Efforts to provide corporations with relief from new pension funding rules that are kicking in just as stock and bond markets have conked out have drawn opposition from the Bush administration.

It’s a twist that could derail corporate hopes for speedy approval of changes to pension laws, leaving large private employers potentially on the hook to pump billions into their underfunded pensions after closing the books on 2008 in just a few weeks