January 22, 2004
In this issue:
- Interest Rate Replacement Legislation May Be Considered By the Senate January 22
Interest Rate Replacement Legislation May Be Considered By the Senate January 22
The Senate may begin its consideration of interest rate replacement legislation, the Pension Funding Equity Act (H.R. 3108), on January 22 following a vote on the omnibus budget bill. If the debate and vote on the omnibus budget bill takes longer than expected, consideration of the interest rate legislation could be bumped into next week. H.R. 3108 will form the core of the interest rate reform package providing for a two-year replacement of the defunct thirty year Treasury bond with a blend of conservative corporate bond indices.
Under the proposal, the permissible interest rate for calculating a plan's funding obligation and variable rate premium paid to the Pension Benefit Guaranty Corporation would be 90-100 percent of the four-year weighted average of a composite blend of the interest rates on high quality long-term corporate bond rates. There has been significant controversy over the inclusion of a deficit reduction contribution relief proposal and relief for multiemployer plans on the amortization of investment losses. This controversy kept the Senate from passing replacement legislation prior to the end of 2003 although the Senate did agree to a resolution by which it would consider the interest rate legislation this year.
The agreement between the Senate Majority Leader, Bill Frist (R-TN) and Senate Minority Leader Tom Daschle (D-SD) calls for consideration of H.R. 3108 and up to seven amendments; one managers' amendment and three amendments from each party related to either the replacement of the 30-year bond rate, the DRC or multiemployer plans. It is the Council's understanding that a single amendment will most likely be offered jointly by Chairman of the Senate Finance Committee Charles Grassley (R-IA), Chairman of the Health Education Labor and Pension Committee Judd Gregg (R-NH) and the ranking minority members of those committees, Senators Max Baucus (D-MT) and Edward M. Kennedy (D-MA). This amendment is expected to include technical corrections to H.R. 3108 as well as a DRC proposal and a multi-employer plan relief proposal. The DRC proposal will be limited to the airline and steel industries but will include an application process for companies not in those industries to apply for a funding waiver of the DRC. The multiemployer relief proposal is expected to include a two-year waiver of the amortization of recent investment losses experienced by the plan.
We will update you as we have more particulars on the details of the legislation with possible modifications. Your continued support in obtaining passage of the interest rate replacement legislation is greatly appreciated. We encourage you to contact your senators and urge them to support the interest rate replacement legislation.
For more information, contact Lynn Dudley, Council vice president & senior counsel, 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.