While pension experts say the recently passed Pension Protection Act of 2006 will indeed help remedy the funding problems that have plagued defined benefit (DB) pension plans, they doubt that it will resolve the insolvency woes of the Pension Benefit Guarantee Corporation (PBGC).
The legislation–which President Bush signed into law August 17–"does take good steps" to deal with pension plans' funding, says Alex Pollock of the American Enterprise Institute, by first raising the funding target of pension liabilities to 100%–giving companies seven years to hit that mark.
The law also increases the variable premium for underfunded plans, and prohibits severely underfunded ones from increasing benefit formulas. A fee of $1,250/participant would be levied on companies that terminate their plans.
