Dow Jones Business News
Bush Admin Eases Opposition To Airline Pension Break
Friday March 5, 4:52 pm ET
By John Godfrey, Of DOW JONES NEWSWIRES
WASHINGTON (Dow Jones)--In a carefully worded letter to Congressional leaders, the Bush administration has signaled that it is backing off opposition to special pension relief for the U.S. airline and steel industries.
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The administration has sent mixed signals on the matter in the past. Various cabinet-level secretaries had said they would recommend a veto of such legislation, while the White House itself took a much less severe tone.
But the letter Friday unifies the Bush Administration's message. It was signed by Office of Management and Budget Director Joshua Bolten, the secretaries of Labor, Treasury and Commerce and Stephen Friedman (News) , the assistant to the president for economic policy.
The letter says allowing underfunded pension plans to avoid their near-term funding would "irresponsibly weaken our pension system, jeopardizing the benefits that America's workers have earned." But the letter doesn't mention the airline and steel provisions specificially, and doesn't say they would prompt a veto recommendation.
"They leave themselves enough room to say `I told you so'," but essentially give Congress the green light to move forward with the bill, said one lobbyist familiar with the legislation.
A congressional aide said that appeared to be a fair read of the letter.
Andrea Newman, senior vice president for government affairs at Northwest Airlines said of the letter, "I think this is very good. She praised the White House for "recognizing the unique nature of the airline industry."
The airlines argue that the stock market crash, low interest rates and the Sept. 11, 2001 terror attacks have put their pension plans in a uniquely bad situation. The airlines say that requiring them to immediately meet their pension funding demands would drive them into bankruptcy.
The letter, however, does make it clear that the administration doesn't want the pension funding break to go to other industries or to multi-employer pension plans.
"If these provisions are not stricken..., the president's senior advisers will recommend that he veto the legislation," the senior administration officials wrote.
The pension funding breaks are part of broader legislation that would replace the 30-year Treasury bond in pension funding calculations.
A temporary replacement of the 30-year Treasury bond expired last year. With the rate of return of the bond falling, businesses will be required to make substantial pension fund contributions if a replacement is not found.
There is general agreement that businesses should instead be able to use a blended rate from long-term corporate bonds to make their pension funding calculations.
The replacement would save businesses $80 billion in pension contributions, according to analyses prepared by the Pension Benefit Guaranty Corporation.
Allowing airlines to avoid their pension catch-up payments will save them about $1.3 billion according to the same analyses. Steel companies would save about $300 million.
But the White House is concerned that a provision in a Senate version of the bill - which allows companies in other industries to ask for the catch-up payment relief - was written too broadly.
The administration said that just about any underfunded pension plan could qualify, allowing those funds to avoid an extra $16 billion in pension contributions.
The House and Senate will begin formal negotiations on their versions of the bill on Tuesday, House Education and Workforce Chairman John Boehner, R-Ohio, said Friday.
Bush Admin Eases Opposition To Airline Pension Break
Friday March 5, 4:52 pm ET
By John Godfrey, Of DOW JONES NEWSWIRES
WASHINGTON (Dow Jones)--In a carefully worded letter to Congressional leaders, the Bush administration has signaled that it is backing off opposition to special pension relief for the U.S. airline and steel industries.
ADVERTISEMENT
The administration has sent mixed signals on the matter in the past. Various cabinet-level secretaries had said they would recommend a veto of such legislation, while the White House itself took a much less severe tone.
But the letter Friday unifies the Bush Administration's message. It was signed by Office of Management and Budget Director Joshua Bolten, the secretaries of Labor, Treasury and Commerce and Stephen Friedman (News) , the assistant to the president for economic policy.
The letter says allowing underfunded pension plans to avoid their near-term funding would "irresponsibly weaken our pension system, jeopardizing the benefits that America's workers have earned." But the letter doesn't mention the airline and steel provisions specificially, and doesn't say they would prompt a veto recommendation.
"They leave themselves enough room to say `I told you so'," but essentially give Congress the green light to move forward with the bill, said one lobbyist familiar with the legislation.
A congressional aide said that appeared to be a fair read of the letter.
Andrea Newman, senior vice president for government affairs at Northwest Airlines said of the letter, "I think this is very good. She praised the White House for "recognizing the unique nature of the airline industry."
The airlines argue that the stock market crash, low interest rates and the Sept. 11, 2001 terror attacks have put their pension plans in a uniquely bad situation. The airlines say that requiring them to immediately meet their pension funding demands would drive them into bankruptcy.
The letter, however, does make it clear that the administration doesn't want the pension funding break to go to other industries or to multi-employer pension plans.
"If these provisions are not stricken..., the president's senior advisers will recommend that he veto the legislation," the senior administration officials wrote.
The pension funding breaks are part of broader legislation that would replace the 30-year Treasury bond in pension funding calculations.
A temporary replacement of the 30-year Treasury bond expired last year. With the rate of return of the bond falling, businesses will be required to make substantial pension fund contributions if a replacement is not found.
There is general agreement that businesses should instead be able to use a blended rate from long-term corporate bonds to make their pension funding calculations.
The replacement would save businesses $80 billion in pension contributions, according to analyses prepared by the Pension Benefit Guaranty Corporation.
Allowing airlines to avoid their pension catch-up payments will save them about $1.3 billion according to the same analyses. Steel companies would save about $300 million.
But the White House is concerned that a provision in a Senate version of the bill - which allows companies in other industries to ask for the catch-up payment relief - was written too broadly.
The administration said that just about any underfunded pension plan could qualify, allowing those funds to avoid an extra $16 billion in pension contributions.
The House and Senate will begin formal negotiations on their versions of the bill on Tuesday, House Education and Workforce Chairman John Boehner, R-Ohio, said Friday.
