NEARLY 300 organizations with defined-benefit pension plans have joined together to ask Congress for legislative relief in light of the current economic tailspin and restrictive regulations under the Pension Protection Act. In a letter to the Ways and Means Committee (reprinted below), the alliance explains the difficulties that pension plans are facing during these troubling times.
According to a Nov. 20 article in the New York Times, Congress has begun considering the request.
This topic is also the focus of Intl. Pres. Newton B. Jones’ column in the Oct.-Dec. 2008 issue of the Boilermaker Reporter.
[LETTER TO CONGRESS]
November 12, 2008
The Honorable Charles B. Rangel
Chairman
Committee on Ways and Means
U.S. House of Representatives
Washington, DC 20515
The Honorable Jim McCrery
Ranking Member
Committee on Ways and Means
U.S. House of Representatives
Washington, DC 20515
Dear Chairman Rangel and Ranking Member McCrery:
As you are aware, the current financial crisis not only impacts workers today but also will have severe, short-term negative effects on the pension plans in which they participate, reducing benefits, undermining retirement security, and, if prompt action is not taken, causing significant job loss and impairing the national economic recovery. The problems stem from a global financial meltdown and were not caused by companies that sponsor defined benefit pension plan or the pension plans they maintain. On behalf of the millions of our employees to whom we provide retirement benefits, the undersigned companies and organizations urge you to consider legislation that would help companies navigate the current economic crisis while minimizing adverse impacts on the defined benefit pension plans they sponsor.
The drop in the value of pension plan assets coupled with the current credit crunch has placed defined benefit plan sponsors in an untenable position. No one who drafted the recently enacted defined benefit plan funding rules anticipated the worst financial crisis since the Great Depression and a once in a hundred years “Credit Tsunami.” Yet, at a time when companies desperately need cash to keep their businesses afloat, the new funding rules will also require huge, countercyclical contributions to their pension plans. Consequently, many companies will divert cash needed for current job retention, job creation and needed business investments and instead contribute the cash to their pension plans to fund long-term obligations due many years after the current market conditions return to normal. We do not believe that, in enacting the Pension Protection Act of 2006 (“PPA”), Congress intended companies to be forced to make this kind of decision. Unless the funding rules are modified, they will increase U.S. unemployment and slow our economic recovery.
For example, a Florida company with four defined benefit plans faces an increase in required contributions of more than 2100%, from $673,000 in 2008 to an estimated $15,186,000 in 2009. The company’s consultant states that in light of this increase, “this client, like many others, may be forced to freeze their plans and may have to eliminate jobs to afford those contributions.” Another larger company has estimated that its 3-year contribution for 2008-2010 will increase from $36 million to $2.18 billion, an increase of almost 6000%.
We are in no way advocating an overhaul of the PPA funding changes. Rather, we urge Congress to consider making technical corrections to the PPA that we believe implement Congressional intent, and adopting temporary provisions that deal with the financial crisis facing us today. Such provisions should include permitting full smoothing of unexpected losses, removing restrictions on asset smoothing, allowing sufficient time to transition to the PPA’s 100% funded target, providing automatic IRS approval for certain funding elections to keep plans viable, clarifying end-of-year valuations, and permitting fixed interest rates to be used for Code section 415 limit purposes so as to avoid benefit reductions.
Employers who contribute to the more than 1500 multiemployer defined benefit plans (more than 90% of which employ 20 or fewer employees), are also severely affected by the financial crisis. While these plans are subject to a separate set of funding rules, similar temporary relief designed to moderate the effects of the aggressive funding targets contained in the PPA is essential to avert devastating burdens and inevitable job losses arising from massive contribution increases and unavoidable benefit reductions that will be required to comply with those rules.
Thank you in advance for considering our request for critical pension legislation. We and employers generally are extremely concerned about the viability of their defined benefit pension plans during this economic recovery. Please feel free to call on any of us if we can help you or your staff craft or enact legislation that will help our country’s economic recovery and avoid unnecessary job loss, while securing sound long-term pension plan funding.
Sincerely,
3M
AEGON USA LLC
AF&PA
AGL Resources
A. H. Belo Corp.
Alcoa Inc.
Alliant Energy Corp.
Allegheny Technologies Inc.
Aluminum Assn.
Ameren Corp.
America's Health Insurance Plans
American Admin. Services Co.
