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Possible Pension Relief
By Jeff Emslie It may be a case of the "Law of Unintended Consequences" when Congress passed the Pension Protection Act of 2006 (PPA) that was signed into law on August 17, 2006. Instead of protecting defined benefit pension plans as the legislation's name suggests, this act may have had the unintended result of accelerating their demise. Recently, two U.S. House of Representative members have introduced new legislation to provide relief from some of the more onerous provisions of the 2006 law. More stringent funding requirements required by the PPA coupled with the greatest economic downturn since the Great Depression has left companies with potentially huge future funding requirements. Fearing that companies will cut jobs, freeze or terminate plans in order to meet these new requirements, Representatives Earl Pomeroy (D–North Dakota) and Pat Tiberi (R–Ohio) have proposed the Preserve Benefits and Jobs Act on October 27, 2009 to provide some relief to employers. Their bill would extend the time that employers have to fully fund their plans. In addition, pension asset smoothing methods would be relaxed. These seemingly arcane changes have the potential to dramatically reduce the amount that employers must contribute to their plans in the next few years. With pension assets hammered by losses during the recent market downturn, employers are now facing the prospect of making large contributions to their pension plans. This may force employers to cut their workforce and thus hamper our economic recovery. The Preserve Benefits and Jobs Act would help to mitigate some of burden on employers in the upcoming years. It would not reduce the amount employers must contribute to their plans, only spread the required contributions out over more years. One provision of the Act allows employers to elect to close the funding gap in their plans over 9 years instead of the 7 years required by the PPA. It also allows employers to contribute substantially smaller payment amounts in the first two years. Another provision allows employers to choose to fund their investment losses over 15 years. The Preserve Benefits and Jobs Act also liberalizes methods that some plans use to "smooth" the value of their plan assets. Many plans use methods to lessen the short-term volatility of their assets from sharp market moves. The theory is that these short-term market moves should not be recognized immediately as the assets are used to fund benefits sometimes decades in the future. The PPA tightened smoothing methods by allowing smoothing assets over a 24 month period, and only allowing smoothed assets to be within 10% of current market value. The Preserve Benefits and Jobs Act would allow smoothed asset to vary up to 20% of market value. This change can make a large change in required pension contributions in these highly volatile investment markets. Introduced by a so-called "Blue Dog” Democrat Pomeroy and a Republican Tiberi, the Preserve Benefits and Jobs Act appears to, at least initially, have some bipartisan support. However, the bill may face some labor union opposition as it would allow currently frozen plans to take advantage of funding relief. Unions don't like the fact that plans that offer no new benefits to employees will be allowed to postpone some required pension contributions under this bill. With health care reform currently dominating the agenda, it is anyone's guess if this pension relief ever gets enacted into law. |
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Comments, questions or story ideas? Please contact newsletter editor Richard Cherrix at 916.561.5900 ext. 107 or richc@agfoodsafety.org  View Newsletter Archive IN THIS ISSUE Member Spotlight: Valley Fig Growers 24th European Dried Fruit Meeting ACFSQ/ DFA Board Members: Don Soetaert, Chairman Shoei Foods USA, Inc. Susan Brauner Blue Diamond Growers Sam Keiper Diamond Foods, Inc. Jack Mariani Mariani Nut Company George Sousa, Sr. Mariani Packing Company, Inc. Barry Kriebel Sun-Maid Growers of California Mark Dalrymple Sunsweet Growers Inc. Mike Emigh Valley Fig Growers Pete Turner Wilbur Packing Company SCTC Board Members: Michael Cassidy, Chairman Sun-Maid Growers of California Chip Litten CalDak International, LLC Bruce Higton California Food Connections Craig Duerr Campos Brothers Farms N. Leon Dermenjian Derco Foods Martin Mariani Mariani Nut Company Jim Zion Meridian Nut Growers, LLC Everett Golden Otis McAllister, Inc. Linda Robbins Pacific Century Trading, Inc. President’s "E" Award By Erika Tarr Known as one of the oldest and most widely trusted companies dealing in global trade of food products, Otis McAllister, Inc. is truly a shinning star. Founded in 1892 by James Otis, Jr., M. Hall McAllister and Everett N. Bee, their mission was simple: to provide their global customers the widest breadth of sources for high quality and reasonably priced foods, beverages and food ingredients and to conduct business with all suppliers and clients in an ethical manner. This practice has continued for one hundred and sixteen year history as a key company in the worldwide food industry. <read more> Agriculture Transportation Coalition (AgTC) 2010 Ag Shipper Workshops By Erika Tarr The Specialty Crop Trade Council works closely with The Agricultural Transportation Coalition (AgTc). The AgTC monitors government and commercial activity on ocean shipping and other transportation issues and keeps AgTC members up-to-date on how these will impact their business. To view Ag Shipper Workshop Dates and Locations, please visit http://www.agtrans.org/Section.asp?article_id=1989 American Shipper <view PDF> |
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