Retirement benefits are front and center on the policy agendas of employee
benefit groups as Congress and President Obama negotiate a deal to solve the
nation's fiscal crisis during the final weeks of 2012.
The American Benefits Council said it was asking Congress during the
legislature's present lame-duck session to consider a six-point policy agenda that ABC said
would help employers maintain their defined benefit plans and promote job
creation and retirement security.
“Importantly, this six-point plan is perfectly suited for the lame duck
session,” ABC said in a document it released Nov. 28.
ABC said enactment of the provisions in its agenda would generate billions of
dollars in tax revenue by making permanent changes in statutory interest rates
used to calculate the minimum amounts that defined benefit plan sponsors must
contribute to their employees' tax-deferred pension trust funds.
The six-point agenda called for the interest rate corridor that applies in
2012 under temporary pension funding stabilization rules in the Moving Ahead for
Progress in the 21st Century Act (MAP-21) (Pub. L. No. 112-141) to become
permanent (126 PBD, 7/2/12; 39 BPR 1265, 7/3/12).
“This alone would raise tens of billions of dollars and create tremendous job
growth,” according to the ABC document.
The ABC agenda also called for:
accounting standards to be stabilized,
premiums paid to the Pension Benefit Guaranty Corporation to be based on
long-term valuations of PBGC deficits,
on PBGC's authority to impose additional financial requirements on defined
benefit plan sponsors when they sell parts of their business operations,
testing rules to be adjusted for defined benefit plans that sponsors have closed
to new participants, and
of “workable” final rules on cash balance and other hybrid pension plans.
“It's an ambitious legislative agenda” that could affect future decisions
that employers make about participating in the defined benefit retirement
system, Lynn D. Dudley, the council's senior vice president of policy, told BNA
Dec. 3. If those changes were made, “you would have more people stay in the
system,” she said. “You might even have a few people return to the
Another employee benefit group, the ERISA Industry Committee (ERIC), said it
has a less-detailed policy agenda for the lame-duck session.
“This lame duck is scarier than most because of everything that is at stake,”
Kathryn Ricard, ERIC's senior vice president for retirement policy, said Dec. 5
in an interview with BNA.
“We feel at this point in time it's not appropriate to have specific asks,”
Ricard said. “It's more important to remind people of the policies behind the
tax incentives” that support the private retirement system and the benefits they
provide to society as a whole, she said.
Eleven members of Congress endorsed a similar position by signing a “Sense of
the Congress” resolution that Sens.
Richard Blumenthal (D-Conn.) and Johnny Isakson (R-Ga.) introduced Dec. 6. The
resolution recognized that tax incentives for retirement savings play a major
role in employers' decisions to sponsor and maintain retirement plans and in
participants' decisions to contribute to those plans.
The American Society of Pension Professionals and Actuaries, one of the
employee benefit groups that announced support for the resolution, has a broadly
framed “let's not lose too much in tax reform” agenda for the lame-duck session
and the next Congress, which is expected to tackle tax reform, Judy A. Miller,
ASPPA's chief of actuarial issues, told BNA Dec. 4.
Other groups listed on a Dec. 6 statement
from the Coalition to Protect Retirement supporting the resolution included ABC,
ERIC, the American Council of Life Insurers, the ESOP Association, the Insured
Retirement Institute, the Plan Sponsor Council of America, the Securities
Industry and Financial Markets Association, and the Society for Human Resource
ASPPA is fine-tuning several specific policy agenda items that it thinks
would simplify and improve the employer-based retirement system, Miller
One of ASPPA's recommendations for simplification is a two-part proposal
that, on the one hand, would maintain current law requiring that defined benefit
plan sponsors subtract any credit balances from trust fund assets before
determining a plan's minimum required contributions, Miller said.
On the other hand, the proposal would change current law by dropping a
requirement that plan sponsors subtract any credit balances before determining
whether the plan is subject to benefit restrictions, she said.
“It would be a huge simplification” and “more rational, frankly,” Miller
The Pension Rights Center, commenting on ABC's proposal, said the lame-duck
session is not a proper venue for changing complex pension funding rules.
“We have to be very careful about the kinds of solutions we put in place, and
we don't think it's appropriate to do that during the lame-duck session,” Karen
Friedman, the center's executive vice president and policy director, said in a
Dec. 3 interview with BNA.
The Pension Protection Act already provides hardship exceptions for pension
sponsors, Friedman said, referring to ABC's proposal to reduce employers' costs
by stabilizing interest rates.
“We all recognize that interest rates have been abnormally low for a long
time, and that's put real pressure on funding for corporations, and we're
sympathetic to that,” Friedman said. “But we don't think there can be any sort
of permanent fixes put in now without really exploring how it's going to affect
participants,” she said.
In a separate assessment of ABC's six-point agenda, a pension actuary said
that several items on ABC's list, although worthwhile, would be unlikely to
reverse employers' exodus from defined benefit plans.
“The 25-year average rates [under MAP-21] are permitting employers to make
lower contributions today, but the plans must eventually be funded,” Donald
Fuerst, senior pension fellow at the American Academy of Actuaries, told BNA
“Under current law, the contributions will be much higher in 2014 and beyond.
Will sponsors be better positioned then to make these contributions? Or will
they say they need more relief? We'll see,” Fuerst said.
A separate ABC proposal would have the Treasury Department and Internal
Revenue Service use their existing authority to provide more leniency in
nondiscrimination testing for closed defined benefit plans in which participants
continue to accrue benefits.
“If Treasury would liberalize the regulations, it would lower the cost” of
complying with the nondiscrimination rules, Fuerst said. Those rules require
that tax-deferred benefits for highly and nonhighly compensated employees be
comparable. But any liberalization would not alter the prevailing trend of
companies' seeking to avoid pension obligations for which they must guarantee
the benefits, he said.
“What we need to change is making the employer the ultimate guarantor of the
benefit, because that's what puts all the volatility [from interest rates] onto
the employer's financial statements, and that's the real thing driving them away
from these plans,” Fuerst said.
If policymakers instead could ensure that employers' retirement plan
obligations are limited to the amount of money they contribute to the plans each
year and “that they don't have additional liabilities on top of that-- and still
find a way to provide lifetime income for the individual, regardless of how long
they live--that's the new kind of [pension] model that we need,” he said.
By Florence Olsen
A copy of ABC's six-point agenda is at http://op.bna.com/pen.nsf/r?Open=foln-92unyv.
Text of the congressional resolution is at http://op.bna.com/pen.nsf/r?Open=foln-92upkd.
The statement from the Coalition to Protect Retirement is at http://www.asppanews.org/2012/12/06/coalition-to-preserve-retirement-strongly-supports-sense-of-the-congress-resolution-on-retirement-savings/.