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Member, Beacon International Group, Ltd.
ONCE AGAIN, Congress is poised to give employers more time to fund their pension plan obligations, and this time we hope the legislation is approved.
As we report on page 3, the House and Senate this week are to consider a broad tax bill that includes pension funding relief similar to that in a tax bill the Senate passed in March but on which the House did not act. In general, we approach rule changes to ease funding requirements skeptically, given the history around pension funding.
For decades, the rules were lax and filled with loopholes. The result was that employers could promise rich benefits and then not come close to funding those promises.
Then, when those employers got into financial trouble and had to ditch their plans, the federal Pension Benefit Guaranty Corp. was forced to pick up much of the tab. Because the PBGC gets the money to pay for failed plans from employers with ongoing plans, the good guys in some cases had to pay for the bad actors.
In 2006, Congress finally woke up to the dubious logic of that system and dramatically tightened funding rules. The result over the long haul will be plans that are better funded and employers that are more responsible about benefits they agree to provide.
While we support those goals, extraordinary situations demand special rules. The equities market meltdown of late 2008 and early 2009 that battered pension plan funding levels is such a situation.
Absent funding relief, employersbecause of circumstances beyond their controlwill have to funnel huge amounts of money into their plans, jeopardizing their own financial recovery.
Temporarily giving employers more time to meet those obligations will increase the likelihood that employers won't be drained of the cash they need to stay in business and continue their pension plans.
We hope Congress sees the logic of that and gives employers the needed relief.