Senator Roberts protecting pensions for rural cooperatives

U.S. Senator Pat Roberts (R-KS) joined U.S. Senator Tom Harkin (D-IA), Chairman of the Senate Health, Education, Labor, and Pensions (HELP) Committee in Pat Robertsintroducing bipartisan legislation that would make it easier for charities and cooperatives to continue to offer pensions to their employees.

The Cooperative and Small Employer Charity Pension Flexibility Act of 2013 would ensure that rural cooperatives and charitable associations are not swept into the Pension Protection Act of 2006 (PPA) funding rules, which would require them to divert funds from critical services and jeopardize their ability to provide pension benefits to their workers. Because of their unique structure, these groups have been exempt from current law since 2006. Senators Patty Murray (D-WA), Lisa Murkowski (R-AK), and Al Franken (D-MN) are also original cosponsors of the bill.

“The PPA was meant to protect employee pensions, but in the case of rural cooperatives and charities, it could jeopardize plans for employees,” Senator Roberts said. “Our bill recognizes these unique plan structures by creating greater flexibility that enables employers to offer stable futures for their workers without passing the cost on to rural communities through increased costs for services.”

“Congress should be doing everything it can to make it easier for employers to offer a pension to their employees,” Senator Harkin said. “Without action, many cooperative and small employer charities—including dozens of Iowa co-ops, private schools, and branches of nonprofits—will struggle to continue to provide pension benefits and could be forced to reduce their services to the public. This important, bipartisan bill will give these employers the necessary flexibility to continue offering benefits to their workers.”

Many rural cooperative associations and charities provide their employees with retirement benefits through defined benefit multiple employer pension plans, now known as Cooperative and Small Employer and Charitable (CSEC) plans. The plans allow small, community-focused employers to pool their resources to achieve economies of scale otherwise only available to large employers. When Congress passed PPA, which fundamentally changed the way most pension plans are funded in order to protect participants and the Pension Benefit Guaranty Corporation (“PBGC”), it recognized that the new rules were not necessarily appropriate for rural cooperative multiple employer defined benefit plans because, by design, the plans pose little risk that they will be unable to pay benefits.

Consequently, Congress granted the plans a temporary exemption from PPA, which was later broadened to include eligible charities by the Pension Relief Act of 2010. Without Congressional action, the temporary exemption will expire and CSEC plans will be forced to comply with PPA funding rules. That will result in many small, non-profit employers being unable to continue to provide pension benefits to middle class families.

The Cooperative and Small Employer Charity Pension Flexibility Act of 2013 helps charities and cooperative associations by implementing pension funding rules that reflect the unique design of their CSEC plans and are protective of plan participants. The rules are substantially similar to those that CSEC plans are currently subject to, with modifications to make them work better and result in far less volatility. CSEC plans would have the flexibility to opt into PPA in 2014 if they want, and importantly, the Act imposes additional transparency requirements on CSEC plans so that participants have access to accurate information.

The Act also provides for a “time out” from scheduled increases to PBGC premiums. Last year, CSEC plans were indiscriminately subjected to significant premium increases without regard to the unique structure of the plans. The Act would freeze premiums at current levels while the agency reevaluates how much CSEC plans should be paying for pension insurance.

The bill has also been endorsed by the National Rural Electric Cooperative Association, Girl Scouts of America, NTCA and the Rural Broadband Association among others.