<nobr>Mar 7, 2005</nobr>

Employers Unveil "10-Point Plan" to Promote the Health of the Nation's Pension System

March 7, 2005 -- The ERISA Industry Committee (ERIC) and a coalition of other business organizations will be unveiling a "10-Point Plan" aimed at strengthening the nation's voluntary pension system to a House Ways and Means subcommittee. The proposal will be presented Tuesday, March 8 at 3 p.m. in Room 1100 of the Longworth House Office Building.

"Targeted reforms" are necessary to guarantee that those private sector employers offering defined benefit pension plans are able to continue to offer such benefits to the tens of millions Americans who rely on them, according to Henry Eickelberg, a member of ERIC and Staff Vice President for Human Capital Process for the General Dynamics Corporation.

Eickelberg will be testifying before the House Subcommittee on Select Revenue Measures on behalf of ERIC and four other business groups: the American Benefits Council, the Business Roundtable, the National Association of Manufacturers and the U.S. Chamber of Commerce.

"The Administration's proposal looks to the worst circumstances in which a few employers have found themselves and would rebuild the pension system to force every other plan sponsor to fund on the basis of those worst possible circumstances," according to Mark Ugoretz, president of ERIC. The Administration included a number of workable elements in their pension reform proposal in the 2006. But that proposal, alone, “doesn't come close” to assuring employers that they will be able to continue offering pension benefits to workers, according to Ugoretz..

"If Congress adopts a legislative and regulatory environment in which employers who are committed to helping finance their workers' retirement are effectively penalized for doing so, secure employer-provided defined benefit retirement plans will become a thing of the past," Ugoretz said. "In contrast, the blueprint employers have provided will allow defined benefit plans to thrive and continue to provide a secure retirement to millions of workers."

Key elements of the 10-point plan to be discussed by Eickelberg are as follows:

1. Permanently Replacement of the Obsolete 30-Year Treasury Bond Rate. Pension policy must provide employers with the certainty that will allow them to make new capital investments, to hire new employees, and to make R&D investments. A permanent replacement for the obsolete 30-year Treasury bond rate used for pension calculations is needed now.
   
2. Ensure that Pension Funding is Predictable. It is essential that any reforms reflect the long-term nature of pension promises and smooth liability and asset valuations. Volatility in these calculations makes it impossible for employers to plan and make prudent business decisions, slowing the economy.
   
3. Avoid Unnecessary Complexity. The Administration’s yield curve proposal would add significant complexity to the system without any real benefit. The long-term corporate bond rate that Congress adopted last year on an interim basis is a simple, appropriate, and transparent measure of liability and should be made permanent.
   
4. Prevent Unnecessary Bankruptcies. Pension reform should not make it more difficult for struggling companies to recover. We must not lose sight of the fact that the best insurance for plans, participants, and the PBGC is a healthy plan sponsor.
   
5. Eliminate Prefunding Barriers. Barriers that prevent employers from making contributions to their plans should be eliminated. We strongly support proposals to revise the tax deduction rules that prevent employers from contributing to defined benefit plans during good economic times.
   
6. Encourage Advance Funding. The pension system should encourage employers to make contributions to their plans as early as possible. Reform should ensure that there is no disincentive to funding plans in advance of future liabilities.
   
7. Provide Timely and Appropriate Disclosure. Participants should have the information they need to evaluate their retirement security. Existing funding disclosure requirements should be enhanced to provide timely and useful information about retirement plans, while at the same time avoiding the creation of costly, confusing or misleading new requirements.
   
8. Fund the PBGC Appropriately. The best way to protect the PBGC is to keep employers in the defined benefit plan system. Rising and uncertain premiums would force many plan sponsors to exit the system.
   
9. Confirm the Legality of Hybrid Plan Designs. To compete effectively and attract and keep skilled workers, employers must be able to tailor pension plans to the unique needs of their workers and the competitive environment in which they function. The flexibility to utilize varied pension plan designs, including cash balance and other hybrid plans, is imperative if we are to maintain a vital defined benefit system.
   
10. Make the EGTRRA Improvements Permanent. The EGTRRA improvements have led to increased defined benefit plan coverage among small employers and need to be made permanent.

Henry Eikelberg's Testimony

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