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Measure to Fund Highway Trust Defers Contributions to Pension Plans

August 15, 2014

Before adjourning for summer break Congress passed a bill to keep the Highway Trust Fund flowing to states through next May. President Obama signed the $10.8 billion measure which provides a large percentage of the money needed to sustain and expand our roads. The fund was set to run out of money at the end of August. Though the passage of the bill did prevent the loss of thousands of jobs, the funding of the bill will adversely affect some workers and their ability to accrue pension savings.

Recognizing that financial support for the Highway Trust Fund could not come only from current federal gas taxes, which are two decades old, Congress decided to allow companies to defer required contributions to certain defined benefit pension plans. Their reasoning was that letting corporations make smaller pension contributions now will subsequently lead to an increase in corporate profits and tax revenues from those profits which will theoretically cover the cost of the payment to the Highway Trust Fund.

While Congress was trying to avoid negatively impacting workers, some critics claim Congress overlooked a bigger issue, that of encouraging companies to defer pension plan contributions, which could have an adverse effect on some employees. And since pension plan contributions will be deferred they will have to be made later — thus decreasing future corporate profits and tax revenue.

As President Obama pointed out when signing this measure, it is only temporary and not intended as a long-term solution. Congress should be expected to find ways to cover the costs of the Highway Trust Fund in the future without impacting worker’s pension plans.