Proposal to Strengthen H.R. 3396

HEHS-94-181R: Published: Jun 24, 1994. Publicly Released: Jul 13, 1994.

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Pursuant to a congressional request, GAO provided information on options that would strengthen H.R. 3396. GAO noted that: (1) H.R. 3396 would improve funding for many underfunded pension plans; (2) H.R. 3396 should be strengthened so that sponsors of poorly funded plans are required to contribute more than the Employee Retirement Income Security Act's (ERISA) minimum requirements; (3) the Pension Benefit Guaranty Corporation (PBGC) needs to determine what threshold defines an underfunded plan so that the risks of benefit loss are reduced and plan contributions are increased; (4) PBGC believes that strengthening H.R. 3396 is unnecessary and that the minimum ERISA contribution will be sufficient to move plans to full funding; (5) funding mechanisms are needed to ensure that a plan's funding ratio will not fall too low, because hidden liabilities can deteriorate a plan's funding rapidly; and (6) a reasonable threshold to define a underfunded plan would be 75 to 85 percent.

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