January 28, 2004
In this issue:
- Senate Approves Pension Interest Rate Replacement Legislation
Senate Approves Pension Interest Rate Replacement Legislation
On January 28, the Senate approved the Pension Funding Equity Act (H.R. 3108) by a vote of 86 to 9.
H.R. 3108, as passed by the House of Representatives on October 8, 2003, would replace the 30-year Treasury bond rate used for calculating a defined benefit plans' funding liability with a rate based on conservatively invested long-term corporate bonds for 2004 and 2005. The Senate approved a substitute amendment (offered jointly by Senate Finance Committee Chairman Charles Grassley (R-IA), Health, Education, Labor and Pension (HELP) Committee Chairman Judd Gregg (R-NH), and the ranking minority members of those committees, Senators Max Baucus (D-MT) and Edward Kennedy (D-MA)) which would make important technical corrections and add a two-year relief provision for multiemployer plans and companies affected by the deficit reduction contribution (DRC).
The measure also includes several amendments passed during Senate debate. Amendment 2261, submitted by Grassley and approved by unanimous consent, extends transfers of excess pension assets to retiree health accounts through December 31, 2013. Amendment 2264, offered by Senator Don Nickles (R-OK) and approved by unanimous consent, expressed the "Sense of the Senate" with regard to private pension plans. The amendment directs the Finance and HELP committees to conduct hearings on the status of multiemployer pension plans, and recommends that they "work in consultation with the Departments of Labor and Treasury on permanent measures to strengthen the integrity of the private pension system in order to protect the benefits of current and future pension plan beneficiaries."
The Senate also rejected two amendments by Senator Jon Kyl (R-AZ). Amendment 2234 would have capped the possible liabilities imposed on PBGC as a result of a company's use of the DRC waiver. Amendment 2236 would have restricted an employer that elected an alternative DRC from applying for a funding waiver.
The board of the Pension Benefit Guaranty Corporation (comprised of the secretaries of Labor, Treasury and Commerce) has expressed its opposition to the inclusion of DRC and multiemployer plan relief, indicating that it will recommend a presidential veto if such proposals are included in the final legislation. The administration's Statement of Position, issued January 22, did not mention a possible veto.
It is still uncertain whether a conference will be held on H.R. 3108 or whether it will be sent back to the House for consideration. Senate Democrats have already objected to the Republicans' request for a conference session with the House. We are monitoring developments closely and will report back when a decision is made. For more information, contact Lynn Dudley, Council vice president and 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.