Mercer Asks for DB Sponsor Relief

By Staff Report

Nov. 18, 2008

Lawmakers and the Department of Treasury were urged to provide relief to sponsors of defined-benefit plans during this time of extreme volatility without weakening funding improvements that have been achieved through the Pension Protection Act of 2006, in a letter and report sent by Mercer to Treasury Secretary Henry M. Paulson.

In the letter, Brian Duperreault, president and CEO of Marsh & McLennan Cos., Mercer’s parent company, made three recommendations to Paulson.

First, funding rules should limit the annual increase or decrease in the company’s contributions to a specified percentage of the total plan liabilities. The Treasury could do this with its existing authority by granting funding waivers to companies whose contributions would increase beyond this threshold, Duperreault wrote. Second, the Treasury should support legislation to delay for one year the requirement for plans less than 60 percent funded to be frozen. Third, the Treasury should propose legislation that would relax lump-sum benefit restrictions.

Company executives are concerned about the increases in contribution requirements for defined-benefit pension plans, Duperreault wrote.

These increases are the result of recent market declines and “will impose significant unanticipated cash demands on businesses when capital is limited, credit markets are unusually tight, and the overall business climate challenging,” Duperreault wrote. “Increased pension contributions compete with other needs for cash and, in the current situation, could result in limiting plan sponsors’ growth strategies, let alone managing through the current situation.”

Filed by Jennifer Byrd of Pensions & Investments, a sister publication of Workforce Management. To comment, e-mail editors@workforce com.

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