By Stephen Manning
Wednesday, November 12, 2008
With pension funds facing billions of dollars in shortfalls as markets plunge, a range of companies from Ford to Verizon are pushing Congress to suspend portions of a two-year-old law they say could force them to cut jobs as they shift scarce money into ailing retirement pools.
The lobbying effort aims to change a 2006 pension revision law as part of any economic stimulus plan in a lame-duck session of Congress that begins next week. Companies warn that the current law could force them to tie up large sums of cash they desperately need in the face of a global recession.
Roughly 300 companies and business groups plan to make the request in a letter tomorrow to congressional committees. The authors include some of the nation's biggest corporate names from a variety of sectors, including Ford Motor, IBM, Pfizer and Verizon Communications.
"Unless the funding rules are modified, they will increase U.S. unemployment and slow our economic recovery," the letter warns.
The Pension Protection Act of 2006 included provisions meant to ensure that company pensions, also known as defined benefits, have money to meet the promises made to workers and retirees. While many companies have phased out such pools of money in favor of 401(k) plans, which cost less, about three-quarters of S&P 500 companies have traditional plans, analysts say.
Under the law, companies facing shortfalls must bring their plans up to full funding over the next seven years. Those that fall short will be forced to take steps such as freezing the accrual of new benefits for current plan members.
The letter asks Congress for changes to the pension law, such as giving companies more time to reach full funding. It also seeks accounting changes that would allow companies to spread losses to their plans over longer periods of time, a process that would temper the effect of sudden drops in plan values.