US - The pension reform Bill proposed by House Republicans will bring "new ability and new flexibility" to defined benefit plans, Seattle-based consulting firm Milliman testified in front of a US government committee.
Speaking to the House education and the workforce committee on the Pension Protection Act (HR 2830), Milliman actuary Bart Pushaw said: “This bill brings a new ability and new flexibility to defined benefit plans which will allow prudent, well-managed companies the ability to continue or return to relying on the defined benefit plan as the core of their retirement benefit strategy, differentiating themselves competitively in a positive manner to a labour force eager to gain and retain financial security.”
The Bill, introduced by committee chairman John Boehner, ways and means committee chairman Bill Thomas, employer-employee relations subcommittee chairman Sam Johnson and employer-employee relations subcommittee vice chair John Kline.
Pushaw said he supported the use of a permanent interest rate based on the modified yield curve for the calculation of future pension contributions, saying it would “enhance financial forecasts, better supporting prudent plan management, leading to higher levels of benefit security for participants” and strengthening the retirement security of “millions”.
The Bill ensures employers properly fund their plans and includes reforms to both single and multiemployer pensions.
Judy Mazon, senior vice president and director of research for consultant The Segal Company, said the status quo for multiemployer plans was unacceptable.
“The alternative is not the continuation of the status quo, but a much worse fate that includes the loss not only of accrued ancillary benefits, but a substantial portion of a participant’s normal retirement benefit as plans are assumed by the PBGC (Pension Benefit Guarantee Corporation); the demise of potentially large numbers of small businesses and the loss, not only of pension benefits, but the jobs from which such benefits stem; and an increase in taxpayer exposure at the PBGC, an agency that is already overburdened,” she said.
Lynn Franzoi, vice president for human resources at the Fox Entertainment Group, urged Congress to act quickly to resolve the legal uncertainty surrounding cash balance or hybrid pension plans - a type of DB plan that is employer-funded and portable from job to job.
“Without statutory guidance, there will continue to be litigation that only serves to confuse the issue even further,” she said. “Such lawsuits against plan sponsors put hybrid plans at risk and threaten the retirement security of workers who benefit under these plans.”
Boehner last week introduced a stand-alone bill, the Pension Preservation & Portability Act as a point of discussion on efforts to resolve the legal uncertainty over hybrid or cash balance plans. He expects to resolve details before the broader bill is reported from committee.
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