Harkin-Roberts Bill to Enable Charities and Cooperatives to Continue to Offer Pensions Clears Congress, Heads to President’s Desk
Monday, March 24, 2014
WASHINGTON, D.C.—Bipartisan legislation authored by U.S. Senators Tom Harkin (D-IA) and Pat Roberts (R-KS) that would make it easier for charities and cooperatives to continue to offer pensions to their employees has cleared both houses of Congress and will be signed into law by the President. The Cooperative and Small Employer Charity Pension Flexibility Act of 2013 will ensure that charitable and cooperative 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.
Harkin is Chairman of the Senate Health, Education, Labor, and Pensions (HELP) Committee, while Roberts is a senior member of the Committee. The bill passed the Committee unanimously in October 2013 and cleared the Senate with unanimous support in January 2014. Senators Patty Murray (D-WA), Lisa Murkowski (R-AK), and Al Franken (D-MN) were also original cosponsors of the Senate legislation.
“Thousands of workers in Iowa and across our country are employed by charities and cooperatives, and under current law, their pensions are at risk. Bipartisan legislation now headed to the President’s desk will ensure that many cooperative and small employer charities—including dozens of Iowa co-ops, private schools, and branches of nonprofits—can continue to provide pension benefits without needing to reduce services to the public,” Harkin said. “By giving these employers the necessary flexibility to continue offering benefits to their workers, this legislation will bolster these businesses and help the workers and families who rely on pensions to save for retirement and the future. Senator Roberts, another senator representing a largely rural state, has been a valuable partner in getting this bill to the finish line, and I thank my colleagues in the Senate and in the House for passing it quickly and unanimously.”
“I am glad the House and Senate have acted swiftly to pass this common sense protection for rural cooperatives,” Roberts said. “I look forward to the President signing into law our bill which 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.”
Many charities and cooperative associations provide their employees with retirement benefits through defined benefit multiple employer pension plans, also known as 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—like the Harkin-Roberts bill—the temporary exemption would have expired, and CSEC plans would have been forced to comply with PPA funding rules, resulting in many small, non-profit employers being unable to continue to provide pension benefits to middle-class families.
Once signed into law, the Cooperative and Small Employer Charity Pension Flexibility Act will help 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 law will help 85 electric, agricultural, and broadband cooperatives in Iowa that are providing pension benefits to approximately 5,300 working Iowans; 20 private schools in Iowa that provide pension benefits to over 800 Iowans; the United Way of Central Iowa, which has 521 active plan participants; and the Girl Scouts of Eastern Iowa and Western Illinois, which has 78 employees in Iowa. It will also benefit 136 Kansas co-op employers with 9,870 active employees.
The Harkin-Roberts legislation has been endorsed by Christian Schools International; UJA, United Jewish Appeal, Federation of New York; United Way Worldwide; The Jewish Federations of North America; National Rural Electric Cooperative Association; Hawkeye Insurance Association; Girl Scouts of America; NTCA, the Rural Broadband Association; and United Benefits Group.
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