While the provision calling for a moratorium on required minimum distribution from 401(k) plans and other defined contribution accounts until the end of 2009 garnered headlines in the mainstream press, the Worker, Retiree and Employer Recovery Act (H.R. 7327) also included a number of technical updates to the Pension Protection Act (PPA) having to do with pension funding.
H.R. 7327 also includes:
- clarification of pension plan “smoothing,’ allowing plans to recognize unexpected asset gains and losses over 24 months;
- improved transition to the new funding rules, in which the phased-in funding threshold would hold at 92% for another year;
- multiemployer plan relief, permitting plan sponsors to elect to temporarily freeze the status of certain multiemployer plans at the same funding status held in the previous plan year;
- a rule easing the requirement that would otherwise compel employers to restrict the accrual of pension benefits.
“Americans have seen trillions of dollars evaporate from their retirement accounts over the last few months as a result of our economic crisis,’ said U.S. Representative George Miller (D-California), the chairman of the House Education and Labor Committee, in a news release. “I’m glad that Congress worked swiftly, and in a bipartisan way, to provide important relief to seniors who may face a steep tax if they do not make a withdrawal from their depleted retirement accounts.’
While the bill addresses the RMD issue for 2009, The Washington Post reported the bill’s sponsors decided to let the Treasury Department handle the RMD issue for this year (see “House Passes Pension, RMD Relief’).
Retirement services industry trade groups praised the House lawmakers for taking on what the trade group officials contended are important financial issues, and demanded their Senate counterparts quickly follow suit.
“ERIC applauds the House for approving the pension relief legislation as an important first step to preventing a crisis next year as plan sponsors face potentially billions of dollars in funding requirements and plan participants face benefit limitations as a result of the extraordinary economic downturn,’ said President Mark Ugoretz of the ERISA Industry Committee, in a statement. ’ERIC strongly encourages the Senate to immediately approve the bill.’
The American Benefits Council also released a statement:
“House passage of the Worker, Retiree and Employer Recovery Act gives hope to employer pension plan sponsors fighting against the current economic downturn. We strongly urge the Senate to follow suit—today if possible—and mitigate the effects of the financial crisis on jobs, economic recovery and retirement security,’ said American Benefits Council President James A. Klein.