ERIC Asks Congress to Fix Pension Funding Rules

February 2, 2012 (PLANSPONSOR.com) – The ERISA Industry Committee (ERIC) called on Congress to enact permanent reforms to the pension funding rules enacted under the Pension Protection Act of 2006 (PPA).

Gretchen R. Haggerty, executive vice president and chief financial officer for the United States Steel Corporation, testified on behalf of ERIC before the House Education and Workforce Subcommittee on Health, Education, Labor & Pensions during a hearing on balancing pension security and economic growth. Haggerty contended that the current rules are severely burdening companies, undermining the future of defined benefit plans and potentially threatening the country’s larger national economic recovery.  

Haggerty explained that the interest rate required by the PPA to calculate pension liabilities and minimum funding requirements is affected by the Federal Reserve’s extraordinarily low interest rate policy.   

“The actions by the Fed to control interest rates potentially put a significant near-term burden on sponsors of defined benefit pension plans, something that the Fed has acknowledged. Minimum funding amounts will be higher in the near-term than necessary for a long term obligation, which creates great economic inefficiency and impacts other important capital allocation decisions that can help the economy,” Haggerty said.