Passes Bill to Fortify Pension Plans
Mary WIilliams Walsh
New Yorks Times
Friday. December 16, 2005
The House passed a measure yesterday aimed at strengthening
the United States' system of company pensions, but many
members said they considered the bill flawed and hoped to
amend it before final passage.
The continued controversy over the bill suggests that it
still faces considerable turbulence when lawmakers try to
work out the differences between the House and Senate
Moreover, the White House warned yesterday that President
Bush would veto the bill unless it went further in shoring
up the creaky pension system. The administration is seeking
legislation that would require companies to put more money
behind their pension promises than current law requires, and
to pay adequate premiums to the Pension Benefit
Guaranty Corporation, the government agency that insures
traditional pension plans.
"The president's senior advisers will recommend a veto" if
the House and Senate end up with a bill no stronger than the
law they have been trying to amend, the White House said in
a statement. The Bush administration has said it considers
pension reform a major legislative priority; it issued a
similar warning when the Senate passed its version in
Negotiations between the House and Senate are not expected
to take place until early next year.
The Republican-backed pension bill, approved yesterday by a
294-132 vote, would require companies to close shortfalls in
their pension funds within seven years, and even more
quickly in cases of very large financing gaps.
The House bill, like the Senate legislation, contains other
provisions that would appear to satisfy, at least in part,
the Bush administration's calls for tougher pension rules.
But the White House has called for applying new rules more
quickly and in a purer form than either the House or Senate
bills, which contain many compromises.
One of the biggest differences between the House bill and
its Senate counterpart lies in its lack of any special
relief for airlines. The major airlines have been struggling
with their big pension plans, and Northwest and Delta, both
in bankruptcy proceedings, have fallen out of compliance
with the existing law.
Those two airlines have little hope of keeping their plans
going unless Congress gives them a break on their pension
contributions. But the administration has said it is opposed
to pension relief for airlines, or for any other single
industry or company.
Several members of Congress, from both parties, focused on
the question of airline pensions yesterday, saying they
wanted to incorporate relief for the airlines when the
differences between the House and Senate bills were worked
"Let's give the airlines a fighting chance," said
Representative David Scott, a Georgia Democrat, who said
many of his constituents were counting on
Delta Air Lines for their pensions and retiree medical
benefits. He said he saw many imperfections in the pension
bill but urged passage anyway so that it could go to a
conference committee with the Senate, which gives airlines
20 years to shore up their pensions.
Republicans said the bill was necessary to prevent further
erosion in the use of traditional corporate pensions.
"Without reform," said Representative Tom Price, a Georgia
Republican, "the system may very well collapse under
But many Democrats complained that the bill, rather than
supporting traditional pensions that provide a guaranteed
income in retirement, would discourage companies from
offering pensions in the future.
"Without question, this bill will dismantle pensions in the
same way they've tried to dismantle Social Security," said
Representative Earl Pomeroy, a North Dakota Democrat.
The House measure would push companies to try to keep a full
dollar set aside in trust for every dollar of benefits they
have promised to their employees. Under the current law,
companies can essentially call their pension plans fully
funded when they have just 90 cents set aside for every
dollar they owe.
Moreover, any time a new deficit appeared in a company's
pension fund - something that routinely happens when
benefits are increased or investment returns weaken - the
House bill would require the company to put in enough money
to close it again within seven years.
Under the current law, companies have as many as 30 years to
close such gaps.
The bill would also bar companies from increasing benefits
at all if their plans are very weak. It would require
companies to give their workers more detailed and up-to-date
information about the health of their pension plans.
In addition, the House bill would require companies to pay
higher premiums to the federal pension guarantor, and would
index the premiums to wage inflation in the future. The
current premium rate, $19 per participant, has been in place
since 1994 and does not come close to covering the value of
the insurance provided.
The bill would also reward companies that have healthier
pension plans by giving them five years to phase in the rate
increase. Companies with weak pension plans would have to
start paying the higher premiums within three years.
But critics cited what they saw as its failure to halt
abuses like "revolving-door bankruptcies," age
discrimination in pensions and generous golden parachutes
for executives of companies that demand concessions from
The House bill also contains a provision that would make it
easier for hedge funds to handle pension money without being
subject to the legal safeguards that cover most financial
Representative John A. Boehner, Republican from Ohio, who
has been a leader in drafting the House pension bill, said
he was confused by some of the criticism yesterday. He
argued that the bill struck a good balance between being too
lax or too tough. He said he was committed to trying to
solve some outstanding issues, like the airline problems, in
a House-Senate conference.