Nears a Pension Bill,
As Airlines Seem to Get Relief
By Deborah Solomon and David Rogers in Washington and Evan
Perez in Atlanta
Wednesday, July 19, 2006
Members of Congress neared a deal on a long-awaited pension
bill as airline executives appeared to make headway in
winning more time to fully fund their employee pension
While details aren't final and much could still change,
House and Senate negotiators have largely resolved some
major sticking points, including giving struggling airlines
some form of relief and making it easier for investment
firms to provide advice to their 401(k) clients.
Negotiators have been working for months to complete
sweeping changes aimed at ensuring that companies are able
to meet their financial obligations to the 44 million
employees with defined-benefit pension plans. U.S.
companies have underfunded their pensions by an estimated
$450 billion and some companies, including the airlines,
have begun abandoning their pension plans as they hit rocky
After seeming to drift for months this spring and summer,
the pension talks have picked up energy in recent days.
This past weekend, a bipartisan bloc of five House and
Senate members began drafting a proposed settlement
independent of Sen. Michael Enzi (R., Wyo.), the official
leader of the talks and chairman of the Senate Health,
Education, Labor & Pension Committee.
The unusual process is politically delicate for all
involved, but it has had the active support of House
Majority Leader John Boehner (R., Ohio). "I think we are
very close to an agreement," Mr. Boehner said yesterday.
Montana Sen. Max Baucus, the ranking Democrat on the Senate
Finance Committee, said there's a "good chance of getting
this all wrapped up before the August recess."
With the House due to go home for the summer July 28, time
is a problem. The Senate, which will remain until Aug. 4,
has more time for debate, but getting the bill to the floor
next week will require final decisions in the next day or
While details are still being ironed out, the agreement will
mandate that companies fully fund their pension plans and
that companies shore up their plans if they are deemed
"at-risk" of abandoning them. It will also seek to shore up
the Pension Benefit Guaranty Corp., which insures
defined-benefit plans and faces a $22.8 billion deficit.
The agreement is also expected to include a break for
Northwest Airlines and
Delta Air Lines, giving them a period of 20 years to
fully fund their pension plans, rather than the seven-year
deadline all other companies would face. The agreement
would also require the airlines to freeze pension benefits
and close pension plans to new employees.
Continental Airlines and
AMR Corp.'s American would likely get a 10-year deadline
to meet their current pension obligations and could increase
benefits for current participants if they set aside enough
money up front to pay for those benefits, but would also
have to close the plan to new entrants.
Pressure to include some form of airline relief has been
building and this week, the chief executives of Northwest
Airlines and Delta Air Lines, along with scores of their
employees, hit Capitol Hill to lobby for a break.
Yesterday, Northwest Airlines CEO Doug Steenland said that
his company may have to terminate its retirement plans if
Congress doesn't move quickly to give it a break on its
"If we don't get legislation promptly, we may have no choice
but to commence the process of termination," Mr. Steenland
told reporters. Northwest already has frozen some of its
pension plans but terminating them would dump them on the
PBGC and result in substantial cuts in pension benefits for
Northwest and its six unions brought more than two hundred
employees to fan out across the Capitol with meetings with
lawmakers, including Sens. Norm Coleman (R., Minn.) and
Trent Lott (R., Miss.). Delta and a group called the Delta
Air Lines Retirement Committee, which represents the Atlanta
airline's nonunion retirees, brought over 100 employees and
retirees for visits to more than 60 congressional offices,
including Sen. Johnny Isakson (R., Ga.), one of the chief
backers of the legislation.
Atlanta-based Delta and Northwest, of Minneapolis, filed for
bankruptcy last September, and their finance executives are
working on business plans that would allow them to exit from
Chapter 11 as soon as next spring. Delta's pensions were
underfunded by $6.4 billion and Northwest's by $3.7 billion
at the end of 2005.
Delta, which has filed to terminate the pension plan for its
pilots, says securing financing to exit from bankruptcy is
dependent on knowing the fate of the pension plan covering
its 91,000 other workers and retirees.
Aside from airline relief, legislators are still wrestling
with whether to allow Wall Street firms to give financial
advice to 401(k) participants, even if the firm's own
financial products are among those that the employee can
pick. The measure is backed by Mr. Boehner but some other
congressmen have expressed concern that firms would steer
clients to their own products instead of to those that best
suit a client's needs. Negotiators are now considering a
compromise that would allow firms to give advice, as long as
they provide the client with an independent,
Another sticking point that seems nearing a resolution is on
employers' use of so-called cash-balance plans, or hybrid
pension plans that combine aspects of a defined-benefit plan
and a defined-contribution plan, such as a 401(k).
Negotiators are favoring a provision that would allow
companies, going forward, to switch their employees from a
defined-benefit plan to a cash-balance plan without
violating age-discrimination rules.
Write to Deborah Solomon
email@example.com, David Rogers at
firstname.lastname@example.org and Evan Perez at