February 6, 2004
Week Ends With No Conference on Interest Rate Replacement Legislation
Two weeks after the Senate completed its work on H.R. 3108, the Pension Funding Equity Act, there is still no indication that the House and Senate will arrange a conference to reconcile the differences between the House- and Senate-passed versions.
Immediately after the Senate passed H.R. 3108, the Senate Democrats objected to naming conferees. Senate Democrats have expressed concerns that a conference may not ensure them a sufficient opportunity to participate in the final outcome of the bill. The Senate Democratic leadership has also expressed concerns about conferences generally, and on February 4, Senate Minority Leader Tom Daschle (D-SD) defended their position in a floor statement. In his remarks he noted that the Democrats were not responsible for holding up the legislation and the Senate was welcome to refer the bill to the House for its review, but they were objecting to a conference given concerns from prior conferences on energy and Medicare.
Nevertheless, Republican and Democratic leadership in the Senate continue to negotiate, and staff members for Senate Majority Leader Bill Frist (R-TN) have indicated that the Senate intends to work with Senate Democrats on any final legislation that would be sent to the President for his signature. However, the objections of the Senate Democrats — coupled with the inclusion of additional provisions in the Senate bill — have resulted in less enthusiasm in the House for a conference. It is our understanding that some conservative Republican members of the House have indicated that they would rather wait for full funding reform before passing interest rate replacement than go to conference under these circumstances.
There is also a growing sense that the pension funding problem may not be as dire as previously thought and the effects of failing to replace the defunct 30-year Treasury rate are overblown. However, key allies in the House such as Chairman of the House Education and the Workforce John Boehner (R-OH) and Representative Rob Portman (R-OH) remain committed to trying to go to conference. The Administration continues to maintain the position set forth in the Statement of Administration Position (SAP) that they are opposed to the inclusion of DRC and multiemployer relief, but have not specifically used the word "veto," despite the letter from the board of the Pension Benefit Guaranty Corporation threatening to recommend veto over the DRC relief. In addition, several moderate Republicans are expected to issue a letter urging the House majority to go to conference and include the multiemployer relief.
Several outcomes are now possible. There could still be a conference if House Republican moderates are able to persuade House Republican conservatives of the need to go to conference, or if the Senate Democrats drop objections. The House could pass another bill, likely including only interest rate replacement, or there might be no movement until Congress begins working on broader funding reform issues. It is critical that Council members contact their Senators and Representatives to urge them to go to conference even if they have previously been contacted.
For more information, contact Lynn Dudley, Council vice president and senior counsel, at (202) 289-6700.
Council Submits Comment Letter to SEC
On February 5, The Council provided written comments to the Securities and Exchange Commission (SEC) today on the agency's proposed "hard 4:00 close" rule.
As we have previously reported, the rule would require that all mutual fund redemption orders be received by the fund (or designated transfer agent, or registered clearing agency "Fund/SERV") by 4 p.m. Eastern Time in order to obtain the current day's price. As a consequence, fund intermediaries such as administrators of retirement plans would have to submit orders to a fund before 4 p.m. in order for participants to receive that 4 p.m. price. Under this rule, retirement plan participants will generally be relegated to next day (or later) trading because participants typically place their retirement plan trades through recordkeepers or third party administrators (TPAs) who perform a variety of functions after trades are closed to participants. It has been estimated that the deadline for participants may need to be made as early as 10:00 a.m. or 12:00 noon ET in order to meet a mutual fund's hard 4:00 p.m. ET deadline, if the rule is adopted.
The Council's comment letter expresses concern about the detrimental effects this rule would have on employer-sponsored retirement plans and urges the SEC to consider the remedies contained in the Mutual Funds Integrity and Fee Transparency Act (H.R. 2420). H.R. 2420, passed by the House of Representatives in November 2003, would provide an exception for retirement plan administrators and other third party intermediaries to the 4:00 close rule. For more information, contact Jan Jacobson, Council director, 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.