<nobr>Dec 9, 2003</nobr>

Pension Funding Correction Delayed

Pension Funding Correction Delayed

December 9, 2003 -- The ERISA Industry Committee released the following statement by its President, Mark Ugoretz regarding pension funding:

The failure today to provide for a replacement of the defunct 30 year Treasury bond after two years of negotiations with Congress, the Administration and other stakeholders and significant compromise by employers is disappointing. It sends the wrong signal at the wrong time to companies that voluntarily sponsor pension plans and to their employees. At the very moment that an aging workforce is becoming increasingly concerned about retirement security, the signal sent to plan sponsors is that their pension plans themselves may face an uncertain future.

If the defunct rate is not replaced soon, companies will be forced to use an interest rate to fund their liabilities that virtually everyone has agreed will require them to put more money – many tens of millions of dollars for many companies -- into their plans than is reasonably necessary. That money would otherwise be used to increase spending on employment and on plant and equipment that would further fuel and support economic recovery in 2004.

The business community and other stakeholders have worked for over two years to replace the defunct rate with a corporate bond rate to which there is now little if any opposition. The failure to reach agreement on extraneous matters is likely to have repercussions in the marketplace as companies are forced to decide whether, on the one hand, they will have to write bigger checks to their pension plans than are necessary and therefore possibly delay hiring or even lay off workers as well as delaying business expansion. Some companies may even be forced to freeze or abandon their pension plans.

We remain hopeful that Congress will act quickly in January to pass the replacement of the defunct 30 year Treasury bond and we intend to continue to work vigilantly to see that the job gets done.

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The ERISA Industry Committee (ERIC) is a non-profit association committed to the advancement of employee retirement, health, and welfare benefit plans of America's largest employers. ERIC represents exclusively the employee benefits interests of major employers all of which provide comprehensive retirement, health care coverage and other economic security benefits directly to some 25 million active and retired workers and their families. The association 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.

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