<nobr>May 3, 2007</nobr>

ERIC Board Member Calls for Pension Act Changes, More Realistic Effective Dates

For Immediate Release

Washington, D.C. -- Scott Macey, Senior Vice President for Aon Consulting, Inc., appeared on behalf of The ERISA Industry Committee (ERIC), the American Benefits Council (The Council) and the National Association of Manufacturers (NAM) before the House Subcommittee on Health, Employment, Labor, and Pensions to testify on ways to improve the Pension Protection Act of 2006 (PPA). Macey, who is a member of ERIC's Executive Committee, discussed several provisions included in PPA that should be modified to achieve Congress' original intent and to avoid unintended consequences.

While noting the importance of many of the reforms included in PPA, Macey cited the downward trend in employers offering defined benefit plans, noting the Pension Benefit Guaranty Corporation statistics for 2005 showing that the number of defined benefit plans it insures decreasing by 7,000 (or 20 percent) since 2000. Macy said "it is critical that public policy achieve an appropriate balance that encourages employers to remain in the system." Macey highlighted changes that are needed now to PPA in order to ensure that employers continue to stay in the system. Such changes include: the effective date of the PPA funding provisions, the phase-in of the funding target, the asset smoothing rules, and the lump-sum distribution rules for underfunded plans as provisions that need correcting.

With respect to the PPA funding rules, Macey noted that the effective date applies to plan years beginning after 2007, and the Treasury Department has yet to propose regulations. Because Treasury has been overwhelmed with priority guidance issues from PPA, and businesses have been relying on temporary guidance, Macey urged that the rules be delayed until 2009. Macey said the delay would give businesses time to comply with any new regulations and absorb any sudden increases in costs.

In discussing the transition from the old funding rules to the PPA funding rules, Macey said "a huge sudden increase in costs will likely cause many companies to eliminate 2008 benefit accruals and to freeze benefits generally. Eliminating the cost of 2008 accruals would be the only way for companies to soften the blow caused by the lack of a real transition rule," and thus, go against PPA's intent of strengthening retirement security.

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For more information:
Ted Godbout
Manager, Communications
The ERISA Industry Committee
1400 L Street, N.W., Suite 350
Washington, DC 20005
Phone: (202) 789-1400; Fax: (202) 789-1120

Text Files:

Testimony

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