Coalition Urges Congress to Offer Relief on Pensions

Independent Sector, a national coalition of charities and foundations, has renewed its call for Congress to ease rules that require charities and other employers to make certain payments to “defined-benefit” pension funds.

The Pension Protection Act of 2006 made significant revisions to the so-called minimum funding rules for employers that provide pension plans with defined benefits, or specific amounts of money, to retired workers.

Nonprofit groups “have endeavored to meet the significantly increased minimum funding obligations imposed by the Pension Protection Act while maintaining programs upon which individuals and communities rely,” Independent Sector said in a statement issued as the House Ways and Means Committee met to discuss pension plans.

“The abrupt [stock] market decline last year turned those pension funding obligations into a severe problem never anticipated when the act was drafted,” Independent Sector said. “The funding rules now threaten not just the viability of the pension plans but the survival of the organizations themselves.

For example, Independent Sector said Family Service of Greater Boston, which annually serves more than 5,800 families in need of help, offers a defined pension plan to its employees. “The funding status of Family Service’s pension plan dropped to 72 percent as a result of the market decline, creating projected future minimum annual contributions of almost $500,000 for this small agency,” Independent Sector said.

Independent Sector said the organization “has already significantly reduced or eliminated other benefits, increased the employee share of health insurance premiums, frozen wages for a two-year period, eliminated positions through attrition, and consolidated administrative functions. Now it is facing further actions that could impede its ability to sustain critical services.”

Without immediate relief from pension obligations arising from the market losses of 2008, Independent Sector said, “the current rules will force nonprofits that sponsor defined benefit plans to divert substantial financial resources away from vital community services at a time when they are desperately needed.”

The coalition asked Congress to provide a temporary reprieve that will allow groups “to recoup the shortfall for 2008 over a longer, more manageable period. By stretching out payments for these unexpected losses, such relief will permit organizations to maintain services and jobs, while continuing to fund their pension plans.”

Independent Sector had earlier asked Congress for help with pensions in a letter last year.