U.S. Senator Pat Roberts' (R-Kan.) legislation to protect pensions for rural cooperatives and rural charities today passed out of the Senate Health, Education, Labor, and Pensions (HELP) Committee with broad bipartisan support. The Cooperative and Small Employer Charity Pension Flexibility Act of 2013 was introduced in July by Roberts and U.S. Senator Tom Harkin (D-IA), Chairman the HELP Committee.
This common sense legislation ensures that rural cooperatives and charitable associations are not swept into the Pension Protection Act of 2006 (PPA) funding rules, which would require them to divert funds from critical services and jeopardize their ability to provide pension benefits to their workers. Because of their unique structure, these groups have been exempt from current law since 2006. Roberts' bill preserves this exemption.
"The idea behind the PPA was to protect employee pensions, but in reality the law could endanger the pensions of rural cooperative and charity employees," Senator Roberts said. "Our bill recognizes these unique plan structures by creating greater flexibility that enables employers to offer stable futures for their workers without passing the cost on to rural communities through increased costs for services. I was encouraged today by the broad bipartisan support for our commonsense legislation in committee, and encourage my colleagues in the House and Senate to give it swift consideration. Our rural cooperative and rural charity employees provide food, electricity, communications, and other necessities of life to communities who provide for millions of their members. They deserve the stability, certainty, and peace of mind this bill provides."
Many rural cooperative associations and charities provide their employees with retirement benefits through defined benefit multiple employer pension plans, now known as Cooperative and Small Employer and Charitable (CSEC) plans. The plans allow small, community-focused employers to pool their resources to achieve economies of scale otherwise only available to large employers. When Congress passed PPA, which fundamentally changed the way most pension plans are funded in order to protect participants and the Pension Benefit Guaranty Corporation ("PBGC"), it recognized that the new rules were not necessarily appropriate for rural cooperative multiple employer defined benefit plans because, by design, the plans pose little risk that they will be unable to pay benefits.
Consequently, Congress granted the plans a temporary exemption from PPA, which was later broadened to include eligible charities by the Pension Relief Act of 2010. Without Congressional action, the temporary exemption will expire and CSEC plans will be forced to comply with PPA funding rules. That will result in many small, non-profit employers being unable to continue to provide pension benefits to middle class families.
The Cooperative and Small Employer Charity Pension Flexibility Act of 2013 helps charities and cooperative associations by implementing pension funding rules that reflect the unique design of their CSEC plans and are protective of plan participants. The rules are substantially similar to those that CSEC plans are currently subject to, with modifications to make them work better and result in far less volatility. CSEC plans would have the flexibility to opt into PPA in 2014 if they want, and importantly, the Act imposes additional transparency requirements on CSEC plans so that participants have access to accurate information.
The bill has also been endorsed by the National Rural Electric Cooperative Association, Girl Scouts of America, NTCA and the Rural Broadband Association among others.