punitive provision that would impose what Cardin calls “an unfair burden” on companies such as General Motors, and it also provides union-managed, multi-employer plans the flexibility they need to continue to fund benefits.
However, the Bureau of National Affairs (BNA) reports that the extended amortization of pension funding is offered in exchange for certain restrictions on employee compensation and employer stock dividends.
The amendment is attached to a Senate bill, H.R. 4213, and according to BNA, a summary of the bill’s pension funding relief provisions provided by Isakson’s office, includes the following conditions for employers who uses the funding relief:
- If any employee’s indexed, taxable compensation for a year exceeds $1 million, the employer would be required to make a matching contribution to the pension for that year in an amount equivalent to the excess.
- The employer also would be required to make a matching contribution to the pension equal to the aggregate amount of “extraordinary dividends,” plus the aggregate fair market value of stock redeemed in excess of a company’s net income for accounting purposes.
The conditions would remain in effect for three years for employers that accept the nine-year amortization relief option and for five years for employers that choose the 15-year option, according to BNA.