A little while ago, a letter from 204 businesses and trade associations representing companies all across the country sent a letter to the Congress urging them to take immediate “action to stabilize funding interest rate rules for private-sector pension plans” to adjust for current economic conditions which are driving up pension funding obligations and in opposition to pension premium increases.
Pension plan funding obligations are inversely tied to interest rates so when interest rates are low – like they are today – then pension obligations are high. Since the financial collapse the FED has adopted a policy of keeping interest rates low in an effort to stimulate the economy.
One negative side effect of this policy is the impact on a company’s pension obligations. The Senate a few months ago passed a provision that would fix the funding rules to all a more historically accurate measure for funding obligations using a 10 percent corridor around the 25 year average.
This provision was part of the highway transportation bill which is now in conference. We are hopeful that the Conferees will adopt this provision and make it permanent rather than time limited as provided for in the Senate bill.
This provision makes sense and if made permanent will go a long way toward helping provide businesses more certainty from which to plan for this commitment. Improved planning will mean more certainty which will in turn help make our companies better able to compete in today’s economy. We urge Congress to adopt this common sense solution.