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The Highway Bill Gives Corporations A Road To Kick The Pension Can Down

I saw this and had mixed emotions about it.

From P&I Online:

The Treasury Department on Thursday issued pension funding rates that will allow sponsors of corporate defined benefit plans to reduce their pension contributions by as much as 20%.

The new rates were dictated by provisions in the highway reauthorization bill signed on July 6 by President Barack Obama that removes the requirement to use two-year average of corporate bond rates for calculating liabilities and annual pension funding obligations.

The new law lets plan sponsors use a 25-year historic average of the corporate bond rates within a 10% range; the higher the rate, the lower the liability and the cash contribution needed.

Yes, pensions apparently fall in the highway bill as it gives companies a road to kick the can down. Why settle up with obligations, when you can change the system and defer your obligations?

At the same time, the credit side of me says that this increases (in the short-term) the credit quality of those corporations that have large unfunded obligations as they will not have to pony up as much in the short-term. Yes, the pension obligation should still be considered quasi debt (and analyzed as such), but that debt service profile just changed.

The consumer/analyst dilemma. Thoughts?

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.