Senate Finance Committee Chairman Charles E. Grassley, R-Iowa, today said he hoped the Senate would vote on a revised version of the Pension Security & Transparency Act sometime this week. The behemoth pension bill would require companies to use a stripped-down yield curve based on corporate bond interest rates to calculate their pension liabilities. It would also require companies with underfunded pension plans and below-investment-grade credit ratings for three consecutive years to accelerate funding of their pension plans, and it would let airlines with underfunded pension plans make up contributions over 14 years, instead of the seven years expected of all other companies.
Under the bill, PBGC flat-rate insurance premiums would rise to $30 per participant from the current $19, and underfunded pension plans would have to pay a variable rate premium. Also, companies that emerge from bankruptcy after terminating their pension plans would have to pay a special premium of $1,250 per participant for three years.
The bill also includes changes to the ERISA conflict-of-interest and fiduciary provisions, which were proposed by Sen. Charles E. Schumer, D-N.Y. As part of those changes, the legislation would not impose fines on individuals and organizations affiliated with pension plans for accidentally engaging in banned transactions with a pension plan if the error is corrected within a reasonable time. The provisions would also let plan assets in a separately managed account to be included in block trades made through electronic communications networks, exempting them from ERISA's banned transactions list. The legislation would also require regulators to study the implications of active cross trading between pension plans on pension plans and sponsors.
The bill also has several provisions affecting defined contribution plans, including allowing employers to offer independent investment advice to participants, encouraging companies to automatically enroll their workers in 401(k) retirement plans, and permitting state and local governments to maintain 401(k) plans.
