"The current economic turmoil has placed a strain on the employer-sponsored retirement system," said American Benefits Council President James A. Klein at a briefing for the news media this week. "To ensure continued retirement security for American workers and retirees, the Council proposes a ten-point plan for immediate consideration by Congress."
The 10-point plan provides concrete recommendations for helping individuals weather the financial storm, for preventing unexpected and unintended pension funding mandates that would cost jobs and trigger massive benefit freezes, and for encouraging future retirement saving. The elements of the plan would:
- Expand the group of middle income individuals eligible for the Savers Credit;
- Protect retirees from mandatory, excessive distributions that deplete their retirement savings;
- Allow IRAs and sponsors of 401(k) plans to offer individuals a one-time opportunity to borrow up to $10,000 to pay for day-to-day expenses and delay the loan repayment start date;
- Permit pension plans to smooth out unexpected asset losses, as clearly intended by Congress in 2006;
- Permit full asset smoothing to recognize the long-term nature of pension obligations;
- Provide a transition to the new funding rules;
- Permit new funding elections for 2009 or 2010 to avoid mandatory benefit restrictions imposed on individuals and keep plans viable;
- Relief from 2008 plan losses to reduce the likelihood of plan freezes;
- Enhance financial education; and
- Increase the start-up credit for small business retirement plans.
"Employees and retirees need the certainty of knowing that during this current turmoil, they can access retirement assets if they need to and won't be compelled to withdraw from their plans if they don't need to. Pensions are long-term obligations. Employers should not be forced to make unexpected contributions based on short-term unprecedented market volatility. If Congress fails to act, employers will be compelled by law to restrict benefits and compelled by circumstances to freeze pension plans to mitigate the impact of market conditions, Klein concluded.
The American Benefits Council is the national trade association for companies concerned about federal legislation and regulations affecting all aspects of the employee benefits system. The Council's members represent the entire spectrum of the private employee benefits community and either sponsor directly or administer retirement and health plans covering more than 100 million Americans.