WASHINGTON, D.C.—U.S. Senator Tom Harkin (D-IA), Chairman of the Senate Health, Education, Labor, and Pensions (HELP) Committee and Senator Pat Roberts (R-KS), a member of the HELP Committee, today applauded unanimous Senate passage of a bipartisan bill 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 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. Senators Patty Murray (D-WA), Lisa Murkowski (R-AK), and Al Franken (D-MN) were original cosponsors.
“Without Congressional action, the pensions of thousands of employees will be in jeopardy. This important, bipartisan bill will help many cooperative and small employer charities—including dozens of Iowa co-ops, private schools, and branches of nonprofits—many of whom struggle to continue to provide pension benefits and could be forced to reduce their 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. I thank my colleagues in the Senate for acting unanimously to pass this vital measure and urge my colleagues in the House to do the same.”
“This bill provides a permanent solution to addresses the unique needs of rural cooperative and charity pension plans,” Roberts said. “Without this legislation, it would be increasingly difficult for these groups to provide pensions for thousands of Kansans. It could also reduce services many of these Cooperatives provide to their rural communities.”
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, 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 bill 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 bill has also 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.