So, let’s say you needed more money to build roads and to keep interest rates low on student loans, what would you do?
Here’s an idea, change the law so employers with pension plans don’t have to fund them as much despite the fact large pension funds are already underfunded. To be sure you have sufficient money you also raise the premium employers pay to the Pension Benefit Guarantee Corporation thereby making pension plans more expensive to operate. By lowering the tax deductible pension contributions you raise revenue (and put employees and retirees at greater risk – think state pension funding shenanigans).
The logic goes that today’s low interest rates are temporary so they are not accurate in determining the required pension funding; change the way you determine the funding interest rate and bazinga, less funding is needed. That may have some short term logic if plans were fully or even adequately funded, but most aren’t – as evidenced by the need to raise the PBGC premium used to protect workers from failed pension plans.
You see the alternative to all this would be to raise the federal gasoline tax that is supposed to pay for US highways. That tax at 18.3 cents a gallon has not been raised since 1993 while the highway trust fund revenue has declined in part because of the federal push for higher car mileage and electric cars (unintended consequences again).
Rather than do the right thing and raise the tax that funds what you want to spend money on, our spineless political animal called Congress plays games funding something for two years by assuming new revenue over ten years (just as it did with Obamacare) and generating that revenue by placing pension plans at greater risk.
And you want to give these guys more money to play with?
QUINNSCOMMENTARY 
No, no more money for those guys.
The irritant here is that they also raised the regular PBGC premium on well funded plans, from $35 to $42 in 2013, $49 in 2014. So, again, instead of penalizing those who deliberately underfund their plans, they assess added costs on those with well-funded DB’s – making plan sponsor continued commitment that much less likely.
One benefits professional who I respect and admire announced, in the run up to PPA 2006, with its new funding requirements, that the changes would be the end of his DB plans and his job. He was right on both counts – and his pension plans were frozen in 2008-2009 and, once the plans were frozen, his job ended as well. However, while I hated to see that result in his individual situation, the fact is that a consistently underfunded or overpromised defined benefit pension plan leads to all kinds of issues – as we see even more dramatically in the multiemployer plan and public employer plan sectors – as expectations are developed and as individuals make employment and benefit and savings decisions in reliance on those benefits.
Yet, in the last few days, you may have noticed Mercer’s estimate of the unfunded liability among those few in the Fortune 1500 who still offer DB plans – the average funding level of pension plans sponsored by private sector companies fell to 74% as of June 30, down from 76% as of May 31 and 79% as of April 30; and the aggregate deficit of the plans hit $543 billion as of June 30, up from $484 billion at the end of 2011.
These numbers are, of course, before the chances you cite in your article – changes that will only increase the level of underfunding of defined benefit pension plans – argues again that plan sponsors should be reducing future accruals or freezing accruals, and that they should have taken that action long ago.
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