President Obama last week signed into law a transportation measure that will change how companies calculate what they must contribute to their pension funds. Companies will be able to estimate the earnings of their pension fund based on the average interest rate over the past 25 years rather than using the average for the past two years, when rates have been unusually low.
The Society of Actuaries estimates the law could cut $35 billion from the $80 billion in contributions companies are required to make this year.
The new law will also increase the annual premium that employers must pay to the Pension Benefit Guaranty Corp. (PBGC) for each worker and retiree, from $35 to $48 by 2014. The premium that companies pay if their plans are underfunded will gradually be doubled.
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