Congress Should Pass Pension Provisions Now

by Aliya Wong

Last week, Congress failed to enact pension legislation that would help employers who maintain defined benefit plans weather the current economic situation.  However, the importance of these provisions cannot be underestimated.  According to a report from the Center for Retirement Research at Boston College Report issued in October, the average expected contribution increased from $50 billion to $150 billion – that means that an extra $100 billion in cash will be diverted from jobs, business re-investment and capital improvements. 

To personalize the dilemma plan sponsors are facing, imagine that you would be required to not only make your normal 401(k) deferrals but also to make up the difference between the value in your 401(k) plan between January 1, 2008 and December 31, 2008.  Moreover, this additional contribution would have to be made in the first part of 2009. 

To further illustrate the enormity of the situation, one should note that the unexpected contributions are almost the same amount that the federal government has loaned out at this point to financial institutions to rebuild the economy.  With no help from the government (or taxpayers), plan sponsors are ready to put the same amount into the economy.  And employers will still make contributions to their plans and continue to fund long-term pension obligations.

Pension plans do not need money from the government – they just need some flexibility to survive funding requirements during the economic downturn. The choice before Congress is very simple: pass pension provisions that would aid workers, employers, and the economy or fail to act and drive businesses further into an economic downturn.

Please see a letter to Congress signed by dozens of companies concerned with enacting economic recovery legislation to avoid unnecessary job loss, while securing sound long-term pension plan funding.