WASHINGTON (TheStreet) — After months of being overshadowed by health care reform rancor, proponents of legislative relief for underfunded pension plans may soon get some good news.
On Thursday, the Senate Finance Committee released a draft of the jobs bill. The proposed legislation earmarks $6 billion for pension plans, many of which are staggering from market volatility and the losses of 2008.
Concurrently, the Preserve Benefits and Jobs Act introduced by Reps. Earl Pomeroy, D-N.D., and Patrick Tiberi, R-Ohio, in October is also gaining traction. This measure would likely go further than the final jobs bill by providing a temporary extension to the mandated time period employers have to fully fund their pension plans.
Barry Young, consulting actuary for Principal Financial Group (PFG) , has been spearheading its lobbying efforts for relief. He says the problem stems from funding rules that went into effect in 2008.
"One of the most significant aspects of the new funding rule is that it requires plan sponsors to fund unfunded liabilities more quickly than under the prior law," he says. "Unfortunately, just months after it became effective, we had the most significant market decline in 50 years. The timing could not have been less favorable. "
(PFG) Total funding of U.S. pension plans fell by $303 billion in 2008. A study by the human resources consulting firm Watson Wyatt, now known as Towers Watson & Co (TW) , found that past relief granted by legislation and regulations had lowered required contributions for corporate pension plans to $32 billion in 2009 from $38 billion in 2008. But without further action, employers' contributions would jump to more than $146 billion in 2011. The firm, surveying the 100 largest corporate pension plans, found they were underfunded by $217 billion at the end of 2008, meeting only 79% of estimated liabilities.
"Without pension reform, the 2,800 pension-eligible nurses working in the city of New York will walk off their jobs, with only four weeks' notice, compounding the already severe nursing shortage," Barbara Crane, president of the National Federation of Nurses says. "The impact of this mass exodus would cripple the ability of some of our city hospitals to deliver safe patient care."
Some people fear that without pension reform more companies may move from pensions to cheaper 401(k) plans.
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