AARP is concerned that new pension funding proposals could substantially cut retirement benefits for job-changers and new retirees.
By changing the rate for calculating both pension funding and lump sum payouts, both the Bush Administration’s new pension funding proposal and the Portman-Cardin pension reform bill could significantly reduce lump sum benefit payouts to individuals — thereby also dramatically reducing their long term retirement security. For example, a 45 year-old could experience a lump sum benefit reduction of 25%.
AARP supports giving corporations some relief from steep pension funding increases triggered by the drop in the stock market and low interest rates. The large pension contributions required by current regulations shouldn’t be allowed to become an incentive for companies to drop their defined benefit retirement plans. But, at the same time, individuals who choose to take a lump sum payout as they leave a job should not be penalized. Individuals have suffered the consequences of the market drop and low returns on investments, too.
It is not unreasonable to give pension relief to corporations, at least in the short term, but Congress and the administration should not penalize individuals by reducing their earned pension benefits.