American Architectural Mfrs. Assn.
American Assn. of Railroads
American Benefits Council
American Chemistry Council
American Civil Liberties Union
American Composites Mfrs. Assn.
American Dental Assn.
American Electric Power
American Forest & Paper Assn.
American Foundry Society
American Gas Assn.
American Public Power Assn.
American Society of Assn. Execs.
American Woodmark Corp.
Aon Corp.
Associated Industries of Florida
ASPPA College of Pension Actuaries
ArcelorMittal USA
Arkansas State Chamber of Commerce
Associated Benefits Corp.
Associated Food Stores, Inc. & Subsidiary Cos.
Associated Industries of Arkansas
Associated Industries of Florida
Associated Industries of Massachusetts
Associated Milk Producers, Inc.
Associated Wholesale Grocers, Inc.
Assn. for Financial Professionals
Assn. of American Railroads Boise Inc.
Avaya Inc.
Avista Corp.
Badger Highways Co., Inc.
Ball Corp.
BBDO Detroit
Bechtel Construction Co.
Belo Corp.
Bendix Commercial Vehicle Systems LLC
Birds Eye Foods
Black Hills Corp.
Boise Cascade LLC
Boise Inc.
BP America Inc.
Bryan Pendleton Swats &
McAllister, LLC
Buck Consultants, An ACS Co.
BCTD, AFL-CIO
Business Roundtable
California Mfrs. & Technology Assn.
Campbell Soup Co.
Celanese Corp.
CF Industries, Inc.
Chrysler LLC
CIGNA Corp.
Cincinnati Children’s Hospital Med. Ctr.
CMS Energy
Colorcon, Inc.
Committee on Investment of Employee Benefit Assets
Commonwealth Public Broadcasting Corporation
Con-Way, Inc.
Connecticut Business and Industry Association
Consolidated Edison, Inc.
Constellation Energy
Cowden Associates
Cummins Inc.
CUNA Mutual Group
Dean Foods Co.
Deere & Co.
Delaware Mfg. Assn.
Delaware State Chamber of Commerce
Delta Oil Company
Deseret Mutual
DTE Energy
Duchossois Industries, Inc.
Duke Energy
Duquesne Light Co.
Eastman Kodak Co.
Eaton Corporation
Edison Electric Institute
Edison International
Eickhoff's ShopRite Supermarkets
Eisenberg Associates, Ltd.
Electro-Motive Diesel, Inc.
Eli Lilly and Co.
El Paso Co.
EMBARQ Co.
Employers Group
Entergy Corp.
ERISA Industry Committee
Eskimo Pie Corp.
Everett Smith Group, Ltd.
Evonik Degussa Corp.
Evraz Claymont Steel
Exelon Corp.
Fabri-Kal Corp.
Federal Signal
First Energy Corp.
FMC Corp.
Food Marketing Institute
Ford Motor Co.
Foundation Coal
Fox Entertainment Group, Inc.
Frontier Communications
FSG Pension Services, Inc.
General Devices Co., Inc.
General Growth Properties, Inc.
Georgia Industry Assn.
GlaxoSmithKline
Goodrich Corp.
Great Atlantic and Pacific Tea Co.
Harry and David
Hawaiian Electric Co., Inc.
Hewitt Associates, Inc.
Hill Fastener Corp.
Hillside Family of Agencies
Honeywell International, Inc.
Honigman Miller Schwartz and Cohn LLP
Hooker & Holcombe Inc.
HR Policy Assn.
IBEW Local 505 - NECA Pension Plan, Mobile, AL
IBM Corp.
Indiana Chamber of Commerce
Indiana Mfrs. Assn.
Indianapolis Power and Light Co.
Industrial Fasteners Institute
Infineon Technologies North America Corp.
Ingram Industries Inc.
Intelsat Corp.
International Brotherhood of Boilermakers
International Brotherhood of Electrical Workers
ITT
Joy Global
Kansas City Power & Light
Kentucky Assn. Mfrs.
Kimberly-Clark Corp.
King Kullen Grocery Co., Inc.
Kraft
Local 903 IBEW Pension Plan, Gulfport, MS
Lonza Inc.
Lord Corp.
Mannington Mills, Inc.
Masco Corp.
MassMutual Financial Group
MC-UA Local 119 Pension Plan, Mobile, AL
MD Helicopters, Inc.
