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ERIC
ERIC Updates

THE ERISA COMMITTEE

<nobr>Sep 28, 2005</nobr>

ERIC: Update on Pension Bill

  1. ERIC has confirmed that both the 180% deduction limit and the elimination of the 25% of compensation combined plan limit are included in the combined Finance-HELP committee bill even though these issues were not mentioned in the summary published by the committees.

  2. ERIC members are urged to take the following actions in advance of possible consideration of the combined committee bill by the full Senate as early as tomorrow afternoon:

    • Secure commitments from Senators to speak up during floor debate in favor of continuing to work toward a comprehensive clarification of hybrid plan designs. We encourage you to emphasize that 9 million individuals currently participate in hybrid plans (according to latest Form 5500 data) and that these individuals need and deserve to know that their plans are valid under the law. Diann Howland of the HELP Committee staff is available to help individual Senate offices draft appropriate statements.
    • Secure commitments from Senators to speak up during floor debate regarding the following issues with the pension funding provisions:

      1. One year averaging and smoothing will not provide businesses the information they need to plan future contributions and thus will make it more difficult for employers to maintain or establish defined benefit plans.
      2. Determining a plan's liability based on the credit rating of the company is wrong-headed. It will unnecessarily strip a company of cash just when that money is needed to effect a turn-around in the company. It will cause the very death spirals it seeks to avoid.
      3. A three year transition from 90% to 100% funding target is too short. Sponsors of these plans, which at 90% already are very well funded and are absolutely no threat to the PBGC, deserve the opportunity to ramp up their funded level over a more rational period of time. It is unreasonable to impose sharp cash calls on well-funded plans by not providing a longer transition period. (HELP had ten year transition; Education & Workforce had five).


Janice Gregory, Senior Vice President
jgregory@eric.org



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