June 29, 2005

House Republicans tackle portable pensions in bill

WASHINGTON (Reuters) - House Republicans have agreed on aproposal aimed at eliminating the legal limbo surrounding "cashbalance" pension plans, and will include it in legislationexpected to advance on Wednesday, an aide said.

Cash balance plans are a portable type of traditionaldefined benefit pension plans, which have a fixed payout atretirement.

Once considered the likely future of traditional pensionplans, cash balance plans have faced legal uncertainty since afederal court ruled in 2003 against the plan of InternationalBusiness Machines Corp, saying it discriminated against olderworkers.

Two key House Republicans have agreed on language that theyhope will clarify the status of cash balance plans, and it willbe part of a pension reform bill scheduled to be voted onWednesday by the House Education and Workforce Committee, saidthe Republican aide, who works for that committee but asked notto be named.

The bill is sponsored by Education and Workforce ChairmanRep. John Boehner of Ohio, and Ways and Means Chairman BillThomas of California, and they worked out the cash balancelanguage together, the aide said.

The language will say that a cash balance plan would meetall age discrimination tests if an older participant's benefitsare equal to or greater than that of any similarly situated,younger individual in the plan.

A new cash balance pension plan that embraces this standardwould not be considered discriminatory. The aide did not wantto comment on IBM's case, which is still on appeal, but said acompany that already is facing a legal challenge could amendits plan to meet this new standard and thus cap any possibledamages, were a court ruling to go against it.

The overall pension bill to be considered in committee onWednesday is aimed at ensuring U.S. companies properly fundtheir pension plans, as well as shoring up the pensioninsurance agency, the Pension Benefit Guaranty Corporation(PBGC).

It would require companies to erase their pension fundingshortfalls within seven years -- although the requirement for100 percent funded plans will itself be phased in over fiveyears.

Current law says pension plans only have to be 90 percentfunded.