Single-employer defined benefit plans could extend the time they can amortize investment losses that occurred at the end of 2008 under legislation being proposed by Rep. Earl Pomeroy, D-N.D.
The draft of the bill, announced today, aims to help DB plans survive the economic downturn. He plans to introduce the bill next month, according to a news release from Mr. Pomeroy’s office.
Two alternative amortization schedules for the losses would be offered, one extending the amortization period to 15 years and the other to nine years with a two-year delay for the first of seven payments. Employers would still make interest payments in those two first years under the second option.
Employers would be required to continue providing benefit accruals under the DB plan; make a 3% contribution to a defined contribution plan for employees frozen out of the DB plan; or freeze all non-qualified DC plans and subject them to the same restrictions that apply to DB plans for “rank and file” employees, the draft said.
“The cornerstone of this bill is temporary pension funding relief that eases an employer’s obligation to make up for the investment losses that pension plans experienced in 2008 by making significantly greater contributions in the coming years,” Mr. Pomeroy said in the release. “At the same time, employees would get important assurances that their retirement benefits will continue to grow. I believe this bill is an important step in ensuring workers’ lifetime income security in retirement.”
Also included is a proposal to allow employers that expand the “asset-smoothing corridor” in which single-employer DB plans are allowed to average asset value from 10% to 20% of fair market value for 2009 and 2010, as well as authorizing the Pension Benefit Guaranty Corp. to “facilitate” the merger of multiemployer pension funds by providing “direct or indirect financial assistance,” according to draft.
Sandra Salstrom, spokeswoman for Mr. Pomeroy, was not immediately available for comment.