A measure to bolster the finances of defined-benefit pension plans has been eliminated from the U.S. Senate's jobs bill, in a move Senate Majority Leader Harry Reid described as an effort to get the jobs legislation passed quickly.
Reid, a Nevada Democrat, said that he plans to bring the slimmed-down jobs bill to the Senate floor on Feb. 22, according to news reports. Components eliminated from the bill, which include extensions of unemployment benefits and the federal subsidy for COBRA premiums as well as the pension funding measure, would be presented as a separate piece of legislation at a later date. The jobs bill seeks to encourage hiring by giving companies an exemption from the 6.2% Social Security tax they pay on wages for workers they hire this year who have been out of work for at least 60 days.
Funding for defined-benefit pension plans was hit hard by the market crisis, and although stocks have recovered a portion of their losses, the very low interest rates have boosted plans' liabilities. A Mercer study of 874 corporate pension plans released earlier this month calculated that the plans were starting 2010 with an aggregate funding ratio of 92%, down from 111% at the start of 2009. And 36% of the plans had ratios below 80% at the start of this year, versus just 7% at the start of last year. Mercer calculates at the plans' aggregate required contributions for 2010 will be 126% higher than their contributions in 2009.
Employer groups criticized the elimination of the pension measure, arguing that in the absence of pension funding relief, companies facing increased contributions to their plans will be discouraged from hiring or even forced to lay off more workers. "Pension funding relief stimulates the economy, saves jobs, and does not cost taxpayers anything," James Klein, president of the American Benefits Council, said in a statement.