<nobr>Feb 11, 2010</nobr>

Baucus/Grassley Unveil Jobs Bill with Pension Funding Relief

Senate Finance Committee Chair Max Baucus (D-MT) and Ranking Member Grassley (R-IA) have released the Finance Committee jobs bill, the "Hiring Incentives to Restore Employment Act," which includes a funding relief provision for single employer plans.

The Finance Committee version of the jobs bill includes the same basic funding relief provisions as the previous bill released yesterday as follows (refer to ERIC update dated February 10, 2010, for more detail on the provisions):

• 2+7 amortization: plan losses could be amortized over nine years (versus the current rule of seven) and the first two years of the nine-year amortization period would be interest-only;


• 15-year amortization: plan losses could be amortized over 15 years;


• Eligible plan years for relief: 2008, 2009, 2010 or 2011;


• Maintenance of effort: would increase required amortization installments (under the 2+7 or 15-year schedule) if any member of a company's control group paid excess compensation (over $1 million), declared an extraordinary dividend or redeemed more than 10% of its company stock;
  
• Benefit restriction relief: provides relief from benefit accrual restrictions for two years (this only applies to benefit accrual restrictions and not to restrictions on lump sums and other accelerated distributions, amendments to improve benefits, plant shutdowns, etc.)

The Finance Committee version of the jobs bill contains some differences from the previous jobs bill as follows:

• Permits interest amounts paid under the 2+7 amortization schedule to be counted toward the shortfall amortization base (the previous version of the bill did not permit such interest payments to count in this way), which is a positive change;


• Requires that the PBGC have the opportunity to comment on the conditions that the IRS prescribes relating to a company election revocation request related to the amortization schedule a company chooses for funding relief;


• Eligible plan year definition: removed reference to 2008 as an exception to the definition of eligible plan year if the due date for the minimum contribution amount is after the enactment of the funding relief provision and broadens the exception to apply to any plan year if the due date of the payment of the minimum contribution for the plan year is after enactment of this provision; and


• Amounts set aside for non-qualified deferred compensation: with respect to counting the $1 million remuneration amount for company employees that would increase the amortization installments, non-qualified deferred compensation "set aside" for services performed prior to February 4, 2010, would be included towards the $1 million (the previous version did not include pre-February 4, 2010, related services in the remuneration total for such executive compensation) (this provision is more aggressive regarding the $1 million trigger for executive compensation).

Congress is out of session next week due to the President's Day recess. However, we understand that Senate leadership will be meeting next week to discuss strategy regarding passage of the jobs bill. Senate Majority Leader Reid (D-NV) has announced that he supports introducing a limited jobs bill at this time that will not include items such as estate tax, expiring tax provisions, etc.

A link to the bill appears below. Pension funding provisions are found in sections 701-703, pages 145-179 of the bill.

Questions or comments on the legislation should be addressed to Kathryn Ricard (kricard@eric.org).

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Draft Hiring Incentives to Restore Employment Act

Baucus/Grassley Press Release

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