I’ll need to look at the details before I say more but here’s the media reports:
Senate Approves Legislation
To Shore Up Private Pensions
By JOHN GODFREY
DOW JONES NEWSWIRES
November 16, 2005
WASHINGTON — The Senate on Wednesday passed a sweeping pension funding bill that touches on almost every type of federally regulated retirement plan except Social Security.
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The 618-page bill passed 97 to 2.
The Senate bill requires companies to fully fund their pension plans, toughens funding rules for companies with older workers and makes it harder for companies to avoid making contributions to their pensions during economic downturns.
The House could vote on its version of the bill some time in December.
The Senate bill would also prevent employees from being stuck with their employer’s stock in their 401(k) plans, allow employees to be automatically enrolled in their company’s plans, clarify the legality of cash-balance pension plans and allow 401(k) plan managers to provide investment advice to plan beneficiaries.
The driving force behind the measure is concern that the nation’s traditional pension plans have become dangerously underfunded, raising the specter of a savings-and-loan-type taxpayer bailout.
The Pension Benefit Guaranty Corp. estimates that the nation’s pension plans are underfunded by more than $450 billion.
The PBGC is a federal corporation that guarantees payment of basic pension benefits for more than 44 million U.S. workers and retirees participating in more than 30,300 private-sector defined benefit pension plans.
“This bipartisan bill represents a huge leap forward for retirement security,” said Senate Finance Committee Chairman Charles Grassley (R., Iowa).
The White House says the Senate bill should have tougher funding rules and earlier Wednesday warned of a veto unless it is dramatically strengthened. By PBGC estimates, the bill would actually reduce the amount companies would have to contribute to their pension plans by roughly $71 billion, or 8%.
Meanwhile, business and labor groups say they will continue to work to kill provisions backed by the White House that more closely tie pension calculations to current interest rates — rather than interest rates averaged over several years — and tying funding requirements to a company’s financial health.
House Education and Workforce Committee Chairman John Boehner (R., Ohio) said that he expects the House to vote on its version of the pension bill in December.
“I remain hopeful we can send a final bill to President Bush very soon,” he said.
Under the Senate version of the bill, little would immediately change in most companies’ pension funding requirements. Temporary pension funding benchmarks created for 2004 and 2005 would be extended through 2006, after which the new funding rules would be phased in gradually.
The Senate bill also would increase premiums paid to the PBGC from $19 to $30 a worker per year. The change would raise $5 billion over five years for the PBGC. President Bush had asked that $18 billion be raised, and the White House said the premium provision in the Senate bill is “inadequate.”
The White House also objects to a provision giving airlines 20 years longer than other companies to adjust to the new pension-funding rules.
Pension plans operated by Northwest Airlines Corp. and Delta Air Lines Inc. are underfunded by a total of roughly $15 billion. according to the PBGC. Both recently filed for bankruptcy protection.
American Airlines, a subsidiary of AMR Corp. and Continental Airlines Inc. could also benefit from the break. In filings with the Securities and Exchange Commission, American said its pensions are underfunded by roughly $2.7 billion. Continental has reported that it had set aside roughly $1.3 billion to meet pension obligations of $2.9 billion.”
