A new bill was recently introduced in the House that would extend the time allotted plan sponsors to fund defined-benefit retirement plans.

Presented last week by Representatives Earl Pomeroy (D-N.D.) and Pat Tiberi (R-OH), the Preserve Benefits and Job Act would, in part, offer pension funding relief to employers by allowing them to spread out required contributions to DB plans over nine years, instead of the current seven.

Under the legislation, employers would make only interest payments for the first two years. Further, Congress would allow employers up to 15 years to fully fund their DB plans if they promised not to freeze the benefits.

“The accelerated funding requirements included in the Pension Protection Act, combined with the market-driven declines in pension asset values and historically low interest rates, have created unprecedented and unforeseen challenges for employers that voluntarily provide generous retirement benefits,” says James Klein, the president of the American Benefits Council.

Klein hopes that the legislation will allow employers to mitigate their investment losses brought about by a deep recession and the 2008 stock market crash. “We urge Congress and the Obama Administration to support this critical legislation and move swiftly toward its enactment,” adds Klein.

ABC issued a research report examining DB funding obligations amid a recession. The report reveals that 68% of DB plan sponsors noted that unexpected cash needs associated with their DB plans would force them to slash costs in other areas, such as hiring and workforce training.

The Pomeroy-Tiberi bill also grants the Pension Benefit Guaranty Corporation more leeway in assisting DB plans that are in endangered and critical status regarding their funding levels. The bill calls for updating PBGC benefit guarantees. 

“Many economists argue that if companies and their pension plans continue to fold at a quickened pace, PBGC may require a taxpayer bailout,” said Barbara D. Bovbjerg, director of education, workforce, and income security at the Government Accountability Office last week at a hearing before the Senate Committee on Health, Education, Labor and Pensions.

Bovbjerg urged lawmakers to rework the way the PBGC processes failed pension plans. “After all, the corporation’s deficit has tripled since the end of fiscal year 2008, from about $11 billion to about $33.5 billion through the second quarter of FY 2009,” she noted.