Letter to the Senate urging them to take up and pass the House-passed Pension Protection Technical Corrections Act (H.R. 6382)
July 31, 2008
On behalf of the National Education Association's (NEA) 3.2 million members, we urge the Senate to take up and pass the Pension Protection Technical Corrections Act (H.R. 6382), as passed by the House of Representatives. NEA supports this bill, including the important "smoothing" technical correction provision. Votes associated with this issue may be included in the NEA Legislative Report Card for the 110th Congress.
The Pension Protection Act of 2006 (PPA) radically changed the rules for funding single-employer defined benefit pension plans, including requiring a plan's assets to be valued at fair market value, rather than, as under prior law, by any reasonable actuarial method that takes fair market value into account. These new rules are having a serious negative impact on the sustainability of single-employer defined benefit plans. And, the impact could be exacerbated by fluctuations in the market value of plans' assets. Such additional volatility could lead plan sponsors to freeze or terminate defined benefit plans rather than face the unpredictable impact of changing contribution requirements based on the short-term fluctuations of market values.
H.R. 6382 would address some of the concerns raised by the PPA rules, by allowing employers to moderate the impact of radical changes in market values that occur over short time periods by taking such changes into account only gradually, over a longer period of time. This technique, known as "smoothing" would make future contributions to single-employer defined benefit plans more predictable and therefore more sustainable.
Even though most NEA members work in the public sector - where traditional defined benefit pension plans continue to constitute a key part of the overall compensation structure - they have a keen interest in the universal recognition of traditional defined benefit pension plans as extremely valuable components in the fight against retirement insecurity. Moreover, some NEA members do work in private sector jobs where their interests are directly affected by pension legislation; as are the interests of NEA's and its affiliates' employees, who also participate in traditional defined benefit plans. Therefore, NEA strongly supports H.R. 6382, including the "smoothing" technical correction provision.
Again, we urge your support for this important legislation.
Diane Shust, Director of Government Relations
Randall Moody, Manager of Federal Advocacy