Hewitt Associates recommended to Congress several modifications to the Pension Protection Act of 2006 to ease the “significant” pension cost burden employers face, including amortizing market losses over a period of up to two years without constraints such as the current rule limiting the average asset value to 110 percent of market value, according to a Hewitt statement.
Hewitt sent letters Tuesday to Sen. Max Baucus, D-Mont., chairman of the Senate Finance Committee, and Sen. Chuck Grassley, R-Iowa, ranking member of the committee, recommending the modifications.
In the statement, Hewitt said current PPA defined benefit funding rules could require cash contributions three times or more higher than previous levels because of “unprecedented” poor plan investment returns this year.
“We believe the design of the PPA funding requirements never contemplated the unprecedented market conditions we are facing today,” Rick Jones, chief actuary of Hewitt’s retirement and financial management practice, said in the statement.
“Our proposals present a sensible framework for refining the funding requirements in a way that will preserve jobs, businesses and financial security for the millions of Americans who rely on pension plans as a critical part of their retirement income.”
To meet current PPA funding requirements, corporations “may be forced to use money earmarked for salaries, growth investments and other business purposes to fund their pension plans,” Hewitt said. Such moves could increase layoffs, bankruptcies and pension plan freezes or closures.