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NEWS RELEASE
October 1, 2009
Defined benefit pension plan relief critically needed, advice legislation should protect existing arrangementsWASHINGTON, D.C. — The American Benefits Council testified on two distinct and important subjects before the House of Representatives Ways and Means Committee today: defined benefit pension plan funding relief and investment advice."Defined benefit funding relief is critically important to every company, every employee, and every community across the United States," according to the Council's written testimony. "This is far more than a pension issue. It is a fundamental jobs issue and a critical economic recovery issue." The accelerated funding requirements included in the Pension Protection Act of 2006 (PPA) and the market-driven declines in pension asset values have resulted in extreme and unanticipated jumps in upcoming pension obligations. "We continue to support the goals of PPA to increase, over time, the funding levels of defined benefit pension plans. However, the rules were enacted in a more robust economy and did not reflect the impact of a scenario like the recent combined effects of tightened credit and precipitous market losses," said American Benefits Council president James A. Klein. "We are very pleased that Representative Earl Pomeroy has issued a discussion draft of legislation that provides relief to plan sponsors and workers. It is focused on providing employers the ability to manage the losses from the recent market turmoil by providing more time to make up those losses. This makes tremendous sense given the lingering downturn in the economy, the number of displaced workers, and the continued tightened credit," Klein said. Republican leader John Boehner (R-OH) and House Education and Labor Committee Chairman George Miller (D-CA) have also each introduced measures that would provide crucial relief to plan sponsors. The Council is hopeful that relief measures can be enacted as soon as possible. "Under the PPA, the vast majority of plan sponsors' increased funding obligations will be locked in on January 1, 2010. Because these obligations are required by law, employers will be forced to divert resources from job retention and creation," Klein said. "Plan sponsors are not asking for a bailout or taxpayer assistance. These companies are not asking to be relieved of our pension funding obligations. Employers simply need more time to manage existing losses sustained in the recent market downturn and make the necessary investments to grow their core business and create jobs. Robert G. Chambers, a partner in the international law firm of McGuireWoods LLP, testified on behalf of the Council, as well as the Profit Sharing/401(k) Council of America and the Society for Human Resource Management, on the subject of providing investment advice to defined contribution retirement savings plans and their participants. "If legislation is enacted with respect to the PPA investment advice provision, it is critical that the legislation not adversely affect the investment advice rules in effect prior to the enactment of the PPA. Participants need investment advice now more than ever," he said. The Council supports efforts to improve financial literacy and savings education, but employers are concerned that proposed legislation would threaten existing programs that already avoid conflicts of interest and operate in the interest of the participants. "Approximately 20 million participants in 401(k)-type plans are offered advice products based on the SunAmerica IRS Advisory Opinion. However, the House Education and Labor Committee has approved a bill that would invalidate these and other non-conflicted advice arrangements," Chambers said. "Our plan sponsors have made the following very clear to us: if Congress invalidates their advice program, they would not re-establish a new program in the near future. Unfortunately, this is not a time when companies have the time or resources to engage in expensive redesigns of voluntary programs. Millions of Americans would lose access to investment advice. This is not the time to cause Americans to lose access to advice programs," Chambers said. Full testimony is available on the Council Web site. For more information, or to arrange an interview with Council staff, please contact Jason Hammersla, Council director of communications, at jhammersla@abcstaff.org or by phone at 202-289-6700 (office) or (202) 253-5458 (cell).
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.
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