Health care lull may open way for pension funding reliefPosted On: Jan. 31, 2010 12:00 AM CST
WASHINGTON—As congressional interest in passing comprehensive health care reform wanes in favor of measures to boost the economy and reduce the unemployment rate, one beneficiary could be legislation to temporarily ease pension plan funding rules.
Lobbyists say legislators are becoming more receptive to easing pension funding requirements. It is likely there will be such relief included in a jobs bill that members of the Senate Finance Committee are developing and could be introduced as soon as this week.
“Pension funding is likely to be in it,” said Lynn Dudley, senior vp-policy with the American Benefits Council in Washington, referring to the jobs bill.
“There now is significant interest” in pension funding relief, said Kathryn Ricard, vp-retirement policy with the ERISA Industry Committee in Washington.
That interest, pension lobbyists say, is driven by new congressional understanding of the tie between funding relief and jobs.
“Pension funding relief is the ultimate economic stimulus. It helps to preserve and create jobs,” Ms. Dudley said. If employers don't have to contribute as much as current law requires to pension plans battered by the equities markets slump, the money could be used to hire employees, she said.
Provisions that could be included in the jobs bill aren't known yet, but likely would, among other things, give employers more time to make required contributions to their plans. A 2006 law, which is being phased in, requires employers to fund liabilities over a seven-year period.
Meanwhile, the Obama administration has made several recommendations to boost retirement plan coverage and participation. For example, last week it renewed its support of requiring employers that do not offer retirement plans to provide individual retirement accounts to employees who would be automatically enrolled unless they opt out.
Additionally, the administration proposed liberalizing what is known as the savers credit, in which the government provides a tax credit on the first $2,000 of contributions made by lower-income employees to 401(k) and certain other retirement plans.
Under the proposal, the tax credit would be refundable, meaning that individuals who don't owe taxes could take the amount of the credit in cash.
Experts say the proposal might have difficulty winning approval at a time of huge federal budget deficits. “This would be a significant cost to the government and that would be a real problem,” said Mark Warshawsky, director of retirement research at Towers Watson & Co. in Arlington, Va.