BNA Pension and Benefits Blog

I'm still yawning from staying up late (for a school night) to see what happened, how The American People made their views known to the governing class.

There are any number of levels to the question, what will be the impact "on us" of the transfer of power. 

"Us" includes, of course, all of us as citizens -- will the election outcome hasten the day that we stop precipitating and experiencing deaths and mutilations in Iraq?  Maybe there's a qualified sorta yes in there, given the swift resolution of Secretary Rumsfeld's DOD career prospects.  Will it lead to more generous policies for the lower economic rungs in our society?  A less qualified yes, at least in terms of an increase in the federal minimum wage.  Note that not only was this on the Democrats' agenda, it was on the ballot in six states and passed in every one -- by contrast, measures to ban same-sex marriage were on the ballot in seven states, but only passed in six (Arizona seems to have defeated it).

[EVEN MORE THAN USUAL, THE IMMEDIATELY PRECEDING TEXT GIVES MY OWN PERSONAL VIEWS, NOT THOSE OF EMPLOYER OR CLIENTS.]

What about as a community especially concerned with general issues of retirement security and access to health care?  The main impact I see at this point is a slowing down (if that's possible) of a drift toward the Ownership Society.  Beyond that, it's hard to envision substantive changes in Social Security or Medicare.  Even if they could agree on a reform program, the Democrats don't exactly have veto-proof majorities in both Houses.  Besides, the next election is only 2 years down the road -- not enough time to tackle the major entitlements.

So what about the rules governing employee benefits?  My guess is that everyone is too exhausted from this year's battles to be willing to reopen the PPA.  However, there may be a little more give around the edges, perhaps in defining what exactly is meant by "technical corrections."  If next year's Congress had been sitting this year, there are some parts of PPA that would probably have come out quite differently: maybe hybrid plans, investment advice, treatment of credit balances in single employer plans, for example.  But undoing what's now in there is a great deal harder than putting it in in the first place (3d rule of lobbying). 

What do you think?

On the ABA Joint Committee on Employee Benefits teleconference last Thursday, Bill Bortz from Treasury cleared up some issues that have been creating uncertainty under the newly-enacted Pension Protection Act of 2006:

• Bill said the restrictions on funding executive benefits when the defined benefit plan is underfunded won't be effective until the funding rules become effective in 2008 or later. The restrictions resulting from the employer's bankruptcy, however, are effective immediately.
• On faster vesting for cash balance plans, he confirmed it only applies to the cash balance portion of the plan, not to traditional benefits that are grandfathered or benefits for participants in the plan that only have traditional benefits.
• On how the 2-year averaging works for calculating the funding interest rate under the new rules, he said it was a simple average not a weighted average as under current law.

I've attempted to summarize the new funding rules and related benefits restrictions in one page. Certainly not all you'll need by 2008 when these rules become effective, but hopefully enough to get you started. BNA has established a Pension Protection Act Center with materials from a number of sources to help you come to grips with the new Act.

Nell Hennessy
nell.hennessy@fiduciarycounselors.com
202-558-5141