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CCH® PENSION — 06/28/12

Reid proposes to attach pension funding provisions to student loan bill

In a letter to House Speaker John Boehner (R-OH) and Senate Minority Leader Mitch McConnell (R-KY), Senate Majority Leader Harry Reid (D-NV) has offered to attach two pension funding provisions to pay for the estimated $6 billion cost of a one-year extension of student loan rates, which are scheduled to double on July 1, 2012. Reid said he believes the combination offers a bipartisan path to break the impasse currently facing the student loan bill (S. 2343).

The first proposal outlined by Reid expands upon the pension funding stabilization provision that passed as part of the Senate transportation bill. The proposal would create a "stabilization range" for employers to compute their pension liabilities. Instead of being forced to use the two-year corporate bond rates in computing their pension liabilities, the new proposal would allow them to compute liabilities using rates for a 25-year period within which the two-year rates must fall. This approach would narrow fluctuations in computing pension contributions and result in businesses taking fewer tax deductions for contributions.

In addition, Reid proposed increasing premiums paid by employers for the insurance provided by the Pension Benefit Guaranty Corporation (PBGC). Currently, employers pay a flat-dollar premium of $35 per pension plan participant, as well as a variable premium equal to $9 for each $1,000 that the plan is underfunded.

"The combination of these two proposals will provide sufficient resources to fund both a one-year extension of the current student loan interest rate and reauthorization of the nation's surface transportation programs," said Reid in the letter. "If House Republicans are still not ready to pass the transportation jobs bill, I suggest that we use part of these offsets to pay for the student loan legislation," wrote Reid, adding: "the remainder of these offsets will still be available to finish completion of the transportation jobs bill once the conference committee completes its work."

Source: S. 2343.

For more information, visit http://www.wolterskluwerlb.com/rbcs.

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.

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