Bush Pension Proposals Get a Cold Reception From Congress

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Bush Pension Proposals Get a Cold Reception

From Congress

By MARY WILLIAMS WALSH, New York Times

July 16, 2003

Bush administration officials offered detailed plans yesterday for how America's pension system might be strengthened but received a cold reception from members of Congress, who said they feared the measures would hurt the companies that offer the pensions.

In testimony given jointly to two House subcommittees, the Treasury under secretary for domestic finance, Peter R. Fisher, called the rules on pension contributions schizophrenic, saying they allow companies a lot of leeway, then suddenly require large cash infusions if a company crosses a certain threshold. A more gradual approach, he said, would be more sound.

Mr. Fisher suggested a number of other changes in the pension financing rules. He said the deductibility of pension contributions might be increased, the number of years in which benefit increases were accounted for might be shortened, and companies might be barred from reducing one year's pension contributions by carrying over credits from previous years' contributions.

These credits are "mere accounting entries," he said, and by carrying them forward in this way companies can "avoid making contributions, often for years."

Ann L. Combs, the assistant secretary of labor, testified that the administration wanted companies to disclose the solvency of their pension plans at least once a year, in a format that would help workers see whether their companies were making viable promises.

Virtually all pension data now disclosed by companies is either quite old or presented in a format that is hard for even securities analysts to grasp. Better information is collected by the government agency that insures pensions, but Congress made that data exempt from the Freedom of Information Act in 1994.

Ms. Combs urged members of Congress to revoke that exemption, and called on them to bar companies with insolvent plans from promising more benefits to their workers.

"The administration believes we must stop the most financially challenged companies from making new promises that they cannot afford," she said. She said the administration had its eye on 57 companies that appeared to be making pension promises they could not keep, but said that she could not name them.

Mr. Fisher said that before embarking on any changes, Congress must replace the current method for calculating pension obligations. He repeated the Bush administration's view that the current method — which bases key calculations on a single interest rate tied to the 30-year Treasury bond — must be replaced by a method that uses a series of interest rates. The rates would be tied to corporate bonds of varying durations, according to the ages of each company's workers.

Representatives from both parties agreed that the method needed to be changed, but they repeatedly challenged Mr. Fisher's proposal, saying it might be too harsh and cause companies to stop offering pensions.

"Your protection is going to `protect' workers right out of their pensions," said Representative Earl Pomeroy, a California Democrat.

Any new pension methodology must be approved by Congress. Early last year, Congress gave companies relief from some of their pension difficulties, but that relief is scheduled to expire at the end of December. If no change can be agreed upon by then, companies will have to revert to an older method. Companies said that would leave them with pension bills few could afford.