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(WASHINGTON, D.C.) – Sen. Patty Murray helped win Committee passage of a bill to provide a three year fix to help ensure the solvency of defined benefit pension plans. The Pension Stability Act, approved by the Senate Health, Education, Labor & Pensions committee on Wednesday, would help ease the pension funding crisis by providing companies a more appropriate formula for calculating pension obligations.

The proposal will help responsible companies continue to fund their pension programs in a fiscally prudent manner, especially those with older workforces engaged in manufacturing.

Current law requires pension plan sponsors to use an interest rate based on the 30-year Treasury bond to calculate liabilities for minimum funding. But this current formula dramatically overstates the funding necessary to fulfill pension obligations.

The provision approved in Murray’s Committee yesterday would replace the 30-year Treasury bond rate with a composite index based on a combination of long-term, high-grade corporate bond indexes.

“More than 3 million Americans have lost their pension coverage since 2000, and today, only 53 percent of America’s workers are participating in a retirement plan. This bill allows congress to responsibly address the problems of our pension system and will help protect the pension benefits that millions of Americans have worked so hard to earn.”

“This bill will provide greater certainty for both workers and employers,” Murray continued.

The temporary change in the formula for companies’ pension contributions will provide a three year grace period needed to develop a long-term approach to strengthening and increasing the long-term solvency of defined benefit plans.

The bill would also create a Blue Ribbon commission to review pension funding issues and to make recommendations to improve current pension laws.

Among the issues for the Commission to address before reporting back to Congress in 2005 are:

  • Whether to ask companies to put more funds into their pension plans during good times, and how to keep funding those plans in down times;
  • How to strengthen the Pension Benefit Guarantee Corporation so that it can more effectively provide the benefit protections that workers rely upon;
  • and How to encourage employers to provide pension benefits for the nearly fifty percent of American workers who are not participating in a pension plan today.