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The new Pension Funding Equity Act of 2004 provides relief both for pension plan sponsors and for mutual life insurers.
One section of the bill, H.R. 3108, lowers funding costs for sponsors of defined benefit pension plans by temporarily replacing the very low 30-year Treasury bond rate with a much higher corporate bond rate index.
The House and Senate approved the conference report version of the bill earlier this month, and President Bush signed it April 11, so that employers could use the rate change when calculating the first-quarter plan contributions that were due April 15.
The new pension rate law is set to expire in 2 years. Congress could make the act permanent or come up with another approach for calculating employers pension obligations.
Employer groups have been asking for a change in the official pension rate index in part because overall rates have fallen in the past few years. Because 30-year bonds are popular and the federal government stopped issuing them 2 years ago, yields on 30-year bonds have been even lower than rates on other types of notes and bonds.
