Many employers with defined benefit plans will be unable to make the required contributions to their pension plans, according to a consulting firm analysis. The employers are asking for funding relief from government regulators to help them lower funding requirements. Excerpts below.
If your employer contributes to a defined benefit plan for your retirement, you may not get what you expect. You might need to consider an alternate plan for saving for retirement.
Link: U.S. Employers Face Huge Pension Funding Tabs Without Relief, Watson Wyatt Analysis Finds
Despite recent increases in asset values and regulatory relief from the Internal Revenue Service (IRS), U.S. employers will be required to contribute $89 billion into their defined benefit (DB) plans in 2010 and more than $146 billion in 2011 unless they receive funding relief from the federal government, according to an analysis by Watson Wyatt, a leading global consulting firm.
“The combination of a deep recession and new pension law has landed employers in extraordinary circumstances, and they need temporary funding relief to lessen the enormous pension contributions required in the next few years,” said Mark Warshawsky, director of retirement research at Watson Wyatt, who testified on these points at an October 1 House Ways and Means Committee hearing.
Watson Wyatt analyzed the projected required contributions for single-employer DB plans under various scenarios: the existing law (including the September 25 IRS guidance) and three legislative proposals currently under consideration.
The analysis found that past relief granted by legislation and regulations had lowered required contributions for corporate pension plans to $32 billion in 2009 from $38 billion in 2008. But without further action, employers’ contributions would explode to more than $146 billion in 2011. Under the three legislative proposals, employers’ contributions would be somewhat lower, by $10 billion to $25 billion annually with different time paths, but required contributions would still be very large.
Without additional funding relief, the average regulatory funded status would decline slightly from 96.4 percent in 2008 to 93.8 percent in 2009, and then fall to 83.8 percent in 2010 and to 76.8 percent in 2011, the analysis found.
…
“A crucial decision lies ahead for lawmakers,” said Gene Wickes, global director of benefits consulting at Watson Wyatt. “Congressional and administration support for funding relief would help ensure that DB plans remain viable for employers and a vital element in the retirement security for workers. It could also save employers from making the difficult choice between large, required pension contributions or jobs, wages and capital investment.”
For the funding analysis, please visit: http://www.watsonwyatt.com/us/pubs/insider/showarticle.asp?ArticleID=22407
For the testimony, please visit: http://waysandmeans.house.gov/hearings.asp?formmode=view&id=8071.
via Michael Panzner at Financial Armageddon
{ 1 trackback }
{ 0 comments… add one now }