Legislation is currently pending in Congress called the Giving Retirement Options to Workers Act or “GROW” Act. There is a possibility it could pass as a part of the pending stimulus bill. Apparently, the goal of this proposed law is to revitalize the private defined benefit pension system in the United States. Unfortunately, we believe the main effect of the GROW Act would be to undermine the current defined benefit pension system we have fought so hard to preserve and protect.
The topic of pension reform is very complicated and so are the solutions unfortunately. The GROW Act started from a bipartisan effort to help, but as always, the devil is in the details. In an effort to avoid making this letter overly complicated, I will boil down our concerns with the GROW Act and what it calls Composite Pension Plans to the following:
· After years of hard work to keep your pension plan healthy, the Composite Pension Plan would make it much more difficult to improve benefits.
· Would allow all benefits, even for retirees in pay status, to be cut if investment performance was poor.
· Would dramatically increase the cost of newly earned pension benefits by creating new funding metrics that would be extremely costly to comply with.
· Could trigger the reduction in future accruals if a funding target of 120% is not met.
· Could dramatically reduce an employer’s liability for unfunded legacy plan benefits if they go non-union.
· Could jeopardize the safety of existing plans by diverting contributions to the new composite plan.
· Would remove PBGC (quasi government program to insure pension plan benefits) protections.
· Would further weaken the PBGC by removing PGGC premiums, reducing contributions to legacy plans and reducing withdrawal liability payments.
Please call your senators and congressional representatives to oppose the inclusion of the GROW Act in the upcoming stimulus bill!