The chairman of the House Workforce Committee and a subcommittee chairman plan to introduce a pension bill today that incorporates much of the Bush administration's proposal earlier this year but softens slightly the initial impact of some of its provisions.
The bill would require companies with underfunded pension plans to fund them fully within seven years. The worst-funded plans -- those whose assets equal 60 percent or less of their liabilities -- would be required to boost funding more rapidly.
But in an effort to ease the impact of the Bush plan, the measure would phase some changes, such as increases in the insurance premiums to the Pension Benefit Guaranty Corp., and restrict, rather than eliminate, credits for past overfunding that allow companies to contribute less to their pension plans.
Rep. John A. Boehner (R-Ohio), chairman of the committee, has promised a general reworking of the private pension system. He and Rep. Sam Johnson (R-Tex.), chairman of the employer-employee relations subcommittee, were working on a final version of the bill yesterday.
There is much pressure on Congress to act on pensions this year.
Employers with traditional pensions have been operating under a combination of years-old rules and temporary patches enacted two years ago. The patches expire at year-end and employers, while not happy with aspects of the administration's proposal, are anxious to have a permanent and predictable regulatory regime.
At the same time, a wave of bankruptcies in the airline and steel industries -- notably United Airlines parent UAL Corp. and Bethlehem Steel Corp. -- has burdened the government's pension insurance agency with billions of dollars in liabilities, pushing it deeply into deficit and raising fears that it will need public money.
"The pension terminations at United Airlines underscore the need for fundamental pension reform to protect workers and taxpayers," Boehner said yesterday. "Without comprehensive reform, more companies will default on their plans or simply stop offering benefits to workers altogether, and taxpayers will be at greater risk than ever of being stuck with a multibillion-dollar bailout."
Rep. George Miller (Calif.), the Workforce Committee's ranking Democrat, said the bill, like Bush's plan, would rely heavily on "employee benefit cuts and billion-dollar tax hikes for employers." Such changes "would seriously undermine" the private pension system for both employees and employers, he said.
At the same time, Miller said, the "proposal fails to stop runaway pension terminations, like at United Airlines."
The bill that Boehner and Johnson plan to introduce, a summary of which was obtained by The Washington Post, would require employers to use a "yield curve" in measuring their liabilities. That device, which proponents say more accurately measures liabilities by reflecting the timing as well as the amounts of benefit payments, has been criticized by employers as too complicated.
The bill also would allow employers to contribute more to their plans in good times but would eliminate credits now allowed for past overfunding. Such credits sometimes allow a company to escape having to put cash into a plan even if assets that created the past overfunding have lost value.
The bill would curb benefit increases by companies with underfunded plans. It also would boost the insurance premium that all plans have to pay to the Pension Benefit Guaranty Corp. to $26 a year per participant, from $19. The increase would be phased in more quickly for less-well-funded plans. And the bill would index to wage growth a second premium paid by badly underfunded plans.