Isakson Praises Senate Passage of Amendment to Ensure Viability of Pension System

WASHINGTON (March 9, 2010) – U.S. Senator Johnny Isakson, R-Ga., today praised the Senate’s passage of his amendment to encourage companies to continue their defined benefit pension programs by providing temporary relief from statutory pension funding obligations. 

The amendment, which Isakson introduced with Sen. Ben Cardin, D-Md., was attached to legislation that would extend a number of individual and business tax breaks. The amendment was accepted by unanimous consent.

“This amendment will help companies avoid severe cost-cutting measures as we continue to recover from one of the worst recessions in our nation’s history,” Isakson said. “The Senate has helped ensure the viability of the pension security system and protected American taxpayers by ensuring that pension plans remain fully funded and incentivizing employers to continue their defined benefit pension programs.”

Without funding relief, Isakson believes it will be difficult to create jobs in the struggling economy and that many companies will be forced to cut expenses and eliminate jobs in order to make the required pension contributions.

Isakson also fears companies may decide to terminate their defined benefit pension programs altogether and turn them over to the Pension Benefit Guaranty Corporation, the federal agency responsible for funding pensions when companies terminate their pension plans. Isakson believes his amendment will help protect American taxpayers by ensuring the Pension Benefit Guaranty Corporation remains solvent.

Under the main provision of the amendment, employers would be allowed to choose from two options to spread out their pension obligations. Under the first option, employers would be able to repay their pension shortfall over seven years, but the seven-year amortization would start two years late. During the two-year delay period, the employer would only owe interest on the shortfall. Under the second option, employers would be able to pay back their pension shortfall over 15 years.