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Pension Relief Bill Negotiations Falter

Posted on: Friday, 26 March 2004, 06:00 CST

WASHINGTON - House-Senate negotiations on a major pensions relief bill broke down Friday, putting at risk legislation that could save employers billions of dollars in contributions to their pension plans over the next two years.

"These negotiations are in serious danger and I believe that this bill is in serious jeopardy at this point," said Rep. John Boehner, R-Ohio, chairman of the House Education and the Workforce Committee.

Sen. Edward Kennedy, D-Mass., blamed White House intransigence for the collapse of the talks, saying the administration stance in opposing more help for union-based pension plans was punitive and "reflects an ideological viewpoint."

The main dispute was language in the Senate-passed bill that extended relief to multiemployer pension plans, which usually are run jointly by unions and management in such trades as construction and trucking.

There was general agreement on the main part of the bill, which would change for the next two years the formula under which single-employer pension plan holders must make contributions, saving those plans some $80 billion while Congress worked on longer-term reform.

The House and Senate were also tentatively in accord on a portion of the bill that would allow airlines and steel companies with underfunded plans some respite in required catchup pay.

Businesses have urged Congress to move swiftly on the single-employer contribution formula fix, citing the April 15 deadline for many companies to determine pension payments and stressing that excessive payments were both undermining the economy and putting financially fragile pension plans at risk of defaulting.

But talks have floundered over the issue of multiemployer plans, which on the whole are in better financial shape than single-employer plans but have experienced some financial difficulties the past few years.

The Senate-passed bill would have given all the nation's 1,600 multiemployer plans the chance to apply for some relief, language that prompted a veto threat from the administration, which said that would only encourage underfunding in pension contributions.

Boehner said their side on Friday put forth a proposal to help the bottom 20 percent of those plans that had investment losses in 2002.

But Rep. Robert Andrews, D-N.J., and Kennedy said in actuality the GOP plan would help fewer than 10 percent of plans. The 20 percent offer, Andrews said, was "disingenuous and false."

"I believe the reason we didn't reach an agreement this morning was because the White House didn't want one," Andrews said.

Boehner said the GOP offer was "as far as we could go."

There were no immediate plans to reopen the talks. Negotiators had hoped to get a compromise to the House and Senate next week, before Congress leaves for its spring recess.

Contributions to single-employer plans had been tied to the interest rate on 30-year Treasury bonds. But the Treasury Department stopped issuing the bonds in 2001 and interest rates fell dramatically, producing smaller returns on pension plan investments and forcing companies to pay more into their funds. The bill would base payments on a long-term corporate bond rate.

The administration, in issuing its veto threat, argued that nothing should be enacted that encouraged the underfunding of plans and increased the potential financial exposure of the Pension Benefit Guaranty Corp., a government agency that insures the pension plans of some 44 million workers, including 9 million in multiemployer plans.

The PBGC has been designated a "high risk" federal program mainly because of problems among single-employer plans. Through the end of 2003 it compiled a record $11.2 billion deficit from covering failing plans.

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The bill is H.R. 3108.

On the Net:

Congress: http://thomas.loc.gov/

Pension Benefit Guaranty Corp.: http://www.pbgc.gov/

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