In what may well be the understatement of the year, Congressman Earl Pomeroy (D-North Dakota) said in a statement, “It is extremely difficult to pass anything by unanimous consent of the 435 members of the House and 100 members of the Senate, particularly during the politically laden final hours of a Congressional session. On this critically important issue, we have come together to bring relief to avoid needless unemployment and massive freezing of pension plans.”
The Washington Post reported that two Democrats, Congressmen George Miller (D-California) and Charles B. Rangel (D-New York) and two Republicans, Congressmen Jim McCrery (R-Louisiana) and Howard P. “Buck” McKeon (R-California), teamed up to propose a one-year moratorium on required minimum distributions (RMD) that would require retirees older than 70 1/2 to withdraw money from their 401(k) accounts and other defined contribution plans by the end of 2009. They stopped short of tackling the RMD for this year, a issue that has been raised several times over the past several weeks (see “Two RMD Delay Bills Filed,’ “Collins Asks Paulson to Cancel 2008 RMD Penalty,’ “Lawmakers Call for End of RMD Penalty,’ “McCain, Obama Back Loosening RMD Rules’).
Waiting ’til Next Year
The Post reported that the bill’s sponsors decided to let the Treasury Department handle the RMD issue for this year. Aaron Albright, press secretary for the House Education and Labor Committee, told The Post, “We are encouraged to hear that Treasury may have a proposal forthcoming that will benefit all seniors for this tax year, whether or not they have taken a required minimum distribution.” The report said that a spokesman for Treasury said the agency is looking at the issue but has no time frame for any decisions or announcements.
The bill sponsors also sought to provide relief to corporations that have faced stricter funding requirements since passage of the Pension Protection Act of 2006 by requiring that companies that fail to meet the target funding percentage for a particular year to cover their plans only up to that target percentage. For example, according to the news report, if a company failed to fund 92% of its pension plan this year, it would have to come up with the money to reach that 92%, not 100%.
“The House tonight has provided critical relief to retirees, workers and sponsors of defined benefit pension plans,’ according to Pomeroy. “Employers who sponsor defined benefit pensions help shield employees and retirees from exposure to market volatility. But, given the current market situation, employers are likely to face pension costs that have increased dramatically over last year’s required contributions.
“This bill eases the funding requirements enacted in the Pension Protection Act, giving employers more time to fund the pension promises to their workers. It does not change the obligations employers have in pension plans, but instead provides appropriate relief in light of the unprecedented volatility in the markets.’
The bill is similar to one introduced last month by four senators (see “Senate Leaves Town with Pension Aid Bill Untouched’).