CIEBA Applauds Congressional Action Crucial to Retirement Plans

The Senate’s Passage of H.R. 3108 is an Important First Step in Enhancing the Long-Term Strength of Defined Benefit Plans

The Committee on Investment of Employee Benefit Assets, a committee of the Association for Financial Professionals (CIEBA of AFP) commends the Senate for passing legislation (H.R. 3108) today to allow pension plan sponsors to use a more up-to-date interest rate to calculate their required funding. The new legislation allows corporate plan sponsors to use a composite corporate bond interest rate in place of the 30-year Treasury bond rate to determine their required minimum funding and premiums to the Pension Benefit Guaranty Corporation (PBGC) for two years.

"This legislation allowing the use of a more rational discount rate is long overdue. The strong vote in the House of Representatives last week and the Senate action today is a positive sign that Congress recognizes the importance of traditional pension plans," said Gary Glynn, Chairman of CIEBA and President of U. S. Steel and Carnegie Pension Fund.

Without this change, corporations would have to contribute much more to their pension plans than is needed to meet benefit promises. Forcing plan sponsors to make unnecessarily large contributions or pay higher PBGC premiums is bad economic policy and bad pension policy.

For plans that are required to make contributions, the first quarterly contribution of 2004 is due on April 15. CIEBA of AFP urges the President to sign the legislation and the U.S. Department of Treasury to issue the revised interest rate as soon as possible.

"Defined benefit pension plans are a mainstay of the nation's retirement system. Passage of this interim legislation is an important first step in developing public policy that enhances the long-term strength and viability of these important plans," Glynn said. "The legislation addresses one of seven issues identified in the new CIEBA report that if not addressed could undermine pension benefits for millions of Americans."

The Committee on Investment of Employee Benefit Assets is the voice of the Association for Financial Professionals on employee benefit plan asset management and investment issues. CIEBA represents more than 110 of the nation's largest retirement funds. Its members manage $1 trillion of plan assets, covering 15 million participants. Defined benefit plans managed by CIEBA members comprise 9.5 million participants, or more than one quarter of all Americans covered by DB pension plans.

The Association for Financial Professionals, headquartered in Bethesda, Maryland, supports more than 14,000 individual members from a wide range of industries throughout all stages of their careers in various aspects of treasury and financial management. AFP is the preferred resource for financial professionals for continuing education, financial tools and publications, career development, certifications, research, representation to legislators and regulators, and the development of industry standards.