A study by Towers Watson has shown that as a result of recent legislation signed into law, employers that sponsor defined benefit (DB) pension plans have the potential to receive billions of dollars in temporary pension funding relief, reducing their contributions between $19 billion and $63 billion.

Yet, the study showed only one-quarter of employers will likely seek relief amid significant concerns about the cash-flow rule.

“The pension funding relief law takes a major financial burden off of employers, at least for two years,” Mark Warshawsky, director of retirement research at Towers Watson, told ai5000. “But I was surprised that the percentage of people actually seeking relief was so low,” he said. “It’s obvious that employers are wary of all the conditions that come with the legislation.”

Under the Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act signed by President Barack Obama on June 25, employers with underfunded DB plans may elect to amortize funding shortfalls for any two plan years between 2008 and 2011 either over a 15-year period or by making interest-only payments for two years followed by seven years of amortization. Generally, DB sponsors are required to amortize shortfalls over seven years. The amount of required contributions depends on which of the two provisions and which plan years employers choose.

According to Towers Watson analysis, a July survey of 137 Towers Watson consultants on behalf of 367 employers revealed that a quarter of plans are likely to elect either of the relief plans and 60% of those who do plan to opt for the 15-year amortization option.

Prior to the passage of the law, the minimum required contributions in aggregate would have been $78.4 billion for the 2010 plan year, $131 billion for 2011, and about $159 billion for both 2012 and 2013.