November 12, 2008
The Honorable Edward M. Kennedy The Honorable Michael B. Enzi
Chairman Ranking Member
Committee on Health, Education, Committee on Health, Education,
Labor, and Pensions Labor, and Pensions
United States Senate United States Senate
Washington, DC 20510 Washington, DC 20510
Dear Chairman Kennedy and Ranking Member Enzi:
The current financial crisis not only impacts workers today, but also will have severe,
short-term negative effects on the pension plans in which they participate, reducing benefits,
undermining retirement security, and, if prompt action is not taken, causing significant job loss
and impairing the national economic recovery. The current financial problems stem from a
global financial meltdown and were not caused by companies that sponsor defined benefit
pension plan or the pension plans they maintain. On behalf of the millions of employees to
whom we provide retirement benefits, the undersigned companies and organizations urge you to
consider legislation that would help companies navigate the current economic crisis while
minimizing adverse impacts on the defined benefit pension plans they sponsor.
The drop in the value of pension plan assets coupled with the current credit crunch has
placed defined benefit plan sponsors in an untenable position. No one who drafted the recently
enacted defined benefit plan funding rules anticipated the worst financial crisis since the Great
Depression and a once in a hundred years “credit tsunami.” Yet, at a time when companies
desperately need cash to keep their businesses afloat, the new funding rules will also require
huge, countercyclical contributions to their pension plans. Consequently, many companies will
divert cash needed for current job retention, job creation and needed business investments, and
instead contribute the cash to their pension plans to fund long-term obligations due many years
after the current market conditions return to normal. We do not believe that, in enacting the
Pension Protection Act of 2006 (“PPA”), Congress intended companies to be forced to make this
kind of decision. Unless the funding rules are modified, they will cause an increase in
unemployment and slow economic recovery.
For example, a Florida company with four defined benefit plans faces an increase in
required contributions of more than 2100%, from $673,000 in 2008 to an estimated $15,186,000
in 2009. The company’s consultant states that in light of this increase, “this client, like many
others, may be forced to freeze their plans and may have to eliminate jobs to afford those
contributions.” Another larger company has estimated that its 3-year contribution for 2008-2010
will increase from $36 million to $2.18 billion, an increase of almost 6000%.
We are in no way advocating an overhaul of the PPA funding changes. Rather, we urge
Congress to consider making technical corrections to the PPA, that we believe implement
Congressional intent, and adopting temporary provisions that deal with the financial crisis. Such
provisions should include permitting full smoothing of unexpected losses, removing restrictions
on asset smoothing, allowing sufficient time to transition to the PPA’s 100% funded target,
providing automatic IRS approval for certain funding elections to keep plans viable, clarifying
end-of-year valuations, and permitting fixed interest rates to be used for Code section 415 limit
purposes so as to avoid benefit reductions.
Employers who contribute to the more than 1500 multiemployer defined benefit plans
(more than 90% of which employ 20 or fewer employees), are also severely affected by the
financial crisis. While these plans are subject to a separate set of funding rules, similar
temporary relief designed to moderate the effects of the aggressive funding targets contained in
the PPA is essential to avert devastating burdens and inevitable job losses arising from massive
contribution increases and unavoidable benefit reductions that will be required to comply with
The undersigned organizations are extremely concerned about the viability of defined
benefit pension plans during this economic recovery. Please feel free to call on any of us to
assist in enacting economic recovery legislation to avoid unnecessary job loss, while securing
sound long-term pension plan funding.
3M American Hospital Association
AEGON USA LLC American Institute of Certified Public
AGL Resources American Public Power Association
A. H. Belo Corporation American Society of Association Executives
Alcoa Inc. American Woodmark Corporation
Alliant Energy Corporation Aon Corp.
Allegheny Technologies Incorporated Associated Industries of Florida
Aluminum Association ASPPA College of Pension Actuaries
Ameren Corporation ArcelorMittal USA
America's Health Insurance Plans Arkansas State Chamber of Commerce
American Administration Services Co. Associated Benefits Corporation
American Architectural Manufacturers Associated Food Stores, Inc. & Subsidiary
American Benefits Council Associated Industries of Arkansas
American Chemistry Council Associated Industries of Massachusetts
American Civil Liberties Union Associated Milk Producers, Inc.
