This morning, President Obama into law the "Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010" that includes a six-month so-called "doc-fix," pension funding relief, and an anti-Medicaid fraud information disclosure measure. It's not all pension relief, but there is some in there.
In June of this year, Medicare physician payment rates are scheduled to be reduced by more than 20%. The "doc fix" would reverse that reduction and provide a 2.2% update to physician payment rates through Nov. 30, 2010. The bill pays for the "doc fix" in part by providing for pension funding relief, namely temporary, targeted funding relief for single employer and multiemployer pension plans that suffered significant losses in asset value due to the steep market slide in 2008. The theory for the revenue offset is that funding relief would increase employers' taxable income thereby boosting government revenue.
Under the pension relief provision, employers that elect the relief would be required to make additional contributions to the plan if they pay compensation to any employee in excess of $1 million, pay extraordinary dividends, or engage in extraordinary stock buybacks during the first part of the relief period. Additional relief is available to certain plans sponsored by charitable organizations. Employers that opt out of requirements to pay more into their pension funds to offset losses would still have to make additional contributions if they pay compensation to any employee in excess of $1 million, pay “extraordinary dividends,” or engage in “extraordinary stock buybacks” during the relief period.
Many plan sponsors have been interested in this type of relief because of concerns over improving their funded status under rehabilitation plans. For sponsors of single employer and multiple employer defined benefit pension plans, it is expected that this relief will make it easier for plans to retain their “green” status and improve their funded status as measured under the Pension Protection Act of 2006. Stay tuned for more details on this relief and the various agencies weigh in on its true implications.