Meridian Health
MetLife
Michelin North America, Inc.
Michigan Mfrs. Assn.
Milliman
Mississippi Mfrs. Assn.
Monongalia Health System
Monsanto
MOOG Inc.
Motor & Equipment Mfrs. Assn.
Mutual Assurance Society of Virginia
Mutual of Omaha Insurance Co.
Natl. Assn. of Chain Drug Stores
Natl. Assn. of Insurance and Financial Advisors
Natl. Assn. of Mfrs.
Natl. Coord. Committee for Multiemployer Plans
Natl. Fed. of Independent Business
Natl. Gypsum
Natl. Life Group
Natl. Marine Mfrs. Assn.
Natl. Shooting Sports Foundation, Inc.
Navistar
NCR Corp.
Nebraska Chamber of Commerce & Industry
New Jersey Business & Industry Assn.
Niles Lankford Group, Inc.
NiSource Inc.
NMB (USA) Inc.
Norcal Waste Systems, Inc.
Norfolk Southern Corp.
Nortel
Northeast Penn. Mfrs. and Employers Association
Northeast Utilities
Northrop Grumman Corp.
NorthWestern Energy Corp.
Novelis
HPnorthwest
NSTAR
OfficeMax Inc.
Ogletree Deakins
Ohio Transmission Corp.
Olan Mills, Inc.
Old Point Financial Corp.
ONEOK, Inc.
Otter Tail Corp.
Pacific Life
Pactiv Corp.
Paul, Hastings, Janofsky & Walker LLP
Peabody Energy
Peerless Machine & Tool Corp.
Pension Consultants, Inc.
Pepco Holdings, Inc.
Pfizer Inc.
PG&E Corp.
Pietzsch, Bonnett & Womack, P.A.
Pinnacle West Capital Corp.
Pitney Bowes Inc.
PNM Resources
Portland General Electric
Poyner Spruill LLP
PPG Industries, Inc.
Praxair, Inc.
Prestolite Electric Inc.
Principal Financial Group
Printing Industries of America
Progress Energy
Prudential Financial
Pulaski Furniture Corp.
Punter Southall LLC
QBE the Americas
Qwest Communications Intl.
Raley's
Replacement Parts, Inc.
Retail Brand Alliance, Inc.
Retail Leaders Industry Assn.
Reynolds American Inc.
RGC Resources, Inc.
RJReynolds
Robert Bosch LLC
Rockwell Automation
Rockwell Collins
Russell Investments
Saint-Gobain Corp.
Sanders Welch, LLC
Save Mart Supermarkets
Schnuck Markets, Inc.
Seyfarth Shaw LLP
Sheet Metal Workers Local 441 Supplemental Pension Plan, Mobile, AL
Smurfit Stone
Sheet Metal and Air Conditioning Contractors’ Natl. Assn.
Smurfit Stone
Sony Electronics, Inc.
SE Actuarial Services, LLC
SE Ohio Regional Med. Ctr.
Southern Company
Spartan Stores, Inc.
Sporting Arms and Ammunition Mfrs. Institute, Inc.
State Street Corp.
Summit Financial Corp.
Textron Inc.
The Boeing Company
The Dow Chemical Company
The Epler Company
The E.W. Scripps Company
The Goodyear Tire & Rubber Company
The Kroger Co.
The Segal Company
The Sherwin-Williams Company
The Timken Company
Towers Perrin
Trelleborg AB
Triangle Package Machinery Co.
UniSource Energy Corp.
United Association
United Illuminating Co.
United Parcel Service, Inc.
United Plan Administrators, Inc.
U.S. Chamber of Commerce
United States Steel Corp.
United Technologies Corp.
USS-Posco Industries
Utah Mfrs. Assn.
Vectren Corp.
Venable LLP
Veolia Transportation Phoenix
Verizon
Virginia Education Assn.
Virginia Mfrs. Assn.
Wakefern Food Corp.
Watson Wyatt Worldwide
Westar Energy
Westinghouse Electric Co.
Whirlpool Corp.
Windstream Communications
Wolverine World Wide, Inc.
Wood Moulding & Millwork Producers Association
Woods Hole Oceanographic Inst.
WorldatWork
W.R. Grace
Xcel Energy, Inc.
Xerox Corp.
YKK Corp.
YRC Worldwide
cc: Members of the House Committee on Ways and Means
