March 25, 2020
Politicians have another lever they can pull to help companies struggling to find money as the coronavirus pandemic roils markets: They could ease the rules for funding pensions.
Tweaking some pension mandates would give businesses more flexibility and free up cash as they deal with the virus’s ripple effects, according to retirement consultant Mercer LLC. The suggestions from the firm, a unit of Marsh & McLennan Cos., would lower contribution requirements by cutting U.S. corporate pension obligations by about $90 billion.
Current rules require corporations to put an allotted amount of money into their pension plans every year. But since most plans are funded well enough to pay retirees for at least several years without added cash, delaying required contributions would allow corporations to use those funds in other areas of their business during the covid-19 crisis, Mercer Chief Executive Officer Martine Ferland said in a letter to members of Congress.
“Those rules will still require many employers to make contributions to their pension plans at a time when cash is critically needed elsewhere,” Ferland wrote in the letter. “We therefore support a number of changes to let sponsors more effectively deploy cash to weather the immediate crisis, while still making provision for the longer-term funding of pension promises.”
Download the full article to read more.