San Antonio Employment Law Blog

Texas companies to contribute less to pensions under new law

Many people in San Antonio are among the 50 percent of Americans who are relying heavily on pensions for retirement. These workers may be concerned that a new law allows companies to contribute billions of dollars less to pension funds.

The federal Employee Retirement Income Security Act regulates pension plans and other employment benefits here in Texas and throughout the country, but these laws do change sometimes, causing an impact to employees’ retirement, health and disability benefits.

The new law, signed by President Barack Obama earlier this month, was designed in part to give employers more leverage during a weak economy. Even workers’ advocates–such as the AFL-CIO, AARP and the Pension Rights Center–say that although reducing pension contributions may hurt consumers, it would be detrimental if the government forced companies to make contributions they cannot afford.

Under the new law, companies will assume that the interest rate is near the average of the previous 25 years in order to estimate pension fund earnings as opposed to looking only at the last two years of interest. This change allows companies to assume pension investments will earn substantial profits and they will thus contribute less money to make up any differences.

Analysts have said the law will mean that this year’s pension contributions will be cut by $35 billion.

Pension plans generally provide company-paid retirement payments on a monthly basis. In the private-sector, the plans have been offered less and less in recent years. In 2008, only 15 percent of private sector workers participated in a pension plan, compared 38 percent in 1979.

ERISA laws can be difficult to navigate and many Texas workers are wise to work with ERISA attorneys if their benefits’ claims are denied.

Source: Associated Press, “New law gives US companies a break on pensions,” July 9, 2012

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