<nobr>Jun 15, 2005</nobr>

ERIC Submits Testimony on Pension Reform and Hybrid Pension Plan Bills

Washington, D.C., June 15, 2005 – The ERISA Industry Committee (ERIC), representing the country’s largest employers, submitted detailed testimony (attached) on two bills intended to strengthen the nation’s pension plans. ERIC’s comments were directed to the U.S. House of Representatives Committee on Education and the Workforce, where the committee’s chairman, Representative John Boehner (R-OH), introduced the bills. In addition, the organization joined with the U.S. Chamber of Commerce in testimony by Lynn Franzoi of Fox Entertainment Group.

HR 2830, the Pension Protection Act, and HR 2831, the Pension Preservation and Portability Act, call for stronger pension funding and validation of ‘hybrid’ plan designs, such as cash balance and pension equity plans.

“Pension funding rules are perpetually challenged by the need to balance the goals of affordability and security,” stated ERIC’s testimony. “Funding rules must secure benefits for workers, but they also must enable a company to allocate cash in its business in a way that ensures the continued viability and growth of that business.”

ERIC’s testimony also addressed hybrid plans and the current confusion of laws nationwide. “The chairman and sponsors of HR 2831 have correctly identified the challenge before the committee. Without legal certainty, innovative and popular benefits particularly suited to many in the modern work force soon will disappear.”

HR 2830 proposes substantially new framework for pension funding requirements. It establishes a permanent interest rate for calculating liabilities; phases in premium increases; and coordinates the discount rate used for funding with that used to calculate minimum lump sum distributions.

ERIC’s testimony stated “HR 2830, in supplanting the Bush Administration’s short-term Pension Benefit Guaranty Corporation (PBGC)-focused view, has avoided several key pitfalls found in the Administration’s approach, including maintaining the averaging of the funding discount rate and the smoothing of assets. These mechanisms were placed in the law so that accelerated funding requirements would not occur if the country moved into a recession.”

ERIC drafted its own comprehensive funding proposal on behalf of major employers that proposes action in three areas of HB 2830 - funding, disclosure, and PBGC protection.

HR 2831 addresses the need for validation of innovative hybrid plans that are more adaptable to the mobile work force of the 21st century; provides a transparent test for age discrimination; and corrects a technical flaw that penalizes employers who provide generous interest credits under their plans.

“Before their legal status was questioned by the courts, many employers were turning to hybrid defined benefit plans that are well-suited to the modern work force, and some of these employers had never before sponsored a defined benefit plan,” the ERIC testimony stated. “ERIC urges in the strongest possible terms the committee include the substance of HR 2831 in the longer pension bill (HR 2830) when it considers these matters. Congress can construct the most perfect funding rules possible, but without certainty for hybrid plans those rules are likely to apply to a rapidly dwindling universe.”

The ERISA Industry Committee (ERIC) is a non-profit association committed to and represents exclusively 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.

For additional information please contact:

Brendan LaCivita, Director of Communications
blacivita@eric.org

Websites:

ERIC Testimony on Pension Reform and Hybrid Pension Plan Bills

HR 2830

HR 2831

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