UPDATE 1-US businesses ask Congress for relief on pensions

(Adds details from hearing, letter, byline)

By Emily Chasan

NEW YORK, Oct 29 (Reuters) - Fifteen U.S. business groups have asked legislators to provide relief on a pension plan funding law to help companies avoid having to freeze or end pension plans that may be inadequately funded because of the financial crisis.

They want Congress to lower levels at which pension plans must be funded and to clarify whether they could smooth out the market values of pension plan assets over several years in financial reports.

In a letter dated Oct. 28 to Rep. Charles Rangel, chairman of the U.S. House of Representatives Ways and Means Committee, and the committee's ranking Republican Rep. Jim McCrery, the groups said: "The drop in the value of pension plan assets coupled with the current credit crunch has placed plan sponsors in an untenable position."

"At a time when companies need cash to keep their businesses afloat, they are also required to make unexpectedly large contributions to their plans in order to meet funding requirements. Consequently, many companies will have to consider whether to freeze or terminate their pension plans or reduce retirement benefit accruals in order to survive."

The groups chiefly complained about provisions in the Pension Protection Act of 2006 requiring companies to fully fund pension plans at certain levels.

For example, if a pension plan is 92 percent funded in 2008 or 94 percent in 2009, companies would have to inject cash to fully fund the plan.

They asked Congress to keep the level at 92 percent for 2009, and to allow companies to fund plans to that level instead of making them fund 100 percent of the plan.

Pension plans at Standard & Poor's 500 .SPX companies were overfunded by $63 billion last year and are on track to be underfunded by more than $219 billion this year, according to S&P. [ID:nN29455169]

A CRY FOR RELIEF

The groups' sentiments were repeated in a hearing before the committee on Capitol Hill on Wednesday.

Martella Turner-Joseph, vice president of Joseph & Turner Consulting Actuaries in New York, told the committee the Pension Protection Act was intended to allow companies time to build up a cushion in their pension plans, but that the market rout had arrived before they had time to do that.

"Large employers with pension plans have seen the value of their plan assets fall precipitously, creating enormous funding obligations for 2009 ... Companies must plan for funding requirements that were unanticipated just weeks ago at a time when lenders are even less willing to extend credit," Turner said.

In her testimony, Turner-Joseph suggested Congress should allow asset smoothing for pension plans, which would allow firms to calculate their funding levels over several years and limit some of the effects of the downturn.

Employers need a chance to "fiscally catch their breath," she said.