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Pension Funding Equity Act
Signed into Law
On April 10, 2004, President George Bush
signed into law the Pension Funding Equity Act of 2004. This law amends the
Employee Retirement Income Security Act of 1974 ("ERISA") and the Internal
Revenue Code of 1986 ("Code") to temporarily replace the 30-year Treasury bond
with a new rate as the interest rate at which defined benefit pension plans are
funded. The new rate is based on long-term corporate bonds and is determined at
the discretion of the Secretary of the Treasury. This new interest rate may be
used by companies to determine their pension plan quarterly contributions due on
April 15, 2004.
This change effectively reduces the
amount employers must contribute to pension plans as part of their required
annual employer contributions. Additionally, the Pension Funding Equity Act
allows certain employers to increase the amount of time necessary to repay
specified pension plan losses. The Pension Funding Equity Act also amends ERISA
and the Code to allow employers within the airline and steel industries to
reduce the amount of their required employer contributions by making alternative
deficit reduction contributions to their pension plans for certain plan years.
In Announcement 2004-38, the IRS has outlined the procedures employers should
use when making these alternative deficit reduction contributions.
To view the listing of corporate
bond rates which replaced the 30-year Treasury bond as the rate at which pension
plans are funded, please see http://www.irs.gov/retirement/article/0,,id=96450,00.html. To view the procedures for using alternative deficit
reduction contributions, as outlined by the IRS for employers to make
contributions to retirement plans, please see the attached
document.
To discuss this matter with your
contact in the Employee Benefits Group at Ice Miller, please use this link
to get to our directory of attorneys. If
you do not have a contact in the Ice Miller Employee Benefits Group, please feel
free to contact Marc
Sciscoe, Mary Beth
Braitman or Martha
Hutzelman, who prepared this article.
This publication is intended for
general information purposes only and does not and is not intended to constitute
legal advice. The reader must consult with legal counsel to determine how laws
or decisions discussed herein apply to the reader's specific
circumstances.
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Ice Miller is a full-service law
firm with offices in Chicago, Indianapolis and Washington, D.C. The 27 employee
benefits professionals of Ice Miller provide legal and consulting services for
retirement and health and welfare benefits and executive compensation to public
and private employers, financial institutions, insurance companies and other
types of benefit service providers.
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