The final transportation funding and student loan extension legislation recently passed by Congress represents a “mixed bag” for employer sponsored pension plans and ultimately for the plan participants, American Benefits Council President James A. Klein says. The measure included several pension-related features to help pay for the transportation and student loan provisions according to the Council.

“We are very gratified that Congress enacted the funding stabilization provision — based on a proposal the Council developed — that gives companies a more historically accurate and less volatile method of achieving full funding,” Klein says. “Employers will now have a somewhat easier time maintaining their pension plans and can therefore devote resources to important job retention initiatives. We applaud Congress for its action,” adds Klein. The Council’s Questions and Answers document regarding pension funding stabilization describes the effect of the provision more fully.

“As much as we appreciate the inclusion of pension funding stabilization, we strongly disagree with the decision to impose an additional $9 billion in pension plan premium hikes,” Klein says. “The increase in insurance premiums paid to the Pension Benefit Guaranty Corporation effectively acts as a tax increase on companies that sponsor these plans for their employees….Unfortunately, large PBGC premium increases could negate the positive effect of the funding stabilization for several companies. Some have argued that raising premiums was the quid pro quo for enacting funding stabilization. But that is a false trade-off. Had Congress enacted even broader stabilization the federal revenue gain would have been higher, obviating the need to raise premiums.”

Klein also commends lawmakers for including a provision extending the ability of employers to transfer excess pension assets to fund retiree health benefits and expanding the provision to allow transfers for retiree life insurance. “These transfers facilitate the continuation of retiree health insurance for countless retirees. Expanding this provision to allow transfers to pay the costs of retiree life insurance will also help foster personal financial security for seniors,” Klein says.