Lawmakers to identify “at risk” pension plans

By Susan Cornwell

WASHINGTON (Reuters) – Key U.S. lawmakers have reached a
framework plan to identify pension plans at risk of default as
part of new funding rules in a broad pension reform bill, a
Republican senator in charge of the negotiations said on
Tuesday.

“I think there’s a common framework,” Sen. Mike Enzi of
Wyoming told reporters. He declined to give details.

House and Senate negotiators are working behind closed
doors to finalize a bill that would put the traditional pension
system on a sounder footing. Defined benefit plans, which pay a
fixed amount to retirees, are underfunded by $450 billion.

Sen. Max Baucus, a Montana Democrat participating in the
talks, said there was a tentative agreement on the definition
of when pension plans are at risk, or in such bad financial
shape that they must add cash. This issue has bedeviled Senate
and House lawmakers since they began working on a compromise
version of the pension legislation in March.

Enzi and Baucus spoke after a negotiating session that also
involved Massachusetts Sen. Edward Kennedy.

But Baucus said there were still some questions to be
answered about the framework plan. He also declined to give
details but indicated the consensus was along the lines
described by House and Senate aides.

Aides have said lawmakers would define a company’s pension
plan as at risk of default if it were less than 80 percent
funded. The funding threshold could be lowered to 70 percent if
the calculation were done using a stricter formula.

Employers and labor groups said on Monday they were worried
that proposals lawmakers were examining would be too harsh and
would encourage companies to abandon offering pensions
altogether.

One goal is to identify the lagging companies in
traditional “defined benefit” pension plans so as to make them
better fund their plans. Some 44 million Americans rely on the
system.

Enzi hoped to have the compromise bill finished before a
one-week congressional recess at the end of this month.

But more details must be worked out.

Struggling air carriers such as Northwest Airlines Corp.
and Delta Air Lines Inc want more time to make payments into
their plans. Another issue is whether to provide legal
protection for “cash balance” pensions, which gained notoriety
in 2003 when a judge ruled International Business Machines
Corp.’s plan was age discriminatory.

The agency that insures defined benefit pension plans, the
Pension Benefit Guaranty Corp. (PBGC), is running a $22.8
billion deficit.