Pension Funding Relief

The stock market declines in 2008 subjected nonprofit and for-profit sponsors of defined benefit pension plans to new rules that require investment losses be repaid within seven years. These mandatory catch-up contribution rules impose huge financial liabilities. The National Council supports temporary relief that would allow nonprofits and other sponsors of defined benefit pension plans to stretch out their payments over a number of years. 

Why It Matters to Nonprofits

Nonprofit employers that provide defined benefit pension plans for their employees do so to attract and retain qualified individuals. One recent survey found that cash contributions to pension plans will be 400 percent higher in 2010 than in 2009. Without relief, nonprofit organizations would be required to divert significant resources away from vital services in their communities to satisfy arbitrary pension funding rules. Permitting employers to stretch out their payments will enable nonprofits to maintain services at a time when they are greatly needed, and ensure that plans are adequately funded.

Status

The Senate and House have approved the Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010 that, among other things, provides temporary funding relief to nonprofit and for-profit sponsors of defined benefit pension plans. The pension relief does two things that would benefit charitable nonprofit organizations that sponsor single-employer defined benefit plans:

• Allows employers to stretch out their payments from seven years to either nine or 15 years, and
• Allows a certain type of plan sponsored by nonprofits to adhere to older, less-restrictive funding rules.

Additional Resources

• Text of the Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010
• House Ways and Means Committee background information
• See Jobs in Peril: Assessing the Impact of Increases in Defined Benefit Plan Funding Obligations on Employment During an Economic Recession, American Benefits Council, October 30, 2009.