US - Marsh & McLennan chief Brian Duperreault has urged treasury secretary Henry Paulson to take action to bridge the short-term pension funding crisis through a set of proposals to help companies with defined benefit schemes.
He said such increases would impose significant unanticipated cash demands on businesses when capital was limited, credit markets were unusually tight, and the overall business climate challenging.
He said: "Increased pension contributions compete with other needs for cash, and in the current situation, could result in limiting plan sponsors' growth strategies, let alone managing through the current situation."
Duperreault said there was a need for relief and put forward three proposals aimed at addressing the issue, including a contribution volatility limit, relief from mandated pension freezes and relief from restrictions on accelerated payments.
In relation to the contribution volatility limit, he said the funding rules should explicitly limit the annual increase (or decrease) in a company's contribution requirement to a specified percentage of total plan liabilities. The Treasury should implement this relief on a temporary basis through its existing authority by granting limited funding waivers to companies whose contributions would otherwise increase beyond these thresholds, he said.
He added Treasury should propose legislation to suspend for one year the current-law requirement to freeze plans that are less than 60% funded. This relief should apply to plans that had a prior year funded ratio exceeding 75%.
Duperreault also called for Treasury to relax the lump sum benefit restrictions while providing safeguards to ensure plans' ongoing financial health.
He said: "We urge the Treasury to seek legislative adoption of our proposals and to exercise its current authority to implement them where administratively possible. From a broader perspective, we also see a need for a wide-ranging discussion on retirement policy in the US. While relief in the current situation cannot wait, recent developments highlight the need for a broader discussion of retirement policy issues."
The letter to Paulson came after almost 300 companies asked Congress, as part of any economic stimulus legislation, to suspend a requirement that they pay more into their pension funds, saying it may force them to cut jobs (www.globalpensions.com; 12 November 2008).
Investment firm Principal Financial Group today joined for funding rules to be eased under the Pension Protection Act (PPA) in order to alleviate financial pressures.
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