AUSWR
The Association of U S West Retirees
 

 

 

House Passes Bill to Ease Pension Crunch for Retirees, Companies
By Nancy Trejos, Staff Writer
Washington Post 
Thursday, December 11, 2008

The House of Representatives last night approved a bill that would provide relief to older Americans who have lost much of their retirement savings and to companies that have complained of stringent requirements for funding their pension plans during a market downturn.

Two Democrats, Reps.  George Miller (Calif.) and  Charles B. Rangel (N.Y.), and two Republicans, Reps.  Jim McCrery (La.) and Howard P. "Buck" McKeon (Calif.), joined forces to propose a moratorium on a law requiring retirees older than 70 1/2 to withdraw money from their 401(k) accounts and other defined contribution plans by the end of 2009 or face a tax penalty.

The bill also would scale back a requirement that companies immediately fully fund their pension plans if they fail to meet certain benchmarks, even if their pensions have suffered big losses.

"I'm glad that Congress worked swiftly, and in a bipartisan way, to provide important relief to seniors who may face a steep tax if they do not make a withdrawal from their depleted retirement accounts," Miller said.

The bill stopped short of addressing so-called required minimum distributions for this year.  The rule has been controversial because the amount a retiree is required to withdraw is based on the account balance at the end of the previous year.  Many retirees are now facing the prospect of having to take their withdrawals after their portfolios have suffered significant losses.  Ignoring the RMD rule would result in a 50 percent tax penalty on the amount that should have been withdrawn.

Aaron Albright, press secretary for the House Education and Labor Committee, which Miller chairs, said the bill sponsors decided to let the Treasury Department handle the RMD issue for this year.  "We believe the Treasury Department is better equipped to quickly address this issue," Albright said.

A spokesman for Treasury said the agency is looking at the issue but has no time frame for any decisions or announcements.

The bill sponsors also sought to provide relief to corporations that have faced stricter funding requirements since passage of the Pension Protection Act of 2006.

A string of corporate bankruptcies led Congress to enact a law requiring companies to bring their pension plans, on a phase-in schedule, to 100 percent funding.  Each year the companies must meet a certain funding benchmark until it reaches 100 percent.  For 2008, the target funding percentage is 92 percent.  If they don't meet that benchmark, they are forced to fully fund their pensions immediately, a measure opponents said was too punitive.

The bill would require companies that fail to meet the target funding percentage for a particular year to cover their plans only up to that target percentage.  For example, if a company failed to fund 92 percent of its pension plan this year, it would have to come up with the money to reach that 92 percent, not 100 percent.

The bill is similar to a Senate measure introduced last month that failed to pass before the Thanksgiving recess.

http://www.washingtonpost.com/wp-dyn/content/article/2008/12/10/AR2008121003247.html?wpisrc=newsletter