Senate Panel Passes Pension Relief Bill

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Senate Panel Passes Pension Relief Bill

By Leigh Strope, The Guardian

October 29, 2003

Relief for companies complaining of skyrocketing pension costs cleared another hurdle in Congress on Wednesday, with a Senate panel approving a three-year interest rate adjustment that would let businesses pay less into their workers' retirement plans.

The bill passed the Senate Health, Education, Labor and Pensions Committee after a compromise was brokered last week between committee Chairman Judd Gregg, R-N.H., and the top Democrat, Sen. Edward M. Kennedy.

Traditional pension plans have been hurt by a combination of low interest rates, the poor economy, stock market losses and an increase in retirees. Supporters fear that companies will stop offering the benefit if relief is not granted, putting labor unions on the rare same side as corporations.

The House passed a similar plan three weeks ago, but it provides only a two-year change.

Underfunding for all pension plans is estimated at more than $350 billion.
Congress is facing a year-end deadline to enact a new measure for future pension plan obligations. The 30-year Treasury bond used to serve as the basis for calculating obligations. But the government stopped issuing new 30-year bonds in 2001. A temporary replacement will expire at year's end.

``Congress must act quickly to replace the 30-year Treasury Bond rate, or companies will be forced to divert billions of dollars from capital investment and job growth in order to satisfy arbitrary pension funding rules,'' Gregg said.

Unlike the House bill, the Senate plan would create a commission to review pension funding issues and report recommendations to Congress by December 2005. It requires Congress to act within 120 days of the report.

A study by the General Accounting Office, the investigating arm of Congress, found the pension system faces severe structural problems and reform is needed. The report was issued at a House hearing on Wednesday. Suggested remedies included providing better incentives for sponsors to keep their plans fully funded.