House panel approves pension reform
By Susan Cornwell
WASHINGTON (Reuters) – Legislation to repair hugeunderfunding of U.S. corporate pensions and avoid a possibletaxpayer bailout of the agency that insures them cleared theU.S. House Education and the Workforce Committee on Thursday.
Traditional pensions are underfunded by $450 billion, andthe federal agency that insures them, the Pension BenefitGuaranty Corp. (PBGC), is itself $23.3 billion in the red,swelled by recent pension defaults at bankrupt United Airlinesand others.
Lawmakers said they should impose stricter pension fundingrules before more pensions default and the PBGC collapses.
“I think the effect of this bill over the next 10 to 20years will prevent a meltdown at the PBGC,” said OhioRepublican Rep. John Boehner, the bill’s co-sponsor.
Modeled after a Bush administration measure, the billrequires companies to erase the shortfalls in their “definedbenefit” pension plans and pay higher premiums to the PBGC.
But unlike the White House plan, the bill would phase inthe funding requirements and premium increases over five years.Defending the differences, Boehner said he did not want todrive employers out of the pension system.
Defined benefit pensions, which have a fixed payout atretirement, cover 20 percent of workers, mainly in olderindustries like automobiles and airlines.
Lawmakers declined to include any specific aid for U.S.airlines, some of which say they may also default on theirpensions if they do not get more help. But Boehner left thedoor open to add such relief later.
The measure could go to the floor of the House for a vote,but it could also be wrapped into a larger retirement packagebeing drafted that includes changes to Social Security.
Democrats in both chambers have warned against combiningcorporate pension reforms, which have some bipartisan support,with the volatile Social Security issue.
The House pension bill seeks to eliminate the legal limboaround “cash balance” plans, a portable type of pension. Thesehave faced legal uncertainty since a federal court ruled in2003 against the plan of IBM, saying it discriminated againstolder workers.
The bill set an age discrimination standard for all definedbenefit pensions, and a new cash balance pension plan thatembraces it would not be considered age discriminatory.
It also sets up a system for improving troubled pensionplans that are maintained by more than one employer. It allowsplan trustees to levy a surcharge of up to 10 percent onemployers’ contributions, and pare workers’ benefits.
The legislation also allows pension plan administrators toprovide investment advice to workers, as long as any potentialconflicts of interest are disclosed.