<nobr>Feb 27, 2009</nobr>

Major Consulting Firms Write Congressional Leadership on Need for Additional Pension Funding Relief

Eight major actuarial consulting firms -- Aon Consulting, Buck Consultants, Hewitt Associates, Mercer, Milliman, Segal Company, Towers Perrin and Watson Wyatt Worldwide -- on February 20 sent letters to the House and Senate leadership, urging the lawmakers to consider additional pension funding relief.

The letter addresses the issue of whether companies can simply address their funding burdens without the use of cash (i.e., through the use of credit balances), describing how, in the case of calendar year plans, the credit balances available at January 1, 2008, will generally be greatly diminished as of January 1, 2009. The letter further explains that, even if remaining credit balances are waived to improve funded status, as measured for the purpose of determining the requirement to impose benefit restrictions on participants, a great number of plans will still be required to impose these restrictions.

The firms write that reducing unmanageable funding burdens, and avoiding the imposition of benefit restrictions that unfairly burden employees are the two key problems that need to be addressed by funding relief proposals, and that there are many ways to address these issues. The letter provides as an example to address funding burdens is to have seven-year amortization of the 2008 plan losses begin in 2011, with only interest payable on those losses for 2009 and 2010. One way that has been suggested to address the benefit restriction problem is to apply the benefit restrictions in 2009 and 2010 based on plans' 2008 funded status, the firms write.

The authors reiterate that they do not believe that plans should remain underfunded and are not advocating undermining the reforms enacted in the Pension Protection Act, but asking companies to make up too much of the 2008 plan losses too quickly will adversely affect job retention and our economic recovery, hurting both employers and employees/plan participants.

ERIC continues to press the case for additional funding relief and is supportive of the consulting firms' letter to Congress.

Websites:

Letter to Congressional Leaders

Back to Previous Page