WASHINGTON — On Friday, Senators Ben Cardin (D-MD) and Rob Portman (R-OH) sent a letter urging Senate leadership to include their Retirement Security Preservation Act (S. 852) as part of a larger retirement package in the upcoming appropriations measure for FY 2018. Late last week, Aon Hewitt, a global consulting company providing pension services, reported that if Congress does not fix this issue in the next several months, approximately 200,000 Americans could lose their pension benefits. Waiting until later this year or next year would likely be too late for these 200,000 Americans.
The Retirement Security Preservation Act, which passed the Senate Finance Committee in 2016 as part of the Retirement Enhancement and Savings Act by a unanimous 26-0 vote, would protect longer-serving employees in grandfathered defined benefit plans by providing relief from outdated nondiscrimination regulations. The current IRS regulations have had the unintended effect of forcing many employers to have to stop providing pension benefits. For example, in order to satisfy certain pension nondiscrimination tests, the number of “highly compensated employees” (HCEs) relative to the number of other participants in the pension plan cannot become too high, even though grandfathered employees typically earn more toward the end of their careers and become highly compensated under the regulations. These outdated pension rules will inadvertently force companies to “hard freeze” their plan entirely, eliminating future benefit accruals for all employees in the plan and significantly undermining the retirement security of older workers. If Congress waits until December of 2018 to pass the bill, freeze decisions and announcements will likely have been made already. More than 600,000 pensions over the next few years are at risk of being frozen solely due to the nondiscrimination regulations, including 200,000 that are at risk in the next several months.
“Protecting retirees should be a bipartisan, bicameral priority. The hundreds of thousands of plan participants helped by the Retirement Security Preservation Act deserve timely relief,” said Cardin. “I’m pleased to partner with Senator Portman on this issue, and I hope that Congress recognizes the urgency of passing our bill and the many other provisions of the Retirement Enhancement and Savings Act that support retirement security for American families and workers.”
“We cannot allow 200,000 Americans to lose their pension benefits just because Washington has failed to update these regulations,” said Portman. “The Retirement Security Preservation Act should be passed now, and I am pleased to stand with my friend Senator Ben Cardin on this issue.”