WASHINGTON, D.C., May 16, 2006 - As Congress drafts legislation that
could dramatically affect the private retirement security system, the
National Association of Manufacturers (NAM) encourages legislators to
develop a bill that preserves a strong pension system by minimizing
funding volatility and allowing a predictable transition period.
"The retirement security legislation will impact millions of Americans
and direct how trillions of dollars are allocated, invested and
protected for workers and retirees," said NAM President John Engler
"The bill should strengthen the private retirement security system by
enacting policies that encourage employers to maintain traditional plans
and encourage employees to save more through improvements to the defined
contribution system."
Despite recent media reports to the contrary, the legislation under
discussion would significantly increase funding for companies that
sponsor defined benefit plans for their workers. Engler said, "Both
bills would require plans to be funded at a minimum of 100% of
liability. While this new rule is a good thing, it represents a 10%
increase in required funding for many companies. Already this year,
PBGC premiums have increased from $19 per enrollee to $30 per enrollee,
a 58 percent tax increase on employers who sponsor traditional pension
plans.
"The bills would accelerate funding requirements by shortening
amortization schedules for almost all plans and increase the funding
requirements for mature industries by moving the discount rate used to
calculate liabilities from the corporate bond rate to a Treasury
Department-derived yield curve," Engler continued. To illustrate these
important points, Engler today joined Business Roundtable President John
Castellani and U.S. Chamber of Commerce President Tom Donohue in a joint
letter to all members of the House and Senate.
"It is critical that legislators craft a final bill that preserves a
strong pension system by eliminating legal uncertainties, minimizing
funding volatility and allowing for a predictable and flexible
transition period to meet the new requirements. At the same time,
Congress should avoid provisions that change a plan's liability based on
the sponsoring employer's credit rating," Engler concluded.
Link to the letter: http://www.nam.org/pensionletter
The National Association of Manufacturers is the
nation's largest industrial trade association, representing small and
large manufacturers in every industrial sector and in all 50 states.
Headquartered in Washington, D.C., the NAM has 10 additional offices
across the country. Visit the NAM's award-winning web site at
www.nam.org <http://www.nam.org/> for more information about
manufacturing and the economy.
1331 Pennsylvania Avenue, NW * Suite 600 * Washington, DC 20004-1790 *
www.nam.org