On March 14, 2012, the U.S. Senate passed a transportation bill that contains provisions to provide some funding relief to defined benefit pension plans. It provides this relief by requiring that the “segment rates” be within a certain percentage of historical rates over the last 25 years. This would enable pension plans to use discount rates that are considerably higher than the current historically-low segment rates, resulting in substantial funding relief for many pension plans. Since the funding target and normal cost are highly dependent of the rates of discount applied, many plans that are viewed as significantly underfunded under the current segment rates may now be viewed as considerably better funded.
This bill now goes to the U.S. House of Representatives where it may face serious challenge on both the guts of the bill – the transportation provisions – as well as on the pension relief provisions. If you are in favor of pension funding relief, you may want to contact your Congressional representatives to encourage final passage of these relief provisions.