House expected to pass pension bill
Thursday, December 15, 2005 4:36:39 PM
afxpress.com
WASHINGTON (AFX) - The House of Representatives is expected Thursday afternoon to pass legislation designed to shore up the nation's defined-benefit pension system, but backers still face tough negotiations with the Senate and the White House
The bill would require employers with defined-benefit plans to increase pension contributions and pay higher premiums to the Pension Benefit Guaranty Corp., which insures the retirement plans. High-profile bankruptcies in the airline and steel industries have contributed to a PBGC deficit of more than $22 billion
Passage was all but assured after the United Auto Workers earlier this week dropped their opposition to the legislation and agreed to support the bill. The UAW changed its stance after a pair of Republican House committee chairmen agreed to modify provisions that the union had said would freeze pension credits and benefits in the General Motors Corp. , Ford Motor Co. and DaimlerChrysler AG pensions plans, as well as other union-negotiated plans. The lawmakers - House Education and Workforce Chairman John Boehner of Ohio and House Ways and Means Committee Chairman Bill Thomas of California -- also modified language that the UAW said would have otherwise prohibited plant shutdown pension benefits negotiated by unions
The move did nothing to appease the Bush administration, which had already voiced objections to the House bill, as well as to pension legislation that overwhelmingly passed the Senate last month
"Although the House and Senate bills are both modeled after the administration proposal, both in their current form might actually result in a weakening of pension plan funding and the pension guaranty system," Randal Quarles, Treasury undersecretary for domestic finance, said Wednesday in prepared remarks to the Exchequer Club
Analysts and lawmakers predicted the UAW's endorsement would bring enough Democrats on board to assure passage of the legislation Thursday. A week earlier, acting House majority leader Roy Blunt, R-Mo., had said there was "no likelihood" of House action on the bill without the support of some Democrats
In a letter to lawmakers, the UAW said Boehner and Thomas agreed to amend their pension bill by allowing pension plans to provide shutdown benefits if they are at least 80% funded. Also, the amendment provides safeguards that would prevent companies from "gaming" the funding level of their pensions to deliberately trigger benefit restrictions, the union said
Timing House passage will set the stage for negotiations with the Senate. Greg Kelly, a Washington policy analyst with Susquehanna Financial Group, sees an 85% chance that final legislation will be enacted by April 15
That date marks a key deadline. Under current law, pension liabilities are determined by a complex formula based on a mix of corporate bond rates. Effective Jan. 1, however, the formula reverts to the 30-year Treasury rate, which would require substantially larger contributions. Companies would be required to make their first quarterly contributions under the Treasury-based formula April 15, unless Congress completes work on the pension overhaul
Thursday's expected House vote, therefore, "helps the momentum and it moves the timing up" for final action, Kelly said
The House and Senate bills would both boost the PBGC premiums paid by firms with defined-benefit pension plans to $30 per plan participant a year, up from $19. The PBGC is funded by employer premiums and investments. The string of high-profile pension defaults by airline and steel companies has raised worries that the PBGC could one day require a massive taxpayer-funded rescue
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