American Composites Manufacturers Associated Wholesale Grocers, Inc.
Association Association for Financial Professionals
American Dental Association Association of American Railroads
American Electric Power Avaya Inc.
American Forest & Paper Association Avista Corporation
American Foundry Society Badger Highways Co., Inc.
American Gas Association Ball Corporation
BBDO Detroit Duke Energy
Bechtel Construction Company DuPont
Belo Corp. Duquesne Light Company
Bendix Commercial Vehicle Systems LLC Eastman Kodak Company
Birds Eye Foods Eaton Corporation
Black Hills Corporation Edison Electric Institute
Boise Inc Edison International
BP America Inc. Eickhoff's ShopRite Supermarkets
Bryan Pendleton Swats & McAllister, LLC Eisenberg Associates, Ltd.
Buck Consultants, An ACS Company Electro-Motive Diesel, Inc.
Building and Construction Trades Eli Lilly and Company
Department, AFL-CIO El Paso Corporation
Business Roundtable EMBARQ Corporation
California Manufacturers & Technology Employers Group
Association Entergy Corporation
Campbell Soup Company ERISA Industry Committee
CBS Corporation Eskimo Pie Corporation
Celanese Corporation Everett Smith Group, Ltd.
CF Industries, Inc. Evonik Degussa Corporation
Chrysler LLC Evraz Claymont Steel
CIGNA Corporation Exelon Corporation
Cincinnati Children’s Hospital Medical Fabri-Kal Corporation
Center Federal Signal
CMS Energy FirstEnergy Corporation
Colorcon, Inc. FMC Corporation
Committee on Investment of Employee Food Marketing Institute
Benefit Assets Ford Motor Company
Commonwealth Public Broadcasting Foundation Coal
Corporation Fox Entertainment Group, Inc.
Con-Way, Inc. Frontier Communications
Connecticut Business and Industry FSG Pension Services, Inc.
Association General Devices Co., Inc.
CONSOL Energy General Growth Properties, Inc.
Consolidated Edison, Inc. Georgia Industry Association
Constellation Energy Georgia Mining Association
Cowden Associates, Inc. GlaxoSmithKline
Cummins Inc. Goodrich Corporation
CUNA Mutual Group Great Atlantic and Pacific Tea Company
Dean Foods Company Greater New York Hospital Association
Deere & Company Harry & David
Delaware Manufacturing Association Hawaiian Electric Company, Inc.
Delaware State Chamber of Commerce Hewitt Associates, Inc.
Delta Oil Company Hill Fastener Corporation
Deseret Mutual Hillside Family of Agencies
Diversified Investment Advisors Honeywell International, Inc.
DTE Energy Honigman Miller Schwartz and Cohn LLP
Duchossois Industries, Inc. Hooker & Holcombe Inc.
Hospital & Healthsystem Association of Motor & Equipment Manufacturers
HPnorthwest Mutual Assurance Society of Virginia
HR Policy Association Mutual of Omaha Insurance Company
IBEW Local 505 - NECA Pension Plan, National Association of Chain Drug Stores
Mobile, AL National Association of Insurance and
IBM Corporation Financial Advisors
Indiana Chamber of Commerce National Association of Manufacturers
Indiana Manufacturers Association National Coordinating Committee for
Indianapolis Power and Light Company Multiemployer Plans
Industrial Fasteners Institute National Federation of Independent Business
Infineon Technologies North America Corp. National Grid
Ingram Industries Inc. National Gypsum
Intelsat Corporation National Life Group
International Brotherhood of Boilermakers, National Marine Manufacturers Association
Iron Ship Builders, Blacksmiths, National Retail Federation
Forgers and Helpers National Shooting Sports Foundation, Inc.
International Brotherhood of Electrical Navistar
Workers NCR Corporation
ITT Nebraska Chamber of Commerce & Industry
Joy Global New Jersey Business & Industry Association
Kansas City Power & Light Niles Lankford Group, Inc.
Kentucky Association of Manufacturers NiSource Inc.
