<nobr>Dec 23, 2008</nobr>

President Signs Pension Funding Relief Legislation into Law

President Bush earlier today signed into law H.R. 7327, the Worker Retiree and Employee Recovery Act of 2008. White House Deputy Press Secretary Tony Fratto said "[t]hose of you who may have followed this issue know that we did have some concerns with this bill because we think it will increase the cost of near-term claims on the Pension Benefit Guaranty Corporation -- the PBGC -- and could also result in some benefits lost to workers over the long term. Our concerns with the legislation remain, but we do believe that in this current economic environment and current economic circumstances, that the benefits of the legislation outweighed our objections."

As reported last week, the House and Senate approved H.R. 7327 by unanimous consent to provide limited funding relief for defined benefit pension plans and make technical corrections to the Pension Protection Act of 2006 (PPA). Among other things, the new law:

• Clarifies that plans may smooth assets over a 24 month period;


• Eliminates the "cliff" transition rule for pension funding under the PPA so that plans falling short of the transition funding targets under the PPA (i.e., 92% for 2008, 94% for 2009, 96% for 2010) would determine shortfall amortization payments using the transition targets rather than 100% of the funding target;


• Allows plans to determine their restriction on benefit accruals by looking back to their funded status for 2008 (a temporary one-year provision); and


• Suspends required minimum distribution rules for 2009 (Note: In a letter last week to House Education and Labor Committee Chairman George Miller, D-CA, the Treasury Department said that it would not provide additional relief from the minimum distribution rules for 2008).

Enrolled Version of H.R. 7327

Joint Tax Committee Explanation

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