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Contact legislators to urge enactment of pension funding legislationACTION REQUESTED: Once again, please contact your congressional representatives, congressional leadership, leaders of the tax and labor committees and/or any other lawmakers with whom your company has a relationship to urge their support for critical pension funding relief legislation. BACKGROUND: Your efforts in communicating the extreme pressure on your companies and their pension plans is increasing awareness that something must be done to help companies manage the dramatic jump in pension funding obligations they are facing in 2009 and 2010. However, more needs to be done to urge lawmakers to address this problem in the short term and to counter some arguments that there is no need to provide legislative relief. The impact of the financial turmoil and market downturn in 2008 on the funded status of defined benefit pension plans across the country is forcing many companies to set aside substantial resources to meet the unanticipated and unprecedented increase in funding obligations – resources that could otherwise be used for job preservation and creation or capital investment. This is true despite passage of the Worker, Retiree and Employer Relief Act (WRERA) in December 2008 that included provisions to potentially reduce funding obligations for many plan sponsors. While more policymakers are acknowledging that there has been a dramatic increase in pension obligations for 2009 and 2010, not enough legislators understand the connection between the manageability of these increased obligations and companies’ business decisions and the larger impact on the ability of companies to recover from the economic downturn. Some in Congress remain concerned about additional pension legislation for two reasons: First, they are uncertain that legislation is needed. Second, they are concerned that legislation will contribute too significantly to the long-term underfunding of pensions and the deficit of the Pension Benefit Guaranty Corporation (PBGC). As we have reported previously, PBGC representatives have raised several concerns with policymakers on Capitol Hill. Some of the more significant points raised by PBGC are outlined in our March 16 Action Alert. The PBGC has now supplemented its comments. Briefly, the PBGC's supplemental comments acknowledge that the required contributions for 2009 will be approximately double the 2008 required contributions ($84 billion compared to $42 billion). Notwithstanding the current economic downturn, PBGC further states that there is no data showing companies cannot afford such increase. PBGC also states that, even without the economic downturn, required contributions for 2009 of approximately $86 billion could have been expected. Congress needs as much data as possible to overcome PBGC's arguments. It is critical that companies tell their legislators about the economic challenges facing them and share with them the impact that the increased funding obligations have on their businesses in an environment where there is reduced market capitalization, reduction in the availability of credit and generally a downturn in business. To better assist companies in weighing in, the Council has drafted a sample letter that can be customized to share your company’s concerns with policymakers. As we have noted previously, PBGC representatives have also stated that the ability to elect to use spot rates to determine plan liabilities will reduce 2009 funding obligations. PBGC believes that any concern that Treasury will not provide the needed approval to return to the use of the smoothed segment rates can be addressed through Treasury guidance. Importantly, PBGC may not object to a correction of the Treasury regulations whereby the full yield curve could be elected for any “applicable month” (i.e., for September, October, November, December, or January in the case of a calendar year plan). If we can obtain assurance from Treasury that this rule will be corrected, that would be a major step forward with respect to 2009 funding obligations for companies with calendar year plans. (See the Council's January 13 letter on this issue to Treasury). There is currently a sign-on letter for companies to sign, prepared jointly by business groups working on the funding issues. To add your company's name to this letter, contact Lynn Dudley, senior vice president, policy, with the exact name of your organization as you would like it printed. The last day to sign onto this letter is the close of business Thursday, March 26, 2009. Despite the pushback from PBGC, there is receptivity within Congress to considering additional funding relief legislation. House of Representatives Minority Leader John Boehner (R-OH) is expected to introduce legislation as early as next week that includes a proposal to temporarily raise the cap on the amount of unexpected losses that can be spread over a 24-month period to 20 percent (widening the so-called "asset smoothing corridor"). Boehner's legislation would also provide that 2008 losses may be amortized over seven years starting in 2011, rather than in 2009; for 2009 and 2010, companies would only have to pay interest on those losses. Proposals along these lines are more fully described in the Council’s funding proposals as well. Other key members of Congress are considering sponsoring and/or supporting legislation making the increased contributions more manageable if a sufficient case is made by plan sponsors. It is critical that companies share with lawmakers the connection to business decisions currently being made or that will be made as a result of these funding obligations. In the meantime, the Council is actively talking to Congress about the issues raised by the PBGC and providing our perspective and views on those issues. But the key to funding relief is communications from companies to the Capitol Hill and the Obama administration regarding how the lack of funding relief will (1) reduce companies' ability to invest in their businesses, (2) cost jobs, and (3) slow down economic recovery. PLEASE HELP: While some companies may prefer to send individual letters like the sample linked above, we also ask you to make immediate calls to the key committees listed below and specifically explain the connection between the funding obligation and the decisions your company is facing. Calls to the leadership of both the House and Senate are extremely important. The Council is organizing letters for companies operating in the districts of Congressional leaders. Additional funding relief legislation is unlikely without your efforts. The December 2008 legislation – the smoothing clarification and fixing the transition "cliff" – were very significant and expressing appreciation for inclusion of those provisions in the 2008 legislation is important. However, they do not fully address the challenges caused by the recent financial turmoil for many companies. The Council is available to work with you, your colleagues, and your actuaries to demonstrate the continuing need for relief. Key contacts and resources are provided below. For more information or assistance, contact Lynn Dudley, senior vice president, policy, or Diann Howland, vice president legislative affairs, at (202) 289-6700. Congressional directory and House/Senate leadership House Ways and Means Committee House Education and Labor Committee Senate Health, Education, Labor and Pensions (HELP) Committee Senate Finance Committee |
