<nobr>Sep 1, 2009</nobr>

Rep. Pomeroy Releases Draft of Pension Plan Funding Proposals

House Ways and Means Committee Member Earl Pomeroy (D-ND) on August 27 released draft legislation he plans to introduce after Congress returns that would provide funding relief to help defined benefit pension plans "weather the historic economic downturn."

Pomeroy said this draft fills in the details of the discussion draft he released in June, and includes feedback he received from various stakeholders on his funding relief proposals.

"Last month, employers made an urgent plea for manageable and predictable pension funding rules as the nation works it way back to recovery. I heard valuable suggestions from employers and from employee organizations in reaction to the earlier outline of this legislation, and they have been incorporated into the draft legislative language being released today," Pomeroy said in releasing the draft.

Below are some of the key provisions of the bill, according to a summary.

For Single Employer Plans:

• Allow a sponsor to elect one of two alternative amortization schedules for the investment losses that occurred at the end of 2008; employers electing the funding relief would have to meet one of three maintenance-of-effort options.


• Expand the asset-smoothing corridor from the current 10 percent corridor by increasing the corridor to 20 percent of fair market value for 2009 and 2010.


• Allow employers that use the spot yield curve for 2009 to use the segment rates for 2010.


• Uses the plan's 2008 funded status to determine if the benefit restriction that freezes benefit accruals for plans that are less than 60% funded will apply in 2009 and 2010.


• Uses the plan's 2008 funded status for the purpose of the rule prohibiting the use of credit balances with respect to a plan that was under 80% funded in the prior year (this would apply for both 2009 and 2010).


• Clarifies that plan investment expenses are not included in the plan's target normal cost.


• Modifies the section 4010 reporting rules by repealing the PPA rule requiring reporting with respect to plans that are less than 80% funded and replacing the trigger for reporting.


• With respect to collectively bargained plans, the draft delays the application of the benefit restrictions until plan years beginning after December 31, 2011.

For Multiemployer Plans:

• Allows multiemployer plans that meet solvency tests to elect one of two approaches, available for 2009 and 2010, to fund recent losses over a 30-year period; strengthens and streamlines existing amortization extension provisions.


• For multiemployer plans in endangered or critical status, extends the Rehabilitation Period and the Funding Improvement Period by 5 years, net of any extension in that period elected by the plan under section 205 of WRERA.


• Authorizes the PBGC to facilitate alliances by providing direct or indirect financial assistance, when the PBGC determines such assistance is reasonably expected to reduce the PBGC's likely long-term loss.


• Updates the level of PBGC guarantees for multiemployer plans that become insolvent.


• Modifies existing provisions for multiemployer plan partitions so that eligible plans that have suffered substantial reductions in contributions due to employer bankruptcies and terminations to transfer liabilities attributable to those employers to the PBGC, if that would significantly reduce the likelihood that the eligible plan would become insolvent.

Rep. Pomeroy Release and Summary

Draft Text of Legislation

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