March 14, 2012
For additional information:
Jason Hammersla
202-422-4652 (cell)

Council applauds Senate approval of critical pension funding measure as part of transportation bill

Provision addresses historically low interest rates, raises federal revenue & saves jobs

WASHINGTON, D.C. — "The overwhelming approval of a bipartisan Senate effort to reform defined benefit plan funding represents a critical and overdue first step in restoring order to pension plan sponsorship," Council President James A. Klein said today upon final passage of The Highway Investment, Job Creation and Economic Growth Act of 2012 (S. 1813), which includes an important pension funding provision based on the Council's October 2011 proposal.

As part of a prudent plan to stimulate economic recovery, the Federal Reserve is intentionally keeping interest rates at historically low levels to help stimulate economic recovery – and expects to continue doing so until at least 2014. "These artificially low interest rates make healthy pension funds appear less well funded than they truly are, triggering abnormally high pension liabilities. This, in turn, sends mandatory employer contributions to defined benefit plans soaring – greatly limiting companies’ ability to invest in jobs and other capital improvements," Klein said. "For many months, the Council has been working with Congress to resolve this little-acknowledged but exceedingly important problem."

Section 40312 (in Division D) of S. 1813 (as added by Amendment No. 1830, approved by unanimous consent) allows companies to use a more historically accurate interest rate for the purposes of calculating pension assets and liabilities. "The final language, which closely follows the Council's proposal offered in October 2011, recognizes the long-term nature of pensions and makes pension plan funding less volatile," Klein said.

"Pension policy can be exceedingly complicated, but enactment of this funding stabilization provision makes perfect sense. It smooths out a company's funding obligation so it is less sensitive to abnormally high or low interest rates that distort a plans financial condition either too positively or too negatively," Klein said. "This measure saves jobs and raises federal revenue while preserving valuable retirement coverage for millions of American workers. We call on members of the U.S. House of Representatives to join the bipartisan effort by enacting this measure as soon as possible."

For more information, or to arrange an interview with Council staff, please contact Jason Hammersla, Council director of communications, at 202-289-6700 (office) or (202) 422-4652 (cell).

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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.