Legislation approved Saturday by the Senate would extend by one year an expiring provision that effectively exempts many severely underfunded plans from rules that require plans to freeze benefit accruals.
Under a 2006 law, benefits are frozen and lump-sum distributions are not allowed when plans are funded below 60%. In late 2008, Congress modified that requirement for 2009 so employers could look at their plans’ Jan. 1, 2008, funding levels to determine whether the plans were at least 60% funded. Legislation approved earlier this year extended the 2008 relief through the end of 2010.
Few plans’ funding levels as of Jan. 1, 2008 — which was before the plunge in the equities markets that occurred later that year and decimated the value of plan assets — were below 60%, so the earlier relief measures assured continued benefit accruals for participants in underfunded plans.
The extension of the relief through Dec. 31, 2011, is part of a broader bill, H.R. 4915, that the Senate approved on a voice vote. The House has not acted yet.