Bush Signs Pension Funding Relief Measure

President George W. Bush signed into law Tuesday, December 23, a measure that relieves certain funding requirements for company pension plans.

The measure, the Worker, Retiree and Employer Recovery Act of 2008, was passed by Congress this month as part of an effort to aid employers facing large pension funding obligations due to the plunge in investment values.

The law softens funding rules that were tightened under a 2006 law that required employers to dramatically accelerate plan contributions if they missed certain funding targets.

Under the 2006 law, employers must put enough money in their plans each year so the plans will be fully funded after seven years. That 100 percent funding target is being phased in, so in 2008, plans have to fund toward a 92 percent target, while the target is 94 percent in 2009, 96 percent in 2010 and 100 percent in 2011.

If the target is missed in any year, employers then must fund toward the 100 percent target. The relief legislation removes that requirement, so that even if the funding target were missed for a year, the target for the next year would not bump up to 100 percent. For example, if an employer missed the 92 percent funding target in 2008, its funding target for 2009 still would be 94 percent.

In addition, the law suspends for 2009 requirements that retirees age 70½ or older take a minimum distribution from their defined-contribution plan.

Filed by Gavin Souter of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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