US - The new Pension Protection Act, which would enforce significant Pension Benefit Gauranty Corporation (PBGC) premium hikes, has been approved by the Committee on Ways and Means.
The Bill will now move to the full House of Representatives for a vote.
The Bill would have a significnat impact on employers as it proposes and increase in the flat rate paid to the Pension Benefit Guarantee Corporation (PBGC) from US$19 to $30 over five years, or three years for plans less than 80% funded.
According to the committee, the old law allowed various companies to fund large executive compensation arrangements for top executives while the pension plans of rank-and file employees were severely underfunded.
Under the amendment, employers cannot fund an executive compensation plan if the qualified pension plans is less than 60% funded. Should the rule be violated, amounts set aside for the executive are immediately taxable and subject to interest and a 20% penalty.
Bill Thomas (pictured), committee chairman, said outdated pension funding laws and structures had “threatened the financial stability of many... plans and allowed some employers to dramatically underfund their promised obligations to their employees.
The new bill makes important changes to outdated pension funding rules which will help companies solidify their pension plans and give their employees the economic security they deserve, he added.
Among other things, this bill will require employers to fully fund their pension obligations and gives them seven years to fund shortfalls.
The bill also reforms outdated funding rules for single employer DB pension plans to protect workers’ pensions and the financial security of the PBGC.
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