May 26, 2004
BB 04—60

In this issue:

  • Council Unveils Report on Defined Benefit Pension Plans
  • DOL Issues Final Cobra Regulations

Council Unveils Report on Defined Benefit Pension Plans

At a May 26 media briefing, the Council unveiled the new report Pensions at the Precipice: The Multiple Threats Facing our Nation's Defined Benefit Pension System. The paper provides background on defined benefit pension plans and the defined benefit system, articulates the unique and unprecedented confluence of threats to this system, and sets forth the Council's policy solutions that will alleviate these threats. Of particular note, the document describes the attacks on hybrid defined benefit plans, the failure to permanently replace the obsolete 30-year Treasury bond rate for pension calculations, the flawed pension funding regime and flawed proposals for funding reform, and the movement to impose "snapshot" accounting standards.

The Council was joined at the Media Briefing by Representative Earl Pomeroy (D-ND), who praised the importance and timeliness of the paper. In his remarks, Pomeroy discussed the forthcoming changes in the way Americans will view retirement planning. In particular, he stressed the diminishing importance of asset accumulation (in light of recent stock market declines), and the corresponding need to ensure a guaranteed, steady cash flow in retirement.

The briefing was attended by a wide array of print and broadcast media, including Reuters, Gannett News, National Journal, the Los Angeles Times and representatives of the trade press.

For more information, or to receive a hard copy of the paper, contact James Klein, Council president, at (202) 289-6700.

DOL Issues Final Cobra Regulations

On March 26 the Department of Labor (DOL) issued final COBRA regulations. Despite many comments sent to the agency urging a relaxation from the proposed rule, most of the final rule is the same as the proposed rule.

Most significantly, the rule includes two notice requirements. An "unavailability notice" requires that, if a beneficiary contacts the employer about what he believes is a qualifying event but the employer determines that there is no right of COBRA continuation coverage, the employer must send a written notice to the individual within 14 days. Secondly, if COBRA terminates early, the employer must send notice to the beneficiary within a reasonable time. Failure to properly send either of these notices could trigger civil or tax penalties.

Some changes were made to accommodate a more generic COBRA notice; however, the notice still must reference the plan name. In addition, the rule requires an employer to implement a reasonable procedure — which must be included in the plan's summary plan description — about how a qualified beneficiary who gets divorced or "ages out" of the plan needs to notify the employer about that situation. If such a procedure is not in place, the qualified beneficiary can provide notice in any manner, including orally. The proposed rule said the oral notice could be provided generally to the employer, but the final rule requires the individual to notify the employee benefits staff of the employer.

These rules apply to all plan years beginning on or after November 26, 2004. For more information, contact Susan Relland, Council health policy legal 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.