<nobr>Jun 25, 2010</nobr>

Pension Funding Relief Legislation Signed Into Law

President Obama on June 25 signed into law H.R. 3962, the Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010, legislation providing pension funding relief along with a short-term reversal of a Medicare physician pay cut that took effect June 1.

The Senate approved H.R. 3962 on June 18 by unanimous consent, and the House followed shortly thereafter, approving the bill on June 24 by a 417-1 vote. This came after the Senate failed several times to move a larger tax-extender bill (H.R. 4213) that also included pension funding relief and a longer-term Medicare pay fix.

The short-term Medicare pay fix reverses a 21-percent reduction that took effect June 1, and provides a 2.2 percent update to physician payment rates through November 30, 2010.

Pension Funding Provisions

The pension funding relief provisions are located on pages 4-27 of the bill text. The bill tracks the language the Senate passed in March and does not include the technical changes previously offered by Senate Finance Committee Chairman Max Baucus (D-MT) and House Ways and Means Committee Chairman Sander Levin (D-MI).

It also does not include additional section 4010 disclosure requirements, an active plan requirement, nor a maintenance-of-effort provision.

Key points of the legislation include:

• 2+7 amortization (first two years are interest only);


• 15-year amortization;


• Conditions: Dollar-for-dollar matching plan contributions for: excess compensation (defined as greater than $1 million) to any employee, extraordinary dividends, redemptions; the no-worse-than-current rule applies to additional contributions;


• Length of time for conditions: For the 2+7 amortization relief, an employer must abide by the conditions for three years, and for the 15-year amortization relief, an employer must abide by the conditions for five years;


• Extending the Worker, Retiree, and Employer Recovery Act of 2008 rule for benefit restrictions for one year;


• Application of the 2008 funded status for purposes of applying the prohibited payments on Social Security leveling options to 2009 and 2010;


• Credit balance look-back rule: Relief such that a funded status prior to September 1, 2008, is used to apply for the credit balance restriction for two years;


• Plans subject to pre-Pension Protection Act (PPA) funding rules: Permits modified versions for the 2+7 and 15-year amortization rules;


• Eligible plan years include 2008-2011; and


• Increased reporting to participants and beneficiaries if plan elects relief.

ERIC has worked tirelessly for the past 18 months in urging Congress to approve additional pension funding relief, and applauds Congress and President Obama in enacting the legislation. We will continue to be actively engaged in monitoring how effective the relief is and advise Congress if further relief or additional changes in the pension funding rules are necessary.

Questions or comments on the legislation should be addressed to Kathryn Ricard, kricard@eric.org.

Summary of H.R. 3962
Websites:

Enrolled Version of H.R. 3962

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