WASHINGTON (MarketWatch) -- The Senate overwhelmingly approved sweeping changes in the nation's pension laws Thursday night, sending President Bush legislation designed to force most companies to shore up their private pension plans.
The Senate voted 93-5 to pass the bill. The House passed it last week.
"The Senate is about to deliver a real victory for working Americans who spend a lifetime earning their pensions by adopting the safeguards and reforms we promised" when House and Senate lawmakers began negotiations in March aimed at ironing out differences between each chamber's version of the complex legislation, said Senate Health, Education, Labor and Pensions Committee Chairman Mike Enzi, R-Wyo., ahead of the vote.
"Too many Americans lie awake at night worrying about how they can afford retirement. Too many workers have seen their pensions fail in recent years. And fifty percent of Americans have no pension at all at their job," said Sen. Edward Kennedy of Massachusetts, the senior Democrat on the Senate pensions panel and a co-author of the original Senate pension bill.
Around 44 million Americans have defined-benefit pensions, which pay retirees a fixed amount based on length of service and salary history. But pensions are underfunded by around $450 billion, and the federal Pension Benefit Guaranty Corp., which is funded by corporate premiums and investments, is running a deficit of more than $22 billion. Read the MarketWatch special report on pensions.
The agency, which is funded solely by premiums collected from firms with defined-benefit plans, has sufficient cash flow to meet its obligations for now. But the possibility of more trouble in the airline and auto sectors has raised fears that the nation's pension system might one day require a taxpayer-funded bailout on the scale of the savings-and-loan debacle of the 1980s.
Under current law, corporate defined-benefit pension plans must be 90% funded. The bill would require all companies to ensure their plans are 100% funded within seven years. And companies whose plans fall below a certain threshold would be required to make even larger contributions to make up the gap.
Among its more contentious provisions, the 900-plus-page bill would give airlines that have frozen their pension plans, barring new employees from participating and halting the accrual of benefits, 17 years to meet their funding obligations. The provisions apply to Delta Air Lines and Northwest Airlines, which also qualify to use a more advantageous interest rate when figuring their pension liabilities.
The carriers, which remain in bankruptcy protection, contend they will have no choice but to dump their pension plans on the PBGC unless funding rules are changed.
Other airlines that opt for a "soft freeze" would have 13 years to fully fund their pension plans. That's drawn criticism from Texas lawmakers, who contend Dallas-based AMR Corp. would be left at a competitive disadvantage to Delta and Northwest.
Northwest dismissed the complaints.
"All airlines have access to the various provisions of the bill and can choose which option they prefer," Northwest spokesman Kurt Ebenhoch said earlier this week. The terms are different "because the frozen pension plan option limits and protects the Pension Benefit Guaranty Corporation liability, the ongoing plan option does not."
The bill also loosens rules that have restricted financial-services firms from providing investment advice on workers' 401(k) plans and investment retirement accounts, or IRAS, even if it includes some of the firm's products among the investment choices.
Enzi also chaired the House-Senate talks, which ended without an agreement last week amid an intra-party Republican battle over how to deal with a package of tax cuts that Democrats and Senate Republicans wanted to add to the pension bill as a sweetener.
The House, before departing at the end of last week for a five-week recess, passed pensions language that the negotiators had largely agreed upon as a separate bill.
House Republican leaders combined the tax measures, which included the business research-and-development tax credit and the college tuition credit, with legislation to boost the minimum wage and reduce the estate tax.
That bill also cleared the House, but failed to overcome a filibuster threat in the Senate.
Democrats, who oppose the estate-tax measure, had previously held open the possibility of amending the pension bill on the Senate floor with the other, noncontroversial tax measures, but eventually agreed to allow the Senate to move quickly to pass the bill without amendments. http://i.mktw.net/mw3/News/greendot.gif
William L. Watts covers Congress and politics for MarketWatch.
The Senate voted 93-5 to pass the bill. The House passed it last week.
"The Senate is about to deliver a real victory for working Americans who spend a lifetime earning their pensions by adopting the safeguards and reforms we promised" when House and Senate lawmakers began negotiations in March aimed at ironing out differences between each chamber's version of the complex legislation, said Senate Health, Education, Labor and Pensions Committee Chairman Mike Enzi, R-Wyo., ahead of the vote.
"Too many Americans lie awake at night worrying about how they can afford retirement. Too many workers have seen their pensions fail in recent years. And fifty percent of Americans have no pension at all at their job," said Sen. Edward Kennedy of Massachusetts, the senior Democrat on the Senate pensions panel and a co-author of the original Senate pension bill.
Around 44 million Americans have defined-benefit pensions, which pay retirees a fixed amount based on length of service and salary history. But pensions are underfunded by around $450 billion, and the federal Pension Benefit Guaranty Corp., which is funded by corporate premiums and investments, is running a deficit of more than $22 billion. Read the MarketWatch special report on pensions.
The agency, which is funded solely by premiums collected from firms with defined-benefit plans, has sufficient cash flow to meet its obligations for now. But the possibility of more trouble in the airline and auto sectors has raised fears that the nation's pension system might one day require a taxpayer-funded bailout on the scale of the savings-and-loan debacle of the 1980s.
Under current law, corporate defined-benefit pension plans must be 90% funded. The bill would require all companies to ensure their plans are 100% funded within seven years. And companies whose plans fall below a certain threshold would be required to make even larger contributions to make up the gap.
Among its more contentious provisions, the 900-plus-page bill would give airlines that have frozen their pension plans, barring new employees from participating and halting the accrual of benefits, 17 years to meet their funding obligations. The provisions apply to Delta Air Lines and Northwest Airlines, which also qualify to use a more advantageous interest rate when figuring their pension liabilities.
The carriers, which remain in bankruptcy protection, contend they will have no choice but to dump their pension plans on the PBGC unless funding rules are changed.
Other airlines that opt for a "soft freeze" would have 13 years to fully fund their pension plans. That's drawn criticism from Texas lawmakers, who contend Dallas-based AMR Corp. would be left at a competitive disadvantage to Delta and Northwest.
Northwest dismissed the complaints.
"All airlines have access to the various provisions of the bill and can choose which option they prefer," Northwest spokesman Kurt Ebenhoch said earlier this week. The terms are different "because the frozen pension plan option limits and protects the Pension Benefit Guaranty Corporation liability, the ongoing plan option does not."
The bill also loosens rules that have restricted financial-services firms from providing investment advice on workers' 401(k) plans and investment retirement accounts, or IRAS, even if it includes some of the firm's products among the investment choices.
Enzi also chaired the House-Senate talks, which ended without an agreement last week amid an intra-party Republican battle over how to deal with a package of tax cuts that Democrats and Senate Republicans wanted to add to the pension bill as a sweetener.
The House, before departing at the end of last week for a five-week recess, passed pensions language that the negotiators had largely agreed upon as a separate bill.
House Republican leaders combined the tax measures, which included the business research-and-development tax credit and the college tuition credit, with legislation to boost the minimum wage and reduce the estate tax.
That bill also cleared the House, but failed to overcome a filibuster threat in the Senate.
Democrats, who oppose the estate-tax measure, had previously held open the possibility of amending the pension bill on the Senate floor with the other, noncontroversial tax measures, but eventually agreed to allow the Senate to move quickly to pass the bill without amendments. http://i.mktw.net/mw3/News/greendot.gif
William L. Watts covers Congress and politics for MarketWatch.
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