Pension-Funding Fix Likely Before Year's End

Jan. 13, 2005
By John S. McClenahen Although the various ways Congress could act are clearer at this stage than the means the lawmakers actually will use, the House and Senate are likely to approve some short-term measure affecting the basis companies use to ...
ByJohn S. McClenahen Although the various ways Congress could act are clearer at this stage than the means the lawmakers actually will use, the House and Senate are likely to approve some short-term measure affecting the basis companies use to calculate their defined-benefit pension-plan funding obligations. Current legislation expires at the end of the year, and without new legislation the pension contributions for some manufacturers could increase dramatically. "This is a huge bottom-line issue for a lot of our members," says Dorothy Coleman, vice president for tax policy at the National Association of Manufacturers (NAM), Washington, D.C. NAM is backing a measure by Sen. Judd Gregg, R-N.H., that, among other things, would replace what it terms "the artificially low" 30-year Treasury bond rate used to figure pension funding with a rate based on long-term corporate bond rates. The current arrangement obligates "many companies to make contributions to pension funds that go beyond any reasonable near-term need," says Coleman. Meanwhile, says Alan Jacobs, senior actuary at Eisner LLP, a New York-based public accounting firm, "there is a tremendous amount of underfunding" in defined-benefit plans, in part because of the 2001 recession and downturn in the stock market. The underfunding is in the "hundreds of billions of dollars," he figures. And while he says corporate bonds rates reflect economic reality better than the 30-year Treasury rate for companies calculating their pension contributions, some companies still would be "left between a rock and a hard place," making large short-term funding contributions that could bankrupt the firm or getting out of their defined-benefit pension plans.

Popular Sponsored Recommendations

Disruptive EV Technologies Are Driving New Supplier Realities

Sept. 20, 2023
Vehicle electrification is upending the automotive landscape, forcing suppliers to make critical strategic and operational decisions. Understand what that means for you in our...

Manufacturing Performance Benchmark Report

Sept. 6, 2021
To overcome today’s challenges and meet goals and milestones for the future, organizations must operate at the highest level of performance. But unfortunately, not every company...

6 Ways Manufacturers Can Use GenAI Today

Feb. 1, 2024
Hear six compelling use cases where generative AI is making a significant impact in augmenting frontline workers and transforming operations. Learn how GenAI Assistants and smart...

Guide to Dedicated Contract Carriage

May 27, 2022
Is DCC (Dedicated Contact Carriage) right for your business? It could be a way for shippers like you to reduce costs, ensure truck capacity and reduce risk. The more you know ...

Voice your opinion!

To join the conversation, and become an exclusive member of IndustryWeek, create an account today!