NEWS RELEASE

August 3, 2006
PR-06/21
For additional information:
Deanna Johnson, APR or Jason Hammersla
(202) 289-6700

Pension bill a ‘mixed bag’ for employers, employees

WASHINGTON, D.C. — "The pension bill passed by the Senate tonight is a very positive step for Americans participating in defined contribution retirement plans. However, as a result of the volatile pension funding rules enacted, I believe we will witness an unprecedented number of companies closing their well-funded defined benefit pension plans to new employees," said James A. Klein, president of the American Benefits Council. The Pension Protection Act (H.R. 4) approved by the House of Representatives on July 28, was approved by the Senate tonight by a vote of 93 to 5 and will now be sent to President Bush for his signature.

"The pension bill is a mixed bag for workers and employers," Klein said. "The permanent enactment of the savings provisions originally contained in the 2001 tax law, as well as provisions for automatic enrollment in 401(k) plans and the encouragement of investment advice for plan participants demonstrate a strong commitment to make defined contribution plans even more successful than they already are. These are all initiatives long advocated by the American Benefits Council.

"We are also gratified that the legislation makes clear, as we have consistently maintained, that cash balance and other hybrid pension plans are not age discriminatory," Klein noted.

"However, although we made progress from earlier legislative versions, the bill is still flawed in its approach to the funding rules for defined benefit plans," Klein added. "Except for the helpful relief for airlines and multiemployer plans, the new funding regime for most companies will inject more unpredictability into their pension financial obligations. Senators of both parties tonight hailed this legislation as protecting the pensions of millions of Americans and avoiding a ‘taxpayer bailout’ of the Pension Benefit Guaranty Corporation (PBGC). But they overlooked that it is employer sponsors of pensions that support the PBGC with their premium dollars. If well-funded pension plans leave the system because of unpredictable funding requirements, then the premium base will shrink and, long-term, the PBGC will be in worse shape, " Klein said.

"As our nation ages, Congress will have to revisit the issue of pension reform to strengthen both defined contribution and defined benefit retirement plans, to ensure that Americans have the retirement security they deserve," Klein concluded. Klein and Jan Jacobson, Council director, retirement policy, are available to comment further on this issue. To arrange an interview, please contact Deanna Johnson, APR, Council director, communications, at djohnson@abcstaff.org, or Jason Hammersla, Council manager, communications & publications, at jhammersla@abcstaff.org. Both can be reached by phone at (202) 289-6700. After office hours, Johnson can be reached by cell phone at (202) 442-4140 and Hammersla can be reached by cell phone at (202) 422-4652.

The American Benefits Council is the national trade association for companies concerned about federal legislation and regulations affecting all aspects of the employee benefits system. The Council’s members represent the entire spectrum of the private employee benefits community and either sponsor directly or administer retirement and health plans covering more than 100 million Americans.