Charities and rural cooperatives got closer to pension funding relief Wednesday as the Senate Health, Education, Labor and Pensions Committee unanimously approved legislation co-sponsored by Chairman Tom Harkin, D-Iowa.
The Cooperative and Small Employer Charity Pension Flexibility Act makes permanent for those types of defined benefit plan sponsors a temporary exemption from the Pension Protection Act of 2006.
Mr. Harkin, who co-sponsored the bill with Sen. Pat Roberts, R-Kan., said in an e-mail that it will give the groups “the necessary flexibility to continue offering benefits to their workers, and I hope the full Senate will take it up swiftly.”
The changes would affect an estimated 33 charitable and multiple-employer plans. Groups like the Girl Scouts of America, National Rural Electric Cooperative Association and Jewish Federations of North America said they were hamstrung by PPA funding regulations aimed at preventing pension fund defaults that were not an issue for their plans, which are backstopped by multiple employers.
“PPA didn't make sense for plans like ours then and still doesn't make sense now,” said Chris Stephen, National Rural Electric's employee benefits legislative counsel, in an e-mail. “It recognizes our plans pose virtually no risk of default to the PBGC, and should be treated that way permanently.”
More appropriate funding rules for charities and cooperatives “would allow them to devote their resources to providing critical non-profit services, rather than diverting assets to overfunding their pension plans under rules that were not designed for them,” said Kent Mason, a partner in law firm Davis & Harman, which represents firms in the retirement industry.