Bulletin Item: President Bush Signs Pension Funding Equity Act (HR 3108)

The new law provides a short-term replacement for the current 30-year Treasury bond rate, which is currently used as the benchmark rate for pension funding liabilities. Some employers, unions, and workers expressed concerns about using the Treasury bond rate because it artificially inflates a plan’s funding liabilities. Congress enacted a temporary fix in March 2002 by allowing employers to use a higher interest rate to determine their pension liabilities, but that fix expired at the end of 2003. The new benchmark will be a blend of corporate bond rates and will be in effect through the end of 2005.