Pension relief bill awaits Bush OK
In one of its final acts of the year, Congress on Thursday agreed to relieve businesses of paying billions of dollars in required contributions to their pension plans in the coming year. Companies say they need the cash to stay afloat in a worsening recession.
The legislation has been a priority of business groups, which contend that some companies will have to freeze pension plans, lay off workers or even file for bankruptcy protection without the relief.
A voice vote in the Senate sent the measure to President Bush. The House approved the bill late Wednesday.
Many businesses with defined-benefit plans have absorbed a double blow: abiding by a 2006 law that they fully fund their plans and seeing the value of the plans eroded by declines in the markets where the pension funds are invested.
Senate Finance Committee Chairman Max Baucus (D-Mont.), one of the authors of the 2006 law, said he and most other senators “agree that those contributions should be postponed or later modified in order to keep companies viable, to allow companies to meet payrolls in these difficult times and prevent them from having to freeze their benefits.”
The measure does not erase employers’ pension funding obligations but, in light of the economic downturn, adjusts some payment schedules set up in the 2006 law.
It is “an important first step to preventing a crisis next year as plan sponsors face potentially billions of dollars in funding requirements and plan participants face benefit limitations as a result of the extraordinary economic downturn,” said Mark Ugoretz, president of the ERISA Industry Committee, which represents the retirement and health plans of the nation’s largest employers.
The legislation also would give a break to some senior citizens by suspending for 2009 the law under which people age 70 1/2 and older are required to withdraw a minimum amount from their now-depleted 401(k) retirement plans or individual retirement accounts. Those who do not do so are subject to a 50% excise tax penalty on the amount that should have been withdrawn.
