Bill would change retirement obligations for blue-collar workers

back

Support Global Action on Aging!

Thanks!

Bill would change retirement obligations for blue-collar workers

By Leigh Strope

Raleigh News, May 6, 2003

WASHINGTON (AP) - A little-noticed provision in a House pension bill would let companies that employ blue-collar workers reduce their retirement obligations by billions of dollars because those workers on average don't live as long as others.

The measure, on page 111 of the 207-page bill sponsored by Reps. Rob Portman, R-Ohio, and Benjamin Cardin, D-Md., would let employers use a separate mortality table for blue-collar workers to determine their liability.
In essence, companies would not be required to pay as much into the pension plan because they could assume blue-collar workers will die sooner than other employees. The provision was first reported by The New York Times in Tuesday's editions.

More than half of the 32,000 traditional pension plans provided by private employers are underfunded, according to the government's Pension Benefit Guaranty Corp.

The alarming financial state of those plans is prompting the Bush administration and Congress to look at ways to provide relief to employers while also encouraging them to continue to offer pensions to employees.

One problem, pension providers say, is that historically low interest rates are artificially inflating their future obligations, forcing them to heavily fund the plans at the expense of new hiring and investments - at a time when cash already is scarce.

Another argument is that employers are being forced to set aside retirement benefits for people that statistically won't be around.

"The argument would be made in some situations that the current law requires more money than is needed because the mortality assumption that is applied is inaccurate," said Janice Gregory, a vice president of the Erisa Industry Committee, which represents major employers.

"What's happening in those cases is the company is being forced to put money into the plan that could be going for jobs, health coverage, upgrading plants and all sorts of stuff," she said. "In their calculations the money is being wasted because its not really going to be needed to pay the benefits."

With the dismal stock market wreaking havoc on 401(k) accounts, the traditional pension plan is regaining popularity with employees because it promises a specified monthly benefit at retirement and they aren't required to contribute anything.