Funding relief legislation for defined benefit plan sponsors has stalled and is not expected to see the light of day in the House at least until April — because Democrats have been unable to agree on what provisions to include.
When push came to shove, House Democrats were so at odds over DB relief that House Ways and Means Committee Chairman Rep. Sander Levin, D-Mich., decided not to include it at all in a jobs creation bill approved by the committee March 17.
The key dispute has been over whether to beef up, relax — or even delete — a provision included in a Senate tax bill that would require plan sponsors that opt for relief to make additional contributions to their pension plans if they pay out extraordinary dividends to shareholders or redeem more than 10% of the market capitalization of their stock in a year.
Some lawmakers, led by Rep. Earl Pomeroy, D-N.D., have sided with plan sponsors in arguing that the provision represents an unnecessary incursion into business practices, according to a congressional aide close to the issue who asked not to be identified.
At deadline, Brenden Timpe, a spokesman for Mr. Pomeroy, had not returned three telephone calls seeking comment.
But other lawmakers, including Rep. Lloyd Doggett, D-Texas, favor keeping the provision in place.
“The only question is whether the House should adopt the Senate provisions designed to ensure that any savings from pension relief are not diverted from job creation, or whether those provisions should be strengthened,” Mr. Doggett said in an e-mailed statement to Pensions & Investments.
Now the earliest the Ways and Means committee is expected to consider DB relief again is April, when the committee is expected to consider the tax bill in which the Senate included its own DB funding relief. (P&I, March 10).
“There are enough pieces that are being debated that it just made it tough to get the whole package through,” said Aliya Wong, executive director of retirement policy, U.S. Chamber of Commerce, Washington. Ms. Wong has been helping lead the lobbying charge for DB relief on Capitol Hill.
“We are urging members of Congress to pass meaningful pension funding relief as soon as possible,” added Kathryn Ricard, vice president of retirement security for the ERISA Industry Committee, Washington.
“Without some sort of meaningful signal from Congress — like a passed bill — some companies may decide to freeze their plans,” Ms. Ricard added.
The American Benefits Council, Washington, had no comment, according to Jason Hammersla, an ABC spokesman. But the Pension Rights Center, Washington, which has been urging lawmakers to impose conditions on employers who opt for the funding relief, plans to continue making its voice heard, according to Nancy Hwa, a PRC spokeswoman.
Employers are going to continue to push for the relief, and we understand why,” Ms. Hwa said. “But we're going to continue ensuring that the relief is equitable and employees are protected.”
The Senate bill, the American Workers, State and Business Relief Act of 2010, was approved March 10. It includes a provision that would allow DB plan sponsors to stretch out amortization periods for investment losses for two of the years between 2008 and 2011, either over a period of up to 15 years or over a nine-year period, at the option of the plan sponsor.
Current law requires plans to amortize their investment losses over seven years.
A key provision would require employers that elect to use the extended amortization periods to make additional contributions to their pension funds if they pay any employee more than $1 million a year, pay out extraordinary dividends to shareholders or redeem more than 10% of the market capitalization of their stock in a year.
Under another key provision, plan sponsors that opt for the extended nine-year amortization period would be obliged to make the additional plan funding contributions for only three years. Employers opting for the extended 15-year amortization would be obliged to make the additional payments for five years.
Some House Democrats favor extending the length of time that employers would be obligated to make the payments, assuming the employers take the amortization relief, pension lobbyists said. In addition, some Democrats would favor barring sponsors that opt for the 15-year amortization from freezing their plans throughout the relief period.
“There's still some contention about the years,” said Ms. Wong. “There's contention on whether it should apply to all plans or just active plans and over how you define active plans.”