News & Events

Employer Pension Funding Requirements Eased

January 28, 2009

The economic downturn and stock market losses are shrinking retirement accounts and impeding employers’ ability to meet pension funding requirements. The Worker, Retiree and Employer Recovery Act of 2008 (WRERA) is designed to help seniors recover some of the value their retirement accounts have lost this year, as well as ease employer pension funding requirements that could have forced businesses to make large pension fund contributions at a time when cash is in short supply. In addition, the act “corrects” several technical provisions of the Pension Protection Act of 2006 (PPA).

Because the economy has affected employers’ ability to fund pension plans, WRERA eases the pension funding requirements enacted in PPA. Here are some of the key changes for:

Single-employer plans: Under PPA, employers were required to increase funding for single-employer pension plans to 100%, from 90%, over a seven-year period. The target funding level is 92% in 2008 and 94% in 2009. The penalty if employers didn’t reach those benchmarks had been that they must immediately fund the plan 100%. Under WRERA, employers who can’t meet these requirements must make subsequent contributions only up to the target for that year, rather than hit the 100% target.

Multiemployer plans: WRERA offers relief for multiemployer pension plans that are “endangered” or in “critical status.” PPA provided funding restrictions for these plan types, and the new law eases those restrictions. Specifically, the act allows plan sponsors to elect to temporarily freeze the status of certain multiemployer plans at the funding status held during the previous plan year.

This covers plan years beginning on or after Oct. 1, 2008, and before Oct. 1, 2009. Also, if the plan was “endangered” or in “critical status” the preceding plan year, it isn’t required to revise its funding improvement plan or schedules until the following plan year.

Even though WRERA’s main provisions are relatively simple, knowing exactly how they affect you and what to do about them is a more complicated matter. We would be glad to answer any questions you have and help you take advantage of this legislation to mitigate the impacts of the current economic conditions.

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