NRLN Board Identifies 2023 Legislative Priorities with 118th Congress
By Cynthia Hadsell
Your retiree association is an active participant on the board of the National Retiree legislative Network. We also support the creation and revision of documents used to educate members of Congress on issues for seniors. We are fortunate to have the continued leadership of Bill Kadereit as president. Bill has provided a good snapshot of the year ahead as we also celebrate some victories in 2022!
The NRLN Board identified protecting retirees from pension de-risking as one of its top 2023 legislative priorities with the new 118th Congress and cited saving Social Security and Medicare among its major objectives.
Pension plan de-risking can begin when a pension plan sponsor reduces liabilities in several ways. For instance, plan sponsors can use the present Employee Retirement Income Retirement Security Act (ERISA) language to terminate plans partially or totally. This corporate action is called a voluntary termination. Plan participants are provided an insurance annuity equivalent to 100% of their company plan benefit payment. So, why worry? Annuities are not ERISA protected! Voluntary termination strips affected plan participants and their beneficiaries of the Pension Benefit Guarantee Corporation (PBGC) plan benefit eligibility and other important ERISA protections.
If the insurance company fails, a state may step in to help protect annuity policyholders. Each state has a Guaranty Association that provides some coverage, called reinsurance. Coverage varies by state. However, it is a lifetime amount and can be as little as $100,000, or as much as $500,000. Most states cover $250,000 which could be exhausted in 10 years if the retiree would have had a $25,000 a year pension.
Many NRLN members who are retirees from CenturyLink, Corteva (DuPont), Ford, General Motors, IBM, and Verizon and others have experienced partial or total voluntary plan terminations and could be at risk should annuity providers fail to pay. A 2021 METLIFE study of 250 companies revealed that 93% said they intended to divest all their defined benefit pension plan obligations. Indications point to increased voluntary terminations in 2023 and beyond.
In November 2022, the NRLN and the Pension Rights Center (PRC) collaborated to draft and present a proposal to Congress that included specific federal statute language that would require plan sponsors to negotiate lifetime reinsurance protection for annuitants as part of any agreement with a third party to annuitize a partial or full voluntary termination of a defined benefit pension plan.
As we end the year, we celebrate that Congress included in its 2022 omnibus bill three issues the NRLN has been lobbying for which are very important to retirees.
• Pension Recoupment: Until now, a company could “recoup” or recover pension overpayments made to a retiree when it discovered them, no matter how long it had been.
• Section 420 Transfers: Companies will be able to tap excess pension funds to provide retirees with healthcare and life insurance benefits.
• Pension Annual Funding Notice (AFN): Before this new law, pensioners could not get a clear picture of how well their pension plan was funded. By the time they received an annual AFN in April, it contained data calculated 16 months earlier. The NRLN advocated for common sense solutions: use year-end valuation so the data is only four months old. Also, the AFN will be simplified by moving all relevant data to a table on the front page. The table will show current and past two years of the following: plan participants; plan assets and liabilities; company funding obligations and contributions; interest rates used to calculate funding levels, and rate of return on plan investments over a three year period. Also, all departments are required study AFN for the next three years.
You can see details of NRLN’s position and whitepapers for its 2023 legislative agenda at www.nrln as they are edited and posted.
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