An independent study by the Society of Actuaries suggests how companies can meet the challenge of increasing pension funding requirements while still preserving pensions.
The report, "The Rising Tide of Pension Contributions Post-2008: How much and when?" suggests that funding and other regulatory requirements might be eased for companies that pose less risk to the pension system. It includes ways to reduce pension costs and volatility, possible regulatory changes to strengthen pension plans and new approaches to manage the wide array of pension risks.
"This report recognizes that pension sponsors face real challenges, but it also suggests ways to help companies meet them—ways that are consistent with the Administration's efforts to preserve plans," said Josh Gotbaum, Pension Benefit Guaranty Corporation director. "The actuaries suggest pension funding and regulatory requirements should be flexible, that sound companies with well-funded pension plans should face less restrictive rules than companies that have more risk of failure. That's consistent with the Administration's premium proposal. The actuaries are suggesting that we consider it for funding and in other areas as well."
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The actuaries' report also suggested that funding requirements might be redesigned to be countercyclical, to avoid hitting companies hardest when they can least afford to pay, which mirrored the Administration's premium proposal.
Among other findings, the actuaries' report shows that employers' pension contributions are likely to increase significantly over the next five years. It notes that companies can decide to freeze their plans and leave the voluntary defined benefit pension system if they choose. The actuaries make several suggestions, both for companies and regulators if they want to avoid that result.
PBGC is a federal corporation that guarantees payment of basic pension benefits earned by 44 million American workers and retirees participating in over 27,500 private-sector defined benefit pension plans.
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