Lawmakers failed to unveil the much-anticipated compromise bill on pension reform before leaving for spring break in mid-April, which means the unveiling of a final bill could likely "drag out" for some time, says Dan Houston, senior VP at the Principal Financial Group. But that's because lawmakers "want to get a good bill out, rather than a quick bill," he says, noting that after lobbying top lawmakers on the Hill, he's confident lawmakers won't get bogged down in partisan politics. "Both sides [of the aisle] want to be thoughtful about getting a good piece of legislation out."
The final legislation would be a compromise bill meshing provisions of House bill H.R. 2830, the Pension Protection Act of 2005, with the Senate's S. 1783, the Pension Security and Transparency Act of 2005; both bills passed their respective chambers last fall. Getting one's arms around the huge number of provisions included in both bills is a daunting task, but the overhaul can be summed up as a "modernizing of defined benefit plans and a strengthening of defined contribution plans," says Scott Talbott, senior VP for Government Affairs at The Financial Services Roundtable in Washington, D.C.
Rick Lawson, VP of federal government relations at the Principal Financial Group, adds that he hopes the compromise bill "strengthens DB plans as well." Compromise legislation would likely include creating "a fixed method to determine the interest rate to be used to fund DB plans," he says, which "will stabilize and encourage more DB plan formation." Any compromise legislation would also seek to "legitimize" cash-balance plans, which are not covered under the Employee Retirement Income Security Act (ERISA), Lawson says. "Since the whole plan design of a cash-balance plan has not been legitimized, small and mid-sized employers are reluctant" to put one in place, he says.
A judge ruled in what is known as the IBM v. Cooper case in Vermont that cash-balance plans are age discriminatory. Older plan participants sued IBM when it converted to a cash-balance plan from a traditional DB plan because while the benefit formula under a cash-balance plan "increases for younger workers, it decreases for older workers," Talbott says.
