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NEWS RELEASE
October 30, 2009
EMBARGOED UNTIL 11:00 AM Eastern Time, FRIDAY, OCTOBER 30
Council research report: pension funding relief critically necessary to preserve jobs, promote economic recoveryEnactment of relief legislation, such as Pomeroy-Tiberi bill, urgently neededWASHINGTON, D.C. — “The research report Assessing the Impact of Increases in Defined Benefit Plan Funding Obligations on Employment During an Economic Recession, prepared by Optimal Benefit Strategies, LLC and commissioned by the American Benefits Council, clearly confirms what employers have been saying for months,” said Council President James A. Klein today. “The current defined benefit funding crisis is more than a pension issue. It is a fundamental jobs issue and a critical economic recovery issue.” Drawing on academic research, congressional testimony and economic analysis, the report clearly demonstrates an inverse relationship between pension funding obligations and revenue available for labor and capital expenditures. “Requiring employers to increase their funding to defined benefit plans during a recession leads to layoffs, bankruptcies, and the freezing of defined benefit plans, suggesting that the pension funding obligations could fundamentally alter the distribution of jobs in the economy,” the report reads. Among the paper’s revelations citing previously conducted research and surveys:
“Broadly available, temporary funding relief legislation — like the Preserve Benefits and Jobs Act, introduced this week by Representatives Earl Pomeroy (D-ND) and Pat Tiberi (R-OH) — will allow employers to mitigate the losses brought about by this deep recession,” Klein said. “We urge Congress and the Obama Administration to support this critical legislation and move swiftly toward its enactment.” The paper also refutes the argument that the cash contributions made to satisfy defined benefit plan funding obligations will result immediately in increased capital investment in the economy and this increased capital investment will create new jobs that will offset any job losses that occur in the companies required to make the increased contributions. “The argument against defined benefit plan funding relief relies on economic theory that indicates that capital will move freely from one market to another following the influx of capital investment. However, for this to occur with dollar-for-dollar symmetry, the domestic capital markets must operate perfectly and remain closed to foreign investment,” the report reads. Defined benefit funding relief will also indirectly improve the retirement security of all American workers. “Even under robust economic conditions, workers who lose their jobs face gaps in employment during which workers are unlikely to save for retirement and may even tap their existing retirement savings in order to meet current consumption needs,” the report says. Other nations, also entrenched in the global recession, have already taken steps to safeguard the economy from huge pension obligations. “Both Ireland and Canada have provided temporary relief from defined benefit plan funding requirements to help employers during the current economic crisis,” the report reads. The following materials are also available for additional background:
The American Benefits Council is the national trade association for companies concerned about federal legislation and regulations affecting all aspects of the employee benefits system. The Council’s members represent the entire spectrum of the private employee benefits community and either sponsor directly or administer retirement and health plans covering more than 100 million Americans.
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