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Bill lets govt agency negotiate pension payments

Posted on: Thursday, 8 September 2005, 18:55 CDT

By Susan Cornwell

WASHINGTON, Sept 8 - The federal agency that insures private pensions would be able to cut deals with individual companies granting more time to pay pension liabilities under a bill approved by a Senate panel on Thursday.

The negotiation provision, part of a pension overhaul bill, is aimed at keeping companies from terminating their pension plans in bankruptcy court as has happened with UAL Corp.'s United Airlines, said an aide to Massachusetts Democrat Sen. Edward Kennedy, a co-sponsor of the bill.

The measure also attempts to eliminate the legal limbo around "cash balance" plans, a portable type of pension. These plans have faced legal uncertainty since a federal court ruled in 2003 against the plan of IBM, saying it discriminated against older workers.

The pension bill, the third such measure to be offered in Congress this year, was approved on a vote of 18-2 by the Senate Health, Education, Labor and Pensions Committee.

Like the other bills, it seeks to fix underfunding of corporate pensions and avoid a taxpayer bailout of the agency that insures them, the Pension Benefit Guaranty Corp. (PBGC).

The newest measure is a bipartisan compromise between the committee's chairman, Sen. Mike Enzi, a Wyoming Republican, and Kennedy, the panel's ranking Democrat. But it drew criticism from the Bush administration, which said in a letter to senators that the net result was to weaken current law.

Enzi said he will move quickly to merge the bill with the version approved by the Senate Finance Committee so one bill can move to the floor. The U.S. House of Representatives also has a pension bill.

Flight attendants, pilots and other workers complained bitterly as United used bankruptcy court to terminate its pension plans and hand them over to the PBGC. The agency insures the plans, but only up to certain limits.

The Enzi-Kennedy bill would seek to avoid these terminations "by giving PBGC the ability to work out payment programs for troubled pension plans," said a bill summary provided by the committee's Democratic staff.

"This program will prevent pension failures and the incredible suffering they cause for workers and retirees," Kennedy said of the provision. At the same time, he said, it would help protect the solvency of the pension system.

Under current law, the PBGC is not authorized to work out alternative pension funding plans with companies, a PBGC spokesman said. Companies are supposed to stick to pension funding rules that are written by Congress.

Those companies wanting major exceptions from the pension funding rules must ask Congress for them under current law, as the airlines have done recently. The bill would give the PBGC the flexibility to negotiate these changes instead.

The bill also includes a break for airlines struggling now, giving them 14 years to stretch out their pension contributions.

Other companies would have 10 years to fully fund their pension plans. The Enzi-Kennedy bill also would raise the insurance premiums companies pay to the PBGC.

Iowa Democrat Sen. Tom Harkin, who voted against the measure, said it would undermine the rights of older U.S. workers by retroactively legalizing some cash balance plans while setting standards for them going forward.

"What this bill does is say, we're going to override the Cooper-IBM case," Harkin said. He will seek to amend the bill on the Senate floor to add protections for older workers.

Source: REUTERS

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