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Bill's funding relief may mean more defined benefit contributions

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WASHINGTON—Some employers would have to make additional contributions to their defined benefit pension plans to qualify for funding relief under a provision in a huge Senate tax and unemployment bill.

Lobbyists say the restrictions in the bill would make the relief—through longer amortization periods for investment losses—useless to employers, and they are working to ease them. The bill, the American Workers, State and Business Relief Act of 2010, is sponsored by Senate Finance Committee Chairman Max Baucus, D-Mont.

Among its provisions:

  • Companies would have to make additional pension plan contributions equal to the aggregate amount of employee compensation above $1 million per year.

  • Those that paid out extraordinary dividends to shareholders would have to make equivalent contributions to their pension funds.

  • Employers that redeemed in excess of 10% of the market capitalization of their stock would have to put into their pension funds an amount equal to the value of the stock exceeding the 10%.

    The idea is to penalize employers that are so flush financially they are able to reward employees or shareholders with high payouts.

    Doug Halonen is a reporter for Pensions & Investments, sister publication of Business Insurance.