October 27, 2020
House Committee Urges Administration to Support Pension Funding Stabilization; White House Weighs in on PBGC
With time running out before the end of the calendar year, the American Benefits Council continues to build support for congressional action to stabilize defined benefit pension plan funding.
As we have frequently reported, the U.S. House of Representatives has approved pandemic stimulus measures including a package of critical funding reforms originally proposed by the Council, specifically, single-employer defined benefit pension plan funding relief in the form of:
- Extended and enhanced interest rate smoothing, starting in 2020.
- Modified seven-year amortization to 15-year amortization, with a “fresh start” in 2020 (prior year funding shortfalls would be disregarded and the plan’s funding status would be recalculated in 2020, with any shortfall amortized over 15 years).
While still somewhat unlikely, the best hope for enactment of these provisions is a compromise economic stimulus bill passed in a “lame duck” legislative session.
On October 23, 11 House Republicans – including six members of the House Ways and Means Committee, which shares jurisdiction over retirement policy matters – wrote a letter to U.S. Treasury Secretary Steve Mnuchin urging the Administration’s support for “a proposal designed to provide predictability and stability for single-employer … pension plans.”
Referencing data provided by the Council, the letter explains how and why funding relief is essential for supporting American companies that are experiencing revenue losses in light of the pandemic.
Meanwhile, on October 22 the White House issued a presidential memorandum calling for a thorough review of the Pension Benefit Guaranty Corporation’s (PBGC) financial position. As we reported in the September 15 Benefits Byte, the agency’s Fiscal Year (FY) 2019 Projections Report reported that the single-employer pension insurance program “is projected to continue to improve and remain out of deficit over the next decade,” while the struggling multiemployer program is very highly likely to run out of money in FY 2026 with insolvency “a near certainty” by the end of FY 2027.
The president’s memo signals the Administration’s interest in (1) revisiting the Obama-era decision to terminate pension plans of non-union and salaried autoworkers of the Delphi Corporation and (2) addressing the multiemployer pension plan funding crisis by soliciting input from cabinet officials on solutions by April 20, 2021. This long-term approach to the multiemployer crisis suggests a lack of urgency to take up the issue before the end of 2020.
Unfortunately, in citing the PBGC’s financial struggles, the memo inappropriately groups its healthy single employer program with its struggling multiemployer program and does not raise the topic of excessive PBGC premiums.
The Council recognizes the importance of addressing the multiemployer plan system challenges and continues to advocate that Congress not finance any portion of the multiemployer program’s deficit through the single employer system. Doing so would accelerate the rate at which single-employer sponsors are exiting the system, exacerbating a decline in companies participating in the PBGC’s single-employer insurance program and thereby worsening the PBGC’s problems.
For more information on defined benefit pension matters, contact Lynn Dudley, senior vice president, global retirement and compensation policy, Diann Howland, vice president, legislative affairs, or Jan Jacobson, senior counsel, retirement policy.