The House Ways and Means Committee late Tuesday proposed pension smoothing as part of a funding package for the Highway Trust Fund, which is projected to run out of money within weeks.
Chairman Dave Camp, R-Mich., said in a statement that the package, while not perfect, is “viable … and should pass both the House and Senate quickly.”
H.R. 5021 is expected to win committee approval Thursday. The Senate Finance Committee is still working on its own proposal, but Mr. Camp said the House version “is the only package with a proven history of getting big bipartisan votes in both the House and Senate.”
Building on a similar feature of the MAP-21 highway bill passed in 2012, the committee proposal would allow corporations a range of rates for calculating defined benefit plan liabilities, which determine contributions to the plans. The most generous funding calculation, which ended with 2012 plan years, would now be available to sponsors through 2017. The reduced pension funding contributions resulting from the change would bring in an estimated total of $6.4 billion in tax revenue, according to a Joint Committee on Taxation estimate of the committee's proposal.
Groups representing corporations also welcomed the absence of further premium increases for the Pension Benefit Guaranty Corp., which had been considered in earlier proposals. “We are very supportive of the approach that the Ways and Means committee and Chairman Camp has taken,” said Kathryn Ricard, senior vice president for retirement policy at the ERISA Industry Committee, in an interview. “Funding pension plans is a long-term effort, and we are always happy to have the support of members of Congress who view this as a long-term liability and therefore a long-term funding obligation.”
“It's something that we think a lot of companies will benefit from,” said Lynn Dudley, senior vice president of global retirement and compensation policy for the American Benefits Council. “We've always believed in funding stabilization, especially when interest rates are very low, because it allows companies and plans to stay stronger.”
According to a Society of Actuaries analysis, MAP-21 pension funding changes benefited well-funded plans as well as those that were less funded in 2012. The SOA found that plans using MAP-21 to set funding levels were more likely to have larger numbers of participants or a higher proportion of inactive participants.