Senate Approves Pension Legislation, Urges House to Act Quickly

by Edith T. Carper

On 28 January, the Senate approved legislation (H.R.3108) that could affect pension plans in several ways. With an 86-9 vote, Senators agreed to amend the Employee Retirement Income Security Act of 1974. The amendments, in essence, would:

• Replace for a time the 30-year Treasury rate currently used to calculate employers' required contributions with a new formula based on long-term corporate bonds

• Provide additional deficit reduction relief to companies that had well-funded pensions in the past

• Provide relief for multi-employer plans

The bill offers other benefits as well. For example, it is expected to provide $16 billion in additional savings to companies, "which will facilitate job creation by freeing up funds for additional wages and hiring."

Senators Voice Support

Sen. Ted Kennedy (D-Mass.) noted at the outset of debate that "many challenges" face the pension system. The present participation rate is the lowest it has been in more than a decade, and part-time and low-wage workers "continue to lag behind other workers in pension coverage." He urged support of the legislation, "to improve and expand our defined benefit system, so that we can ensure all Americans receive the secure retirement they deserve."

Kennedy also noted that "we must ensure companies adequately fund their pension plans and we must encourage companies to put more money into their pension plans when times are good, instead of penalizing them when times are bad."

Sen. John Kerry (D-Mass.) urged support for the bill, despite the fact that it's only a temporary solution. He said that during the last three years, companies that provide defined benefit plans "have come under extreme financial stresses due to the sluggish economy and changes in the interest rate that determines their pension plan liability. "Renewal of the legislation is "essential to prevent companies from having to freeze or terminate their defined pension plans because of outdated rules that show how their pension plan liabilities are calculated."

Rockefeller Highlights Airlines as Example

Sen. John D. Rockefeller (D-W.Va.) urged the House to approve the bill quickly and get it to the President's desk for signature, saying that the reforms it provides "are urgently needed." He said many large companies have contacted him "to stress how important it is that Congress act to update the interest rate used to calculate pension liabilities. Continuing to require employers to use the outdated 30-year Treasury rate would jeopardize pension plans for millions of workers." He noted in particular the plight of the airline industry, "which has already laid off more than 200,000 people. Many airlines are struggling either to emerge from bankruptcy or to avoid having to file for bankruptcy."

By giving the airlines "some breathing room," he said, we can "protect workers' benefits that might otherwise be cut." This bill is ultimately "an effort to do what we can to take care of workers who have already seen involuntary furloughs, seen their wages reduced and seen their pensions cut. In my judgment, preserving the benefits and rights of workers who make our industries strong is crucial to strengthening our economy."

According to Sen. Norm Coleman (R-Minn.), the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO), the Airline Pilots Association and the International Association of Machine & Aerospace Workers all support this legislation.

 

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Edith T. Carper is a special correspondent to IEEE-USA Today's Engineer.