Sponsors and retirees get a break from funding and withdrawal requirements
The United States Congress has unanimously passed a law to give temporary help to retirees and employers with defined benefit pension plans.
The Worker, Retiree and Employer Recovery Act addresses the dramatic and unanticipated increases in pension funding requirements resulting from the current economic and market turmoil.
The act allows single-employer DB plan sponsors to "smooth" the value of pension plan assets over 24 months instead of having to apply the Treasury's mathematical average, which should soften the accounting of 2008 plan losses.
The act also helps multi-employer plans, which may elect to "freeze" their status as endangered or critical for one year, which delays the need to respond to any lack of progress under the terms of the funding improvement or rehabilitation plan until the following year. These sponsors can also choose to extend their funding improvement or rehabilitation plans by three years (13 years instead of 10 years for critical plans and 18 years instead of 15 for seriously endangered plans).
"Without speedy enactment of this legislation, more employers would have been unable to remain committed to the defined benefit system, weakening this important pillar of retirement security for millions of Americans," said Elaine Sarsynski, executive vice-president of MassMutual's Retirement Services Division, which has 400 clients with DB plans.
The act provides the necessary temporary assistance to employers to allow them to maintain their focus of job creation and economic stability while remaining on a path of sound pension funding, said Sarsynski.
In addition to crucial temporary relief for sponsors of DB plans, the act also includes a provision to help retirees who have recently seen their retirement savings account balances decline. The act temporarily suspends the requirement for taxpayers over the age of 70 (and their beneficiaries) to make annual minimum withdrawals from their retirement plan accounts.
The Worker, Retiree and Employer Recovery Act addresses the dramatic and unanticipated increases in pension funding requirements resulting from the current economic and market turmoil.
The act allows single-employer DB plan sponsors to "smooth" the value of pension plan assets over 24 months instead of having to apply the Treasury's mathematical average, which should soften the accounting of 2008 plan losses.
The act also helps multi-employer plans, which may elect to "freeze" their status as endangered or critical for one year, which delays the need to respond to any lack of progress under the terms of the funding improvement or rehabilitation plan until the following year. These sponsors can also choose to extend their funding improvement or rehabilitation plans by three years (13 years instead of 10 years for critical plans and 18 years instead of 15 for seriously endangered plans).
"Without speedy enactment of this legislation, more employers would have been unable to remain committed to the defined benefit system, weakening this important pillar of retirement security for millions of Americans," said Elaine Sarsynski, executive vice-president of MassMutual's Retirement Services Division, which has 400 clients with DB plans.
The act provides the necessary temporary assistance to employers to allow them to maintain their focus of job creation and economic stability while remaining on a path of sound pension funding, said Sarsynski.
In addition to crucial temporary relief for sponsors of DB plans, the act also includes a provision to help retirees who have recently seen their retirement savings account balances decline. The act temporarily suspends the requirement for taxpayers over the age of 70 (and their beneficiaries) to make annual minimum withdrawals from their retirement plan accounts.
