House Passes Bill to Ease Pension Crunch for Retirees, Companies
By Nancy Trejos, Staff Writer
Thursday, December 11, 2008
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
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
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
"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have been withdrawn.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.