>The 397 to 2 approval came on the Pension Funding Equity Act (HR 3108) that provides for the replacement of the 30-year Treasury bond rate with a blend of corporate bond index rates through 2005. Backers of the measure say that will give lawmakers a chance to find a more lasting solution to the current funding crisis affecting many tradition defined benefit pensions.
>Many in the pension industry have complained about using the Treasury bond interest rate in the liability and funding calculations, charging that it artificially inflates a plan’s funding responsibilities . Congress enacted a temporary remedy in March 2002 by allowing employers to use a higher rate. Because this fix expires at the end of 2003, many industry representatives have been pressing lawmakers to address this issue before year’s end when it reverts back to the 30-year Treasury rate.
“This chronic underfunding crisis in traditional defined benefit pension plans has wide-ranging implications on the future of millions of American workers who have worked all their lives for a safe and secure retirement,” said Representative John Boehner (R-Ohio), who introduced the measure. “This bill represents a responsible approach that provides greater certainty and short-term funding relief to employers while strengthening the retirement security of millions of working families who rely on defined benefit pension plans.”
>Signing on as cosponsors were Representatives Bill Thomas (R-California), George Miller (D-California), Charles Rangel (D-New York), Sam Johnson (R-Texas), and Rob Portman (R-Ohio).
Pension industry groups quickly released statements Wednesday applauding the House action with the American Benefits Council labeling it “an important first step in rescuing the imperiled defined benefit pension system.” Similar kudos came from The ERISA Industry Committee.