ACTION ALERT
March 31, 2004
AA 04–04
White House Support Needed for Final Action on Pension Funding Rate Legislation
Contact administration officials today and urge their cooperation
Action Requested: Contact the White House and urge them to help complete work on the conference report to the Pension Funding Equity Act (H.R. 3108) before the end of this week.
Background: If Congress fails to pass an interest rate replacement that is enacted into law, many pension plan sponsors will be forced to make much higher contributions to their pension plans than are necessary to meet plan liabilities. The artificially high funding requirements drain resources that would otherwise be used for capital investments and job creation while discouraging employers from maintaining defined benefit plans.
Time is of the essence: Final action on H.R. 3108 is long overdue and some plans are fast approaching a critical deadline. April 15 is the first due date for plans making quarterly contributions and in some instances, this one payment would be significantly greater than the contribution for the whole year using a rate based on long-term corporate bonds.
Tentative agreement on the rate and limited DRC relief: Conferees appear to have reached agreement on the interest rate and on limited DRC relief but have stumbled over whether or how to grant funding relief to the multiemployer plans.
Multiemployer relief hang-up: The White House and the House Republicans are conflicted over whether they should grant funding relief to multiemployer plans. The Senate bill grants limited funding relief to certain multiemployer plans. Several variations of the relief have been discussed but the White House has not signaled that any version discussed thus far would be acceptable. Several conferees and the House leadership have indicated that they do not want to pass a bill that could be vetoed.
Compromise is possible: The parties have reached an impasse. Currently, neither House Republicans, the White House nor the conferees supporting multiemployer relief are willing to suggest a new compromise with respect to the multiemployer relief. However, the primary concern about the relief appears rooted in the potential access to the proposed relief – not the relief itself – and thus it would appear compromise is possible. Congress and the White House should not lay blame for the failure of negotiations, but rather should do whatever it takes to enact the replacement rate. The support of the White House is critical to finding a solution and bringing the interest rate legislation to closure.
Impasse must be overcome. Failure to replace the rate will be disastrous. A survey by Hewitt Associates in January noted that without interest rate relief, 39 percent of the remaining large employers will either freeze their pension plan or convert it to a defined contribution plan. One estimate shows that more than half of the $80 billion in projected pension liability owed for 2004 is attributable to the use of a broken interest rate rather than actual cash needed to fund benefits.
Contact the White House and urge the Administration to help the conferees reach a compromise on H.R. 3108 this week. Below is the contact information for key administration officials:
Stephen Friedman
Assistant to the President and Director of the National Economic Council
(202) 456-2800
Mike Meece
Special Assistant to the President and Deputy Director of Public Liaison
(202) 456-2380
Charles Blahous
Special Assistant to the President for Economic Policy, National Economic Council
(202) 456-2800
For further information contact Diann Howland, Council vice president, retirement policy, at (202) 289-6700.
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.