The Scum at the Top
Commentary on the Rats in Washington
Senate passes pension bill
CNN.com
© Wednesday, January 28, 2004
WASHINGTON (AP) -- The Senate on Wednesday passed legislation
that could save employers tens of billions of dollars in
pension payments and help protect the pensions of American
workers.
"The retirement security of millions of workers hangs in the
balance," Sen. Max Baucus, D-Montana, said before the Senate
voted 86-9 to approve legislation to reconfigure how employers
must fund their defined benefit pension plans.
The bill, the first major act of this legislative session,
enjoyed wide bipartisan support in an election year when
congressional harmony is expected to be rare.
"This is about protecting American workers and their pension
benefits," said Sen. Norm Coleman, R-Minnesota.
The bill still must be reconciled with the House version
and ironed out with the administration, which is balking
at a provision giving special treatment to airlines and
steelmakers with chronic pension underfunding problems.
The legislation is a short-term, two-year fix to protect
employers from what could become artificially inflated
pension contributions and allow Congress time to work on
more lasting solutions to pension funding and the problems
of companies that underfund or abandon their defined benefit
plans.
Congress must move before April, when companies will again
have to determine payments based on the 30-year Treasury
bond rate. Because the Treasury Department no longer issues
the bond, its interest rate has fallen precipitously. That
in turn, under an inverse relationship, causes required
pension contributions to increase.
"Our members are already making investment plans, job-hiring
retention plans and without this fix they are going to have
to divert in some cases hundreds of millions of dollars into
their pension plans unnecessarily," said Dorothy Coleman,
vice president for tax policy at the National Association
of Manufacturers."
For the next two years, the formula would be based on a
composite of investment-grade corporate bonds. Companies
will save about $80 billion over two years under the new
formula, says the Pension Benefit Guaranty Corp., which
insures the pensions of 44 million people in more than
30,000 single and multi-employer defined benefit plans.
The Senate bill separately would allow airlines, steelmakers
and others with underfunded plans who must make catch-up
deficit reduction contributions to waive large parts of
their catch-up pay over the next two years. They could
waive 80 percent of those payments the first year and 60
percent the second year.
The three Cabinet secretaries who comprise the PBGC board,
Elaine Chao of Labor, John Snow of Treasury and Donald
Evans of Commerce, said they would advise President Bush
to veto the bill if it should contain this provision
because they said it would worsen pension plan underfunding,
now estimated at $350 billion nationwide.
The PGGC said those who qualify for the deficit reduction
contribution waiver would save another $16 billion.
Currently, underfunded plans must make catch-up payments,
including their normal contributions, to ensure their
plans return quickly to financial viability.
Business groups support the bill as do unions, even though
it would produce smaller corporate contributions to pension
plans. Organized labor fears that many financially pressed
companies will otherwise opt to dissolve their plans or
declare bankruptcy and turn the plans over to the PBGC,
which may not pay the full pension that was promised.
The measure is particularly important to mature industries
such as automobiles, where retirees at some companies
outnumber current employees. General Motors Corp., for
example, has 25 retirees for every 10 active employees
and will have to pay out $6 billion in pension benefits
this year.
Sen. Jon Kyl, R-Arizona, proposed an amendment that he said
would make the bill more acceptable to the administration
by making taxpayers less vulnerable if companies that get
special breaks become insolvent, transferring the pension
payment to the PBGC, which last year the PBGC had a record
deficit of $11.2 billion. But is was defeated Tuesday,
67-25.
Copyright 2004 The Associated Press. All rights reserved.
This material may not be published, broadcast, rewritten,
or redistributed.
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Last Modified:
January 15, 2007