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Retiree Security in Employer Plans Strengthened by
Labor Department
Jan. 10, 2005 – Labor Department announces actions
they say will strengthen the retirement security of the 34 million
workers and retirees covered by private, single employer defined benefit
pension plans.
“As Chairman of the Board of Directors of the
Pension Benefit Guaranty Corporation, I have become increasingly
concerned as the number of terminated plans grows and the PBGC is forced
to assume ever larger liabilities,” said U.S. Secretary of Labor Elaine
L. Chao, U.S. Secretary of Labor. “If nothing is done, the financial
integrity of the federal insurance system will be compromised and the
pension security of 34 million workers and retirees will be more at
risk.” Chao is also Chairman of the Board of the Pension Benefit
Guaranty Corp.
The Administration's plan will ensure the long term
solvency of the PBGC and protect the workers and retirees covered by
private, single employer defined benefit plans, they say. It is based on
three main principles:
> Reforming the
funding rules for private defined benefit pension plans to
ensure that employers fully fund their retirement promises.
> Reforming the
premiums that private defined benefit plans pay to the
federal insurance program to better reflect the real risks and costs.
> Increasing the
disclosure of information about private defined benefit
pension plans to workers, investors and regulators to ensure greater
transparency and accountability.
The key elements of the Administration's plan include:
> A single, accurate way to measure pension fund
liabilities, replacing an existing system that is overly complex,
confusing and ineffective.
> Funding targets that reflect a plan's real
risk of termination.
> Reasonable time periods for plans to reach
funding targets.
> Flexibility for solvent companies to make more
generous contributions to pension plans during good economic times.
> Restrictions on the ability of financially
strapped companies to promise more benefits than they can pay for.
> Measures to ensure the long-term solvency of
the PBGC.
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Fact Sheet
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