Floor and Committee Statements

Tuesday, March 9, 2010 -

Floor Statement on Pension Relief

Tuesday, March 9, 2010

U.S. Senator Johnny Isakson (R-GA)
Floor Statement on Pension Relief
Remarks as Delivered on the Senate Floor

Mr. President, I wish to thank the leader for his courtesy and for his help on this legislation. In particular, I wish to thank Chairman Baucus and his staff and Senator Grassley and his staff, as well as my staff, Ed Egee in particular, who did a great job of addressing the pension problems in this country.

This amendment gives corporations two alternatives to accept, adopt, and smooth their obligation on pensions. It will raise $3.5 billion against the debt. It will save the pensions of many Americans.

I wish to acknowledge the leadership of Senator Baucus from Montana, Senator Grassley, and their staffs for helping us accomplish it.

Also, let me thank my friend and colleague, Senator CARDIN from Maryland, for his good work and cooperation on this issue. Senator CARDIN has long been a leader on retirement issues. I recall in the House supporting a landmark retirement bill that bore his name: the Portman-Cardin Pension Reform Act of 2001.

Almost 4 years ago, I was proud to support the Pension Protection Act of 2006. That piece of legislation adopted a stringent new funding regime for single employer defined benefit pension plans. It raised the full funding target to 100 percent, based the sponsor's contribution requirements on the funded status of the plan, encouraged pre-funding of pension funds through the recognition of credit balances, and included much-needed smoothing of both assets and liabilities.

All of these were positive changes. Unfortunately, just as the Pension Protection Act's stringent funding requirements began to be implemented, the assets of most pension funds were depleted by the economic recession.

The gravity of the situation was reflected in a recent Mercer study of over 800 companies. Mercer found that required cash contributions to pension plans will be more than 400 percent higher in 2010 than in 2009.

Over the last year, dozens of employers who sponsor defined benefit plans have come to me and to many Members of this body asking for relief from the stringent funding rules of the Pension Protection Act. They hope to avoid severe cost-cutting measures. A May 2009 survey indicated that the overwhelming majority of DB plan sponsors--68 percent--will have to cut other expenses, including jobs, in order to make required pension contributions.

Even if the market were to come soaring back tomorrow, this relief would still be appropriate. A February 2010 study by Towers Watson found that even if equities rise by 20 percent in 2010 and projected interest rates increase by a full percentage point, total 2011 funding obligations would still be approximately triple the level of 2009 funding obligations.

Given the scope of the situation, there is broad agreement that the Senate must act. As such, Senators BAUCUS and GRASSLEY included targeted funding relief in this tax package.

Our amendment makes small but important changes to the underlying language, mostly affecting the application of the ``cash flow rule.'' Generally speaking, the cash flow rule forces employers to make additional contributions to their plan above the amount they would normally owe.

We do not oppose the inclusion of the cash flow rule in the relief package. We agree that that is an appropriate stick in exchange for the carrot of relief.

However, the stick can last up to 7 years while the relief is only available for 2 years. Accordingly, we are urging this Senate to limit these restrictive conditions on the funding relief that we are offering to employers in this amendment.

Sponsors would continue to receive 2 years of relief from the onerous funding obligations imposed by the Pension Protection Act. However, our amendment applies the cash flow rule for 3 years for the 2 plus 7 option and 5 years for the 15 year option--as opposed to 4 and 7 years, respectively.

Our goal here is to achieve a balance. We want to ensure the viability of the pension security system by ensuring that the plans are fully funded. At the same time, we want to make the relief usable to employers so they will be incentivized to continue their defined benefit pension programs.

I continue to support efforts to protect taxpayers by strongly opposing any attempts to break down the wall between the Pension Benefit Guaranty Corporation and general Treasury funds.

I thank Senators GRASSLEY and BAUCUS for accepting our amendment and thank the staff for their work on the amendment. Cathy Koch and Tom Reeder with Senator BAUCUS; Chris Condeluci with Senator GRASSLEY; Debra Forbes with Senator HARKIN; Greg Dean with Senator ENZI; Femeia Adamson with Senator CARDIN; and Ed Egee with my staff.