A Fix by politicians for the Pension mess.
J6P need to wait for additional 5 years (age at 75)
to draw pension fund.
U.S. House Panel Backs Pension Fix
Fri July 18, 2003 04:13 PM ET
By Susan Cornwell
asia.reuters.com
WASHINGTON (Reuters) - Companies with underfunded pension plans would get relief for three years under legislation backed by the U.S. House of Representatives Ways and Means Committee on Friday, in an acrimonious session to which police were called.
The measure was rushed through by the Republican majority as Chairman Bill Thomas of California called a voice vote while committee Democrats were conferring over last-minute changes in an adjacent library.
Democrats questioned whether the committee action was legitimate and later tried to get it reversed on the House floor. They were furious that Republican staffers had called police amid the acrimonious wrangling over the bill.
"There is no question in my mind this is an absolute abuse of power," declared Rep. Robert Matsui, of California.
"This is the United States of America, not a police state," said Rep. Sander Levin, a Michigan Democrat.
Under the measure that the committee approved, traditional "defined benefit" pension plans would be allowed to assume a more generous return on investments based on an index of high-grade corporate bonds rather than the current formula based on 30-year U.S. Treasury bond yields.
This new measure of pension liabilities would be used for the next three years while a permanent replacement is sought as part of a comprehensive overhaul of pension rules.
The bill raises the amount workers can contribute each year to 401(k) plans, which let an individual choose from company-provided investment options. Starting next year, workers could save a maximum $15,000 in their 401(k)s, up from $13,000.
Individual Retirement Account contributions could rise to $5,000 a year from $3,000 currently and those over 60 could contribute $6,000 annually to an IRA.
The bill also raises from 70-1/2 to 75 the age at which retirees must start drawing money from retirement accounts.
ADMINISTRATION TO WORK WITH CONGRESS
Total pension underfunding exceeds $300 billion at U.S. companies, with $60 billion in the auto industry, according to the agency that bails out troubled corporate pension plans.
A sluggish economy, lackluster stock prices, low interest rates and a bubble of older workers nearing retirement have all combined to undermine traditional corporate pensions that promise a set payout.
Reps. Benjamin Cardin, a Maryland Democrat, and Rob Portman, an Ohio Republican, had proposed using the returns on corporate bonds as the appropriate yardstick for valuing pension funds.
But critics say changing the method of valuing the funds is an accounting device that doesn't address the shortfall.
Treasury Secretary John Snow, who had favored a different approach to pension funding, said the Bush administration would work with Congress to develop accurate funding rules.
"As we work toward a more comprehensive reform of the pension system, the President continues to believe that these changes must include a more accurate measure of pension liabilities, increased transparency of pension plan information, and safeguards against pension under-funding," he said in a statemennt.
The Bush administration had proposed taking the Portman-Cardin approach for two years, then having companies move to a more accurate way of calculating pensions called a yield curve, which considers when pension bills come due.
But this idea got a chilly reception from lawmakers, who said the administration's proposal would increase volatility in pension funding -- and might make companies decide they did not want to offer defined benefit pensions anymore. |