Kimberly-Clark Corporation NMB (USA) Inc.
King Kullen Grocery Company, Inc. Norcal Waste Systems, Inc.
Kraft Norfolk Southern Corporation
Local 903 IBEW Pension Plan, Gulfport, MS Nortel
Lonza Inc. Northeast Pennsylvania Manufacturers and
Lord Corporation Employers Association
Mannington Mills, Inc. Northeast Utilities
Masco Corporation Northrop Grumman Corporation
MassMutual Financial Group NorthWestern Energy Corporation
MC-UA Local 119 Pension Plan, Mobile, AL Novelis
McGuireWoods LLP NSTAR
MD Helicopters, Inc. OfficeMax Incorporated
Mechanical Contractors Association of Ogletree Deakins
America Ohio Transmission Corporation
Meridian Health Olan Mills, Inc.
MetLife Old Point Financial Corporation
Michelin North America, Inc. ONEOK, Inc.
Michigan Manufacturers Association Otter Tail Corporation
MillerCoors Pacific Life
Milliman Pactiv Corporation
Mississippi Manufacturers Association Paul, Hastings, Janofsky & Walker LLP
Monongalia Health System Peabody Energy
Monsanto Peerless Machine & Tool Corp
MOOG Inc. Pepco Holdings, Inc
Pfizer Inc. Spartan Stores, Inc.
PG&E Corporation Sporting Arms and Ammunition
Pietzsch, Bonnett & Womack, PA Manufacturers' Institute, Inc.
Pinnacle West Capital Corp. State Street Corporation
Pitney Bowes Inc. Summit Financial Corporation
PNM Resources Textron Inc.
Portland General Electric The Boeing Company
Poyner Spruill LLP The Dow Chemical Company
PPG Industries, Inc. The Epler Company
Praxair, Inc. The E.W. Scripps Company
Prestolite Electric Inc. The Goodyear Tire & Rubber Company
Principal Financial Group The Kroger Co.
Printing Industries of America The Segal Company
Progress Energy The Sherwin-Williams Company
Prudential Financial The Timken Company
Pulaski Furniture Corporation Towers Perrin
Punter Southall LLC Transamerica Retirement Services
QBE the Americas Trelleborg AB
Qwest Communications International Triangle Package Machinery Company
Raley's UniSource Energy Corporation
Replacement Parts, Inc. United Association of Journeymen and
Retail Brand Alliance, Inc. Apprentices of the Plumbing and
Retail Industry Leaders Association Pipefitting Industry of the United
Reynolds American Inc. States and Canada
RGC Resources, Inc. United Illuminating Company
RJReynolds United Parcel Service, Inc.
Robert Bosch LLC United Plan Administrators, Inc.
Rockwell Automation U.S. Chamber of Commerce
Rockwell Collins United States Steel Corporation
Russell Investments United States Telecom Association
Saint-Gobain Corporation United Technologies Corporation
Sanders Welch, LLC Usibelli Coal
Santa Barbara Pension Consultants, Inc. USS-Posco Industries
Save Mart Supermarkets Utah Manufacturers Association
Schnuck Markets, Inc. Vectren Corporation
SECURA Insurance Venable LLP
Seyfarth Shaw LLP Veolia Transportation Phoenix
Sharon Regional Health System Verizon
Sheet Metal Workers Local 441 Supplemental Virginia Education Association
Pension Plan, Mobile, AL Virginia Manufacturers Association
Sheet Metal and Air Conditioning Wakefern Food Corporation
Contractors’ National Association Watson Wyatt Worldwide
Sony Electronics, Inc. Westar Energy
South Carolina Chamber of Commerce Westinghouse Electric Company
Southeast Actuarial Services, LLC Whirlpool Corporation
Southeastern Ohio Regional Medical Center Windstream Communications
Southern Company Wolverine World Wide, Inc.
Wood Moulding & Millwork Producers Xcel Energy, Inc.
Association Xerox Corporation
Woods Hole Oceanographic Institution YKK Corporation
WorldatWork YRC Worldwide
Cc: Members of the Committee on Health, Education, Labor, and Pensions