As defined benefit sponsors are all too aware, interest rates continue to drop, causing pension liabilities and contributions to reach all-time highs in 2012. In response to this, a bipartisan bill was introduced and approved by the Senate on Wednesday, allowing pension plans to base their liabilities on interest rates averaged over 25 years, instead of the current two-year averaging. The next step is for the House to approve a similar measure.

The relief would have the greatest impact in 2012 and then diminish somewhat in subsequent years until it levels out in 2016. While the relief may be temporary, it will likely produce welcome reductions in contributions in the short term. We’ll keep you posted as the legislation makes its way through the House.