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US Senators OK Plan Doubling Pension Premiums
By Susan Cornwell, Reuters
October 18, 2005
A plan to more than double corporate pension insurance premiums and penalize companies shedding pensions in bankruptcy was approved on Tuesday by a U.S. Senate committee over business protests.
But backers said the plan would not take effect if other, comprehensive pension reforms are enacted this year.
"None of us wants this premium ultimately to be enacted into law," said Wyoming Republican Sen. Mike Enzi, chairman of the Health, Education, Labor and Pensions (HELP) Committee, before the panel approved the measure by a vote of 15 to 5.
The plan would raise insurance premiums to $46.75 per participant, per year, from the current $19 paid by companies sponsoring traditional pension plans to the agency that insures them, the Pension Benefit Guaranty Corp
(PBGC).
That agency is currently running a $23.3 billion deficit which is expected to get larger if some companies now in bankruptcy protection, such as Delta Air Lines Inc., Northwest Airlines , and auto parts supplier Delphi Corp. , drop their pensions in the PBGC's lap.
Enzi had threatened the premium hike earlier this month, when he warned that a big increase would be needed if business interests continued to block reform legislation aimed at shoring up the pension system and the
PBGC.
He said on Tuesday that the premium hike would not go into effect if the pension reforms are passed later this year. The higher premiums, part of the HELP committee's recommendations for meeting federal budget targets, would still have to be approved by the entire Senate and later the House in any case.
New Mexico Democrat Sen. Jeff Bingaman said he would offer an amendment on the Senate floor, making the premium $30 per plan participant, instead of $46.7
The plan approved by the HELP committee on Tuesday would require even larger sums from companies that shed pensions in bankruptcy, although an amendment by Republican Sen. Johnny Isakson of Georgia said this would not apply to companies that have already filed for bankruptcy protection in his state, such as Delta.
This payment -- a whopping $1,250 per plan participant in each of the first three years after emergence from bankruptcy protection -- was denounced as "grossly irresponsible" by business lobbyists.
"The punitive new premium tax on emergence from bankruptcy, as much as $185.5 million for a company with 50,000 employees, would likely force dissolution of most if not all companies that might otherwise emerge from bankruptcy at a cost of hundreds of thousands of jobs," said a statement by the ERISA Industry Committee, which represents large employers.
The comprehensive pension reform bill that was blocked in the Senate earlier this month would have raised pension insurance premiums to $30 per plan participant.
It also would have generally tightened the rules on funding traditional pensions, known as "defined benefit plans," which have a fixed payout at retirement. But there would have been relief for distressed airlines willing to freeze their plans.
Opponents who delayed the pension bill's consideration said some provisions were too onerous, in particular those imposing tougher funding rules on companies with falling credit ratings. Senate Majority Leader Bill Frist, a Tennessee Republican, says he still wants to get the pension bill considered this year.
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