Buried at the end of the Highway and Transportation Funding Act of 2015 is a provision that would extend overfunded pension plans the ability to use excess assets to fund retirees’ health care costs.
The provision, introduced by House Ways and Means Committee Chair Paul Ryan, R-Wisconsin, is part of a larger, long-running bi-partisan debate over how to fund the nation’s highway infrastructure projects, being waged in both chambers of Congress.
Section 2007 of the bill would extend the ability to use excess pension funding through 2025, from the current 2021 sunset date established in 2012.
It is the fifth time the allowance has been extended since 1990, when overfunded plans were first allowed to transfer funds to support funding of retiree health care benefits.
That provision has “allowed companies to continue to pay for retiree health insurance for a countless number of retirees with no significant impact on pension funding,” wrote Annette Guarisco Fildes, CEO of the ERISA Industry Committee, in a letter to Rep. Ryan urging inclusion of the provision.
Sponsors are allowed to transfer assets so long as the pension fund remains at least 125 percent funded. The average funding level rose to 87.8 percent in June, according to BNY Mellon.
Also, employers can’t reduce money otherwise committed to funding retiree health care for five years after the cash infusion.
The House’s bill is another stopgap funding measure that extends existing infrastructure funding into December. In the Senate, some members are saying a more long-term funding bill is immediately necessary.
A controversial proposal in both the House and the Senate would use $30 billion in savings from the federal employee retirement savings plan to partially fund the highway trust.
Rep. John Delaney, D-Maryland, voiced new concerns over the idea of comingling retiree benefit funds and highway infrastructure funds.
Delaney and other Democrats favor taxing overseas corporate profits to fully fund a new highway bill, an idea also advanced by the White House.
“We face a stark choice right now: we can either begin work immediately on a six-year highway bill that uses revenues from international tax reform or we can choose a two-year bill paid for by cutting benefits to federal workers,” Delaney said in a statement.
Congress has not passed a transportation bill that funds more than two years of projects since 2005.
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Nick Thornton
Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.
