U.S. Congress takes up nonprofit pension relief

Legislation was introduced in the U.S. Congress in October to provide temporary relief for nonprofits that face large increases in pension contributions in the future. The bill, introduced in the House by Representatives Earl Pomeroy (D-N.Dak.) and Patrick Tiberi (R-Ohio) addresses a problem created by the 2006 Pension Protection Act, which did not forsee the current economic downturn.

"Not all nonprofits are affected by this, but for the ones that are, it's a terrible problem," Diana Aviv, CEO of the Independent Sector.

The nonprofits affected are those that offer defined benefit pension plans, which will be required to meet new minimum pension payments. The proposed legislation would not relieve the organizations of their obligations, but it would extend the deadline for making the pension funds whole. Some could make interest-only payments for two years and complete their payments over nine years rather than the required seven years. Others could choose to make level payments over 15 years.

"The Pension Protection Act was designed to make sure that coompanies paid an adequate amount into their pensions," said Michael Watson of Girl Scouts of America. "But I don't think any of the designers anticipated the dramatic decline in the market to the extent that we've had."

Girl Scouts is facing an increase in minimum pension payments from 3.8 percent of payroll, about $9 million, in 2010 to 9 or 10 percent in 2011, or $58 million. For more on this, see the Nov. 15 edition of NonProfit Times.