<nobr>Sep 30, 2009</nobr>

ERIC Urges Congress to Approve Pension Funding Relief; Protect SunAmerica Investment Advice Arrangement

Washington, D.C. -- The ERISA Industry Committee (ERIC), the Washington, D.C.-based trade association representing America's major employers, today submitted a statement for the record to the House Ways and Means Committee urging the lawmakers to approve meaningful funding relief for defined benefit plans, and protect the SunAmerica investment advice arrangements for defined contribution plans.

ERIC submitted the statement in connection with a hearing scheduled for tomorrow (October 1) to examine both defined benefit plan funding levels, and investment advice rules for participants in defined contribution plans.

ERIC argues that the new funding rules under the Pension Protection Act (PPA) coupled with the economic meltdown require plans sponsors to make extraordinary and unexpected cash contributions to their defined benefit plans to fund liabilities that are many years in the future. ERIC for the past several months has been actively engaged with staff from the Obama Administration and Capitol Hill to press the importance of relief to both pension plan sponsors and participants.

ERIC President Mark Ugoretz said that, "Plan sponsors have spent the two-plus years since the legislation was enacted preparing to meet the new law's funding requirements, but they, like Congress when the law was enacted, did not and could not anticipate the financial crisis through which the nation is now progressing. The confluence of tighter funding laws and the current economic environment created a 'perfect storm' that requires relief."

The statement emphasizes that "[e]mployers are not asking for relief in the form of direct financial support from the government. Rather we are merely asking for more time to make unexpected and larger contributions to defined benefit plans as a result of the unprecedented financial and economic problems that stem from the ongoing global financial meltdown."

While the Treasury Department has provided some needed regulatory relief in this area, due to statutory constraints, the Treasury relief was not provided to all pension plans, leaving some plans (fiscal-year plans) suffering grave economic hardship. "Simply stated, Congress needs to act, quickly and decisively in order to support the remaining defined benefit plans still offering retirement security to participants. Any relief that Congress provides must be made available to both frozen and non-frozen plans in order help companies transition out of this deep recession," ERIC argues.

With respect to investment advice to participants, many ERIC member companies who sponsor 401(k) plans offer investment advice products and services to plan participants by utilizing the regulatory framework approved by the Department of Labor known as "SunAmerica." Under that framework, participants receive investment advice based on a computer model designed by a third party with no financial stake in the underlying investments in the plan and is independent of the service provider or financial institution providing the investment advice.

ERIC makes clear, however, that legislation approved last summer by the House Education and Labor Committee would significantly disrupt the manner in which employers provide investment advice to plan participants. Specifically, this legislation would prohibit employers from providing investment advice under most SunAmerica models, which has provided a framework for employers to provide investment advice for eight years.

"Employers need clear rules that apply when an employer chooses to make investment education or investment advice available under a participant-directed defined contribution plan. Congress should recognize, however, that plan sponsors and fiduciaries are increasingly targeted in class action lawsuits that propose expansive theories of fiduciary liability and seek substantive damages. Even when these lawsuits are without merit, as is often the case, they are expensive to defend and they divert time and attention from the employer's business," ERIC says.

ERIC urges a full and fair debate on this issue within the Committee. "However, by casting doubt on SunAmerica arrangements, Congress would force employers to review and reconsider their investment advice arrangements. Employers would limit and or eliminate investment advice programs resulting in fewer Americans receiving investment advice through their employer-sponsored 401(k) plans," ERIC concludes.

A link to ERIC's statement is below.

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For more information:
Ted Godbout
Manager, Communications
The ERISA Industry Committee
1400 L Street, NW, Suite 350
Washington, DC 20005
Phone: (202) 789-1400
Fax: (202) 789-1120
tgodbout@eric.org
www.eric.org

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The ERISA Industry Committee (ERIC) is a non-profit association committed to representing the advancement of the employee retirement, health, and compensation plans of America's largest employers. ERIC's members provide benchmark retirement, health care coverage, compensation, and other economic security benefits directly to tens of millions of active and retired workers and their families. ERIC has a strong interest in proposals affecting its members' ability to deliver those benefits, their cost and their effectiveness, as well as the role of those benefits in the American economy.


Text Files:

ERIC Statement to Ways and Means Committee

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