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KAI RYSSDAL: You’ll be happy to know at least one small slice of the financial crisis might not wind up in taxpayers’ laps. The government agency that backs private pension plans filed suit in New York today. The Pension Benefit Guarantee Corporation’s trying to make sure Lehman Brothers remains on the hook for almost a billion dollars in pension benefits.
Earlier this week Congress gave both corporations and retirees a break. Lawmakers relaxed rules on mandatory withdrawals from IRAs and 401k’s for people over 70. They also let businesses delay payments to pension plans. Marketplace’s Nancy Marshall Genzer has more.
NANCY MARSHALL-GENZER: A few years ago, Congress told employers they had to fully fund their pension plans. But this week, Congress let businesses off the hook for billions of dollars in contributions.
Beth Almeida heads the National Institute on Retirement Security. She says the funding requirements couldn’t have come at a worse time for companies struggling through a bad economy.
BETH ALMEIDA: Now, when you layer on top of that additional requirements to contribute additional dollars into pension plans, it really is like a double whammy for employers.
But is Congress setting itself up for a whammy or two in the future? After all, the lawmakers wanted companies to fully fund their plans so the government insurer, known as the federal Pension Benefit Guarantee Corporation, wouldn’t have to take them over.
Will it eventually need a taxpayer bailout? Dallas Salisbury says no. He heads the Employee Benefit Research Institute.
DALLAS SALISBURY: They’ve got a lot of money in the bank and they pay out pensions at a relatively slow rate and that means that your money can last for a long time.
So, no bailout there. But the government might need to do more for retirees. This week’s legislation says people over age 70 don’t have to withdraw money in IRAs or 401ks. But Mark Iwry of Brookings wonders, what about seniors who can’t afford to leave their money alone?
MARK IWRY: Most retirees need to live on their retirement savings. A lot of people will have to take money out in any event.
And that money will be taxed. Iwry says the least Congress can do is let these seniors withdraw a certain amount, tax free.
In Washington, I’m Nancy Marshall Genzer for Marketplace.
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