The vast majority of NRECA’s members provide their employees with the NRECA-sponsored and administered “multiple-employer” defined benefit (DB)-pension plan (the Retirement Security Plan) under § 413(c) of the Internal Revenue Code.

Reacting to news of some bankrupt corporations walking away from their defined-benefit (DB) pension plans and turning those liabilities over to the government, the “Pension Protection Act (PPA) of 2006” (Pub. L. No 109-280) was enacted into law in August 2006. The PPA recognized that by design, NRECA’s “multiple-employer” defined benefit plan posed no risk of default to the Pension Benefit Guaranty Corporation (PBGC). Specifically, the PPA provides a delayed effective date (until January 1, 2017) for the most costly provisions of the bill. NRECA RS Plan actuaries estimate that without these provisions, rural co-op contributions to the RS Plan would have unnecessarily risen across the board by tens of millions of dollars each year after this legislation goes into effect in 2008 and hundreds of millions of dollars during the next 10 years. This dramatic increase in required funding could have forced NRECA members to either (1) reduce benefits to their employees, or, (2) institute what amounts to an “electricity tax-hike” on rural American families – a no win situation for rural America.

In reviewing the new law, however, NRECA and many other public policy organizations agree that some PPA provisions do not clearly describe Congressional intent. Policymakers have indicated that as a result, a “technical corrections” bill could be considered sometime in late-2007. We look forward to continuing to work with all members of Congress on the very bipartisan issue of encouraging employers and employees alike to sponsor and participate in these critical retirement savings programs.

News:

• IRS Regulation Could Eliminate Long-Service Co-op Employees’ Retirement Benefit
  October 16, 2007 - While the IRS has granted temporary relief to NRECA from its May 21, 2007 Regulation that properly seeks to stop tax system abuses associated with "cash balance" retirement plans, a permanent solution is still needed. NRECA's "quasi-retirement" option is consistent with the purpose of promoting private pension plans and is not abusive of the tax system. Without change, the Regulation could cut retirement benefits for co-op employees with 30 years of dedicated service.  more >>