Worker, Retiree and Employer Recovery Act of 2008

Was passesd by the House on Wednesday and the Senate yesterday. It is unclear whether Bush will sign it.

The Act

• Provides that shortfall amortization contributions will be based on a percentage of the funding target. The percentage will be 92% in 2008, 94% in 2009 and 96% in 2010, before reaching 100%. For example, under PPA a plan funded at 90% in 2008 had to establish an shortfall base equal to the entire 10% unfunded. Under the Act, this same plan would establish a shortfall base of only 2%.
• Permits asset smoothing.
• Provides that for the first plan year beginning on or after 10/1/2008 the test for the restriction on benefit accruals will be done using the greater of the current year or prior year AFTAP.
• Clarifies that plan expenses must be included as part of the target normal cost.
• Clarifies that target normal cost is reduced by the amount of mandatory employee contributions expected to be made during the year.
• Contains other provisions such as a waiver of age 70-1/2 distributions for 2009 for defined contribution plans, multiemployer funding relief, changes to maximum benefits for small employers and airline specific provisions. In addition, the Act includes some technical corrections.