Possibly you have read in your newspaper or the postings on the NRLN websites that many employers are lobbying federal lawmakers to relax provisions in the Pension Protection Act of 2006 that will require them to meet new pension funding levels. Pension fund managers are saying that the stock market plunge has taken a steep toll on pension plan assets. The Congressional Budget Office (CBO) has reported that the surplus in many pension plans of a year ago has vanished. Last month pension funds on the whole faced a $35 billion deficit, with many funds at risk of failing to meet their obligations, according to the CBO.
The American Benefits Council — which represents a broad range of 300 American businesses, including Ford, IBM and Verizon—are asking members of Congress for legislation to clarify or delay several provisions of the Pension Protection Act of 2006. Among the changes they want are a delayed schedule for pension plans to meet new funding levels and a relaxing of accounting rules to soften the effects of the current volatile stock market. The new rules would give fund managers more time and flexibility to calculate gains and losses. As you may recall, the NRLN and its Grassroots Network members wrote thousands of letters and made thousands of phone calls to members of Congress to help gain passage of the 2006 amendments to ERISA (Employee Retirement Income Security Act) to strengthen the protection for pension plans. Under the changes to the ERISA law, employers are required to ratchet up their funding so that by 2011 they have fully funded their pension obligations. If assets fall below 80 percent, the law requires that those employers cut benefits; if the assets fall below 60 percent, they could freeze the plans. ERISA now requires that under-funded pension plans increase their funding levels from 90 percent to 92 percent by the end of this year. Next year, the level would increase again, to 94 percent.
Because of the work we put into gaining the passage of the Pension Protection Act of 2006, it presents a dilemma to the NRLN on the position we should take on the push by companies to tinker with the ERISA law. We understand the effect the severity of the meltdown in the stock market has had on the value of pension plan portfolios. We also recognize that holding employers accountable to the new funding requirements could force some firms into bankruptcy and result in a Pension Benefits Guarantee Corp. takeover of the pension plans. When the PBGC takes over a pension plan, it is not unusual for many retirees to lose some level of their pension benefits. This would be a lose-lose situation for everyone. The PBGC has lost $4.79 billion in the 12 months ending September 30, 2008 because it invested a significant portion of its funds in mortgage-backed securities and expects its 2008 deficit to be between $10 and $12 billion.
Given the dire financial circumstances our country is experiencing, the NRLN's legislative team has concluded that we could accept a temporary delay in the implementation of pension funding and accounting requirements if Congress will include in any ERISA relief legislation the NRLN's proposals to protect pension assets. The measures we want included are:
• Protect pension plan assets by preventing companies from using assets for restructuring expenses, such as paying lump-sum severance or layoff payments.
• Prevent the purchase of pension plans by third parties, such as financial firms.
• Prevent the use of pension plan assets to enhance deferred compensation of executives.
The NRLN's position is simple and straightforward. We believe pension assets should remain in pension trusts to provide a cushion against economic downturns such as we are currently experiencing, and when there is sufficient surplus the assets should be used to fund Cost of Living Allowances (COLA) for plan participants.
So that members of Congress can hear from retirees and not just big businesses about the future of our pensions, I'm urging you to access the NRLN's Action Alert at http://capwiz.com/abtr/home/ and use the NRLN's sample letter to communicate to your elected representatives your concerns for the need to protect pension plan assets. Look for the Action Alert headline: PENSION PLAN ASSETS MUST BE PROTECTED. Click on “Take Action.” On the next screen, type in your zip code to identify your U.S. Senators and Representative to receive your email and click "GO" to bring up the sample letter. Be sure to add in the letter your own personal comments to increase the chance that a staff member will pass your letter on to your Senator or Representative.
If you have a problem accessing the Action Alert with the above link, go to www.nrln.org and click on the “Take Action Now” headline at the top of the NRLN Website’s Home Page.
Send your email today. It would also help to call the Washington, D.C. or the state office of your Senators and Representative. Phone numbers can be found through the NRLN’s Capwiz website at http://capwiz.com/abtr/dbq/officials/ . The more constituents who write and call their Senators and Representatives, the better chance there is in gaining their attention on this pension issue.
Please share this email with your family and friends and encourage them to write and call their members of Congress. Also, encourage them to sign up in the Grassroots Network at http://capwiz.com/abtr/mlm/signup/ and become an NRLN Individual Member by making a personal annual contribution. Details are available at www.nrln.org .
President, National Retiree Legislative Network