Progress of a bad idea.(Editorial)(Editorial)

Pensions & Investments, March, 2003

In 1987 Congress passed a bill that contributed significantly to the underfunding disaster confronting many defined benefit pension plans today. In December of that year, Congress passed an omnibus budget reconciliation bill that limited the ability of companies to fund their pension promises.

With little warning, it changed the full funding limit from 150% of the projected benefit obligation to 150% of the accrued benefit obligation, a much lower target. That is, companies could fund on a pre-tax basis only to 150% of what they would owe to employees in pension benefits if the plan were immediately terminated, not to 150% of what they would owe to all employees at normal retirement age, the previous limit. Congress did this to discourage corporations from...

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