NEWS RELEASE

June 24, 2009
PR-09/22
For additional information:
Jason Hammersla
202-289-6700
jhammersla@abcstaff.org

Council applauds Chairman Miller for inclusion of defined benefit funding relief provisions in retirement savings legislation, applauds Rep. Pomeroy for development of comprehensive relief measure

Council remains concerned with 401(k) fee disclosure, investment advice provisions of H.R. 2989

WASHINGTON, D.C. — “The addition of crucial defined benefit plan funding relief to the 401(k) fee disclosure and investment advice legislation is a critical step toward ensuring the ability of many companies to meet the challenges of the recent economic downturn,” said Council President James A. Klein with regard of the House Education and Labor Committee’s approval of the 401(k) Fair Disclosure and Pension Security Act of 2009 (H.R. 2989). “We applaud Chairman George Miller (D-CA) and the rest of the committee for their support of the voluntary, employer-sponsored defined benefit pension system.”

The recent, intense financial market volatility, combined with substantial pension plan funding changes enacted in 2006, has caused huge swings in asset values and funding obligations. “Many companies are facing billions of dollars in funding shortfalls and, if relief is not enacted, they will be forced to reallocate resources from capital investment, infrastructure and their workforce,” Klein said. “Funding relief is absolutely essential if we are to save American jobs and continue our national economic recovery.”

The legislation’s new defined benefit pension funding relief provisions will help alleviate some of this funding pressure by permitting companies using the spot yield curve for 2009 to be able to elect to use the segment rates for 2010; revising the effective date of the Internal Revenue Service funding regulations to apply to plan years beginning after December 31, 2009; and clarifying the term “target normal cost” to exclude plan investment expenses. An amendment offered by Representative Brett Guthrie (R-KY) would add the "two plus seven" provision, under which employers would be required for two years to pay interest on their plans’ 2008 losses to prevent the plans’ shortfall from growing, but seven-year amortization of those losses would not commence until the expiration of those two years. The Council had recommended these measures in our defined benefit plan suggested funding proposals. "This relief will help restore companies’ economic footing. We look forward to the committee returning to this issue as soon as possible to more fully address substantive relief to specifically address the 2008 losses,” Klein said.

“The Council also applauds the leadership of Representative Earl Pomeroy (D-ND), who issued his own discussion draft of comprehensive pension plan funding proposals on June 23. Representative Pomeroy has been a tireless supporter of pension plan sponsors and participants and we look forward to working with him on this topic,” Klein said.

“The Pomeroy bill would provide wide-ranging relief for companies working to sustain their business while maintaining sponsorship of defined benefit pension plans. The efforts by both Chairman Miller and his Republican and Democratic colleagues on the Education and Labor Committee and by Representative Pomeroy, who is a senior member of the House Ways and Means Committee, underscores that Congressional leaders recognize how important pension funding measures are to preserve jobs and help the economy recover, ” Klein said.

“We continue to have some concerns about the underlying 401(k) fee disclosure bill, which continues to expose employers to unacceptable levels of fiduciary liability,” Klein said. In proposed modifications to H.R. 1984, the Council identified several liability issues raised under the bill as introduced. “We are hopeful that these outstanding issues can be addressed before the bill goes to the House floor,” he added.

“The Council is also concerned that the investment advice portion of the legislation does not protect the many non-conflicted advice arrangements approved by the U.S. Department of Labor prior to the enactment of the Pension Protection Act of 2006 (PPA) — including those established under the long-standing Sun America advisory opinion,” Klein said. The Council had urged lawmakers to validate these pre-PPA arrangements in recent comments on H.R. 1988 and a proposed modification to the bill.

“We look forward to continued work with the committee to not only ensure workers’ financial security in retirement, but to encourage their participation in the successful, voluntary employer-sponsored benefits system,” Klein said.

For more information, or to arrange an interview with Council staff, please contact Jason Hammersla, Council director of communications, at jhammersla@abcstaff.org or by phone at 202-289-6700 (office) or (202) 253-5458 (cell).

The American Benefits Council is the national trade association for companies concerned about federal legislation and regulations affecting all aspects of the employee benefits system. The Council’s members represent the entire spectrum of the private employee benefits community and either sponsor directly or administer retirement and health plans covering more than 100 million Americans.