BENEFITS BYTE

March 25, 2004
BB 04—38

In this issue:

  • Conferees Nearing Agreement on Pension Interest Rate Replacement Legislation
  • Eleven Congressmen Send Letter to SEC Chairman Regarding Hard 4 p.m. Close

Conferees Nearing Agreement on Pension Interest Rate Replacement Legislation

The Council has been working closely with Congressional staff members and has learned that House of Representatives and Senate conferees are near an agreement on the Pension Funding Equity Act (H.R. 3108). Through the leadership of Chairman of the House Education and the Workforce Committee John Boehner (R-OH), who is chairing the conference negotiations, and the diligence and willingness of the conferees to reconsider earlier positions, the conferees are close to completing work on a final bill. The conferees are expected to meet later today for what may be final discussions, though it could also open the door to additional negotiations.

The final bill is expected to contain a two-year replacement of the defunct 30-year Treasury bond rate with a composite rate based on long-term corporate bonds. Council staff is working closely with appropriate congressional staff to ensure that the rate will be based on an adequate range of publicly available indices. The legislation is also expected to permit the use of the 30-year Treasury rate for purposes of maximizing the limit on deductible contributions, so that employers that want to make larger contributions may do so.

Funding relief for multiemployer plans and expanded deficit reduction contribution (DRC) relief for companies not in the airline and steel industries — contained in the Senate bill but not the House bill — have generated the most controversy during the conference process. (The Senate bill contains DRC relief for airlines and steel, which was not contained in the House bill, though the House subsequently passed H.R. 3521, the tax extenders measure, which did include DRC relief for airlines. This portion of the Senate DRC relief was not a significant issue for debate in the conference.) The conference agreement reportedly extends DRC relief to airlines and steel manufacturers.

The conference agreement could resolve the hotly debated multiemployer issue by providing narrower multiemployer plan relief. The fate of the controversial application process for DRC relief (for companies not in the airline and steel industries) is still uncertain; it may be refined to target employers in the most need of relief, or it may be dropped altogether. Miscellaneous elements and company-specific provisions included in the Senate bill have not been resolved but are expected to be settled fairly quickly.

While the Bush administration has vocally opposed the inclusion of the expanded application process for DRC relief for non-airline and non-steel related industries and broad multiemployer relief, prospects for enactment based on recent negotiations appear promising. A one-page chart comparing the House and Senate bills is still available on the Council Web site.

The Council is continuing to work closely with appropriate Congressional staff to address concerns raised by our members. We will keep you informed as more details and official legislative language become available. For more information, contact Lynn Dudley, Council vice president and senior counsel, at 202-289-6700.

Eleven Congressmen Send Letter to SEC Chairman Regarding Hard 4 p.m. Close

On March 22, Representatives Rob Portman (R-OH) and Ben Cardin (D-MD), along with a bipartisan group of nine other representatives, sent a letter to Securities and Exchange Commission (SEC) Chairman William Donaldson expressing their concern that the SEC's proposed hard 4 p.m. close rule would cause problems for retirement plan participants. The Council, several individual member companies and other business groups were instrumental in encouraging the representatives to express their concerns to the SEC. The letter was co-signed by Republicans Judy Biggert (IL), Sam Johnson (TX), Jim Ramstad (MN), Johnny Isakson (GA) and Edward Royce (CA), and by Democrats Earl Pomeroy (ND), Robert Andrews (NJ), Dennis Moore (KS) and Artur Davis (AL). All are members of the House Ways & Means, Education and the Workforce or Financial Services committees.

Under the proposed hard 4 p.m. close rule, same-day pricing of mutual funds would be denied to mutual fund trade orders that are not received by the fund, the fund's primary transfer agent or a registered clearing agency by the fund's close for that day, which is generally 4 p.m. Eastern Time. The letter outlines the representatives' concerns, stating, "As Members dedicated to improving our nation's retirement plan system, we believe a better option that should be considered would be to continue to allow later processing of orders by plan intermediaries when the intermediary has imposed procedures that prevent the acceptance or canceling of trades after the fund closing time and subjects those procedures to an independent annual audit."

For more information, contact Jan Jacobson, Council director, retirement policy, at (202) 289-6700.

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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.