Issues: Single Employer Funding Issues

Defined benefit plans are employer-provided retirement plans that provide a guaranteed retirement income.  In these plans, the employer assumes all of the investment risk and the benefits are guaranteed by the Pension Benefit Guaranty Corporation. There are approximately 30,000 defined benefit plans that cover roughly 23 million workers. The replacement of the 30-year Treasury rate for the determination of pension liabilities and other calculations is an issue of paramount importance for sponsors of defined benefit plans.   On April 9, 2004, Congress passed H.R. 3108, the Pension Funding Equity Act of 2004 and it was signed by the President on April 10, 2004. The fix provided in this bill will expire at the end of the 2005 plan year. Therefore, a permanent fix is required. In addition, there are other funding reforms that need to be made.

This year, there have been a number of proposals for single-employer funding reform. In January, the Administration issued a comprehensive funding reform for single-employer plans. In June, the Education and the Workforce Committee reported out the Pension Protection Act, H.R. 2830 and, in July, the Senate Finance Committee reported out the National Employee Savings and Trust Equity Guarantee Act of 2005, S. 219.

Interest Rate Assumption

• Questions on the Re-issuance of the 30-year Treasury Bond

Credit Balances

• American Benefits Council Concerns Regarding the Administration's Credit Balance Proposal - Adobe PDF file
• Business Roundtable - Credit Balances Provide a Critical Incentive To Prefund Pension Plans - Adobe PDF file

Credit Rating

• American Benefits Council Concerns Regarding the Administration's Credit Rating Proposal - Adobe PDF file
• Business Roundtable - Pension Rules Should Not Be Based on Credit Ratings - Adobe PDF file

Smoothing

• American Benefits Council Concerns Regarding Spot Valuations and Back-end smoothing - Adobe PDF file
• Business Roundtable - Smoothing Rules Are Necessary To Make Funding Predictable - Adobe PDF file
• Business Roundtable - Pension Smoothing Changes Would Worsen Job Losses in Recessions - Adobe PDF file

PBGC Premiums

• Business Roundtable - The Administration's Proposed PBGC Premium Increases Go Too Far - Adobe PDF file
• Pension Coalition Group Budget Letter
• Assessing the status of the PBGC (Adobe PDF file)

Principles on Funding

• Consensus Proposals for Pension Funding, PBGC Reform and Hybrid Pension Plans (executive summary, May 2005) - Adobe PDF file.
• Consensus Proposals for Pension Funding, PBGC Reform and Hybrid Pension Plans (full report, May 2005) - Adobe PDF file.
• US Chamber of Commerce Pension Funding Reform Must Contribute to the Viability of the Defined Benefit Plan System - Adobe PDF File.
• Defined Benefit Plans: Current Issues - Microsoft PowerPoint file.
• CIEBA Principles for Pension Reform - Adobe PDF file.
• NRECA Concerns regarding the Administration's Pension Funding and Premium Proposal.
• Business Roundtable - Immediate Action Is Needed To Fix The Pension System - Adobe PDF file.
• Business Roundtable - The Administration's Pension Proposals Are Counter-Productive - Adobe PDF file.
• NAM - Retirement Security Task Force Principles for Reforming the Defined Benefit Pension Plan System (January 2005) - Adobe PDF file
• ERISA industry Committee Letter to the Senate on Legislation Affecting Hybrid Defined Benefit Pension Plans and NESTEG (Adobe PDF file)
• ABC Summary of Boehner Bill and Concerns with the Proposal - Adobe PDF file

Testimony and Statements

• ERIC Statement for June 15^th Education and the Workforce Hearing on the Pension Protection Act of 2005 - Adobe PDF file
• US Chamber Testimony for June 15^th Education and the Workforce Hearing on the Pension Protection Act of 2005 - Adobe PDF file

Background and Statistics

• CIEBA Report on the Impact on Defined Benefit Plans
• CIEBA Fact Sheet on Contributions to US Pension Plans
• Private Sector Defined Benefit Plans And Capital Markets (analysis and graphs) - Adobe PDF file.
• Plain English Explanation of Funding Requirements for Single-Employer Pension Plans (Adobe PDF file)