Low interest rates are forcing major employers to put too much money into their pension funds, according to business groups urging Congress to allow contributions to be cut. A measure attached to the Senate highway bill would change the formula major employers use to calculate contributions to defined-benefit pension plans, allowing them to divert funds elsewhere, reports the Wall Street Journal. The measure before Congress would allow firms to use a 10-year average of bond yields, instead of a 2-year average. If it passes, it would be the sixth relaxation in the pension formula since 2002.
Companies are "not opening a plant or not launching a new product because they're sitting on the cash," says an official at the American Benefits Council. Labor groups say they're not opposed to the move in principle, but they want to see guarantees that pension plans will not end up underfunded. The measure would, in the short term, reduce major firms' tax deductions, boosting government revenue and partially funding the highway bill. (Read more pensions stories.)