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<nobr>May 24, 2005</nobr>
ERIC Proposes Reforms for Pension Funding, PBGC, and Hybrid Pension Plans
May 24, 2005 - The ERISA Industry Committee (ERIC), whose members comprise the greatest concentration of private sector defined benefit pension plans in the nation, today urged Congress to enact its proposals regarding pension funding, the Pension Benefit Guaranty Corporation, and hybrid pension plans.
ERIC’s “Consensus Proposals for Pension Funding, PBGC Reform and Hybrid Pension Plans” make recommendations for action regarding (1) contributions that plan sponsors are required to make to their pension plans; (2) contributions that plan sponsors are permitted to make above the minimum required levels; (3) the solvency of the PBGC; (4) disclosure to participants; and (5) the lawfulness of hybrid plan designs and of conversions to such plans.
“Few, if any, of today’s discussions about pension policy provide a full and accurate picture of how defined benefit plans today do – and tomorrow can – provide substantial retirement income security to tens of millions of current and former workers and their families,” said Mark Ugoretz, ERIC’s president. “Instead,” he said, “they focus on worst possible scenarios or scenarios that are industry specific.”
ERIC’s recommendations: - Provide for more secure funding of pension promises while not subjecting employers to volatile and unpredictable cash calls, especially during economic downturns;
- Preserve the ability of employers to pre-fund future pension obligations and would allow an employer to put extra cash in its plans during favorable economic times;
- Protect the PBGC against rapid deterioration of a plan prior to a termination while seeking to preserve benefits for workers;
- Provide participants with the same more timely information on the plan’s funded status that is provided to investors; and
- Affirm the lawfulness of hybrid plan designs and of conversions to such plans, which are critical to the future availability of secure pensions plans for workers.
“Failure to provide realistic and balanced rules that do not discourage pension plan sponsorship means millions of Americans will retire with less money in their pockets,” said Mr. Ugoretz.- Over 44 million Americans receive benefits from defined benefit pensions or will receive benefits in the future. Approximately 20 million plan participants are still working and accruing benefits under these plans. By contrast, the PBGC in 2004 paid out just over $3 billion in benefits.
- Defined benefit plans pay approximately $110-120 billion in benefits each year, in contrast to the PBGC’s payment of just over $3 billion in 2004.
- From its beginning in 1975 through the end of 2003, the PBGC has trusteed only 3,277 plans. Over the same period, approximately 194,000 defined benefit plans either have concluded their business through standard (i.e., fully funded) terminations or are still in existence.
“The vast majority of plans are not a threat to the PBGC,” said Mr. Ugoretz, “but harsh and volatile rules are a threat to the vast majority of plans and to the businesses that sponsor them.”
A copy of ERIC’s proposals (17 pages + executive summary) is available at:
http://www.eric.org/forms/documents/DocumentFormPublic/viewDoc?id=36DE00000006
For additional information, contact:
Janice Gregory, Senior Vice President
jgregory@eric.org
Mark Ugoretz, President
mugoretz@eric.org
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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 and represents exclusively the employee benefits interests of major employers. ERIC's members provide comprehensive retirement, health care coverage and other economic security benefits directly to some 25 million 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.
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