The Senate Finance Committee yesterday approved a bill that would toughen pension-funding rules generally but grant special relief to airlines.
The bill, approved on a voice vote, also would make it easier in the future for employers to convert traditional pensions into "hybrid" cash-balance plans, from which employees usually withdraw lump sums instead of receiving regular payments.
The Finance Committee joins the House Education and the Workforce Committee in passing broad pension-reform bills. The House measure is before the Ways and Means Committee, while the Senate awaits action by the Health, Education, Labor and Pensions Committee.
Congress faces a year-end deadline by which it needs to overhaul the nation's pension laws -- something the Bush administration has called for and many members have urged -- or extend again a temporary provision dealing with out-of-date requirements for calculating pension-plan liabilities.
Workforce Committee Chairman John A. Boehner (R-Ohio) said yesterday that he opposes such an extension. "Another Band-Aid won't solve the problems," he said.
The Finance Committee measure, by Chairman Charles E. Grassley (R-Iowa) and senior Democrat Max Baucus (Mont.), was praised by members of both parties yesterday. Employer groups, though, said they are worried that, among other things, it would make it difficult for companies to predict future pension expenses -- something they need to be able to do for budgeting cash flow.
The Finance Committee bill would increase the premiums that employers pay to the government's pension insurance agency, the Pension Benefit Guaranty Corp., and would require them to meet funding targets based on plan liabilities, calculated using higher interest rates for benefits that are payable in the near future and lower rates for those due further in the future. It would curb techniques that have allowed weak plans to go years without adding cash to their pension funds, though it includes provisions to ease volatility in funding requirements that result from market fluctuations.
Airlines would get 14 years to pay off underfunding in their pension plans. That is less than the 25 years some airlines had asked for, but Grassley said it was necessary to compromise to avoid giving certain carriers an advantage.
Cash-balance plans would be shielded from age-discrimination charges as long as they include provisions to protect older employees. Plans instituted in the past, however, such as one by International Business Machines Corp. that a federal judge ruled illegal, would not be covered.
Also yesterday, House Democrats announced a retirement security proposal. The centerpiece is a program under which the government would match the retirement savings of middle- and low-income employees, up to $1,000 a year.