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Pension Funding Stabilization Communication to Key Senate Staff

The trade associations listed below appreciate the work being done by the Senate to address the very serious need for funding stabilization.  This is a critical issue for the thousands of companies represented by these associations and is an issue that affects the companies’ ability to invest in jobs and economic recovery. Moreover, the important work being done in the Senate reflects the core reality that pension plan sponsors and their employees should not be penalized by the government’s efforts to maintain artificially low interest rates.

We also understand the revenue and policy constraints under which the Senate is operating in the context of the highway bill. Those constraints unfortunately prevent consideration of the more robust proposal that the business community feels is needed, which includes both permanent interest rate stabilization (using the 25-year/10% structure) and amortization stabilization. While that is still the strongly preferred route, within the constraints you face in the highway bill, we are united in the following positions.

(1)   We would support in this context legislation that provides short-term interest rate stabilization that is as effective as our original proposal. That could be achieved, for example, by making the original proposal – the “25-years / 10% proposal” -- effective for as many years as possible (but at least 2012 and 2013) within the revenue constraints. Alternatively, a specified number of basis points could be added to the current segment rates; our projections indicate that 150 basis points would need to be added to the current segment rates in order to generally replicate the effects of our original proposal, lasting at least two years. After the stabilization described here expires, the law could revert to the current rules or could be phased out in other ways.

(2)   We believe that any conditions on stabilization would not work. The conditions attached to the 2010 funding legislation ended up precluding all but approximately five percent of eligible companies from electing the remedy provided. Similarly, we have explored the idea of requiring surety bonds (or other security) for unmade contributions, and the reaction has been uniform that that would not work. Most importantly, since we are not asking for relief, conditions are not appropriate. We are simply asking that pension plan sponsors and their employees not be penalized by artificially low interest rates.

You have asked us for our thoughts on how we can work together to make funding stabilization work within your current constraints. In working on the compromise described above, we have put aside many things that our members very much want and need. Many companies maintain strongly that amortization stabilization should be a part of the proposal. Many others do not like the idea of supporting a proposal that only helps on a very temporary basis. But the vast majority of the companies we have heard from feel that we should support the proposal set forth above if the proposal is not modified in any material way.  We recognize the difficulty the Hill faces in dealing with the multitude of views on funding issues. We appreciate the enormous progress already made on the Hill with respect to this issue. We believe that the compromise set forth above would achieve exactly the right balance.

We would also very much appreciate the opportunity to meet with you to address any concerns you may have and go over the elements of the compromise. We will make ourselves available at your convenience. Thanks.

American Benefits Council
Business Roundtable
Committee on Investment of Employee Benefit Assets
The ERISA Industry Committee
National Association of Manufacturers
National Rural Electric Cooperative Association
Newspaper Association of America
US Chamber of Commerce

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