US - The call for Congress to provide relief for corporate pensions is gathering pace, with Watson Wyatt warning defined benefit plans could be frozen if the government fails to take action.
"New pension funding rules will squeeze pensions at exactly the wrong time, and both companies and workers will bear the consequences. When Congress reconvenes, we urge them to take a common-sense approach to pension funding that reflects current economic conditions, not one based on theoretical models. Workers' retirement benefits are at stake."
Earlier this week 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).
And yesterday, Marsh & McLennan chief Brian Duperreault joined the call, recommending a set of proposals to treasury secretary Henry Paulson (www.globalpensions.com; 13 November 2008).
Watson Wyatt said the business community was not seeking an overhaul of the Pension Protection Act (PPA) funding rules but was advocating temporary provisions and technical corrections to soften the transition from the old rules to the new ones, which were passed in 2006 but take effect this year.
Watson Wyatt said new pension funding changes could significantly increase the year-to-year volatility of required pension contributions and create a situation where large cash contributions were required at the same time that cash was both scarce and needed for other business purposes.
"Marking-to-market at the end of every day might make sense for day traders, but it creates chaos for a plan sponsor trying to budget the costs of retirement plans being funded over 30- or 40-year time horizons," said Wickes.
"Without some relief, a sustained downturn in asset values will noticeably increase required contributions to pension plans starting next year, when plan sponsors will also be facing significant business pressure."
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