Goodyear: Hooray for pension legislation
Pension stabilization legislation approved by the United States Congress and signed on July 6, 2012, by President Barack Obama will help offset historically low interest rates and enable companies to invest in growing their businesses and creating jobs, accorfding to Goodyear Tire & Rubber Co.
“We are pleased that Congress saw that a pension plan’s ability to pay benefits to retirees over multiple decades is unrelated to the federal government’s actions to keep interest rates historically low,” says Richard Kramer, chairman, CEO and president.
The Federal Reserve’s policy of low interest rates resulted in a dramatic and unforeseen increase in pension liabilities, and as a result company pension contributions were inflated, says Goodyear. The legislation passed as part of the Moving Ahead for Progress in the 21st Century Act (MAP-21) temporarily lessens this artificial funding distortion and ensures defined benefit pension plans are viable and secure for years to come.
Goodyear says the legislation would reduce its minimum required pension contributions by approximately $375 million to $425 million over the next five years, with the greatest benefit coming in 2013 and 2014. The impact on the company’s 2012 pension expense will not be significant, and it continues to expect to record pension expense of $275 million to $325 million for the year.
For more on MAP -21 from the Society of Actuaries, click here. (According to the "Merriam-Webster Dictionary," an actuary is "a person who calculates insurance and annuity premiums, reserves and dividends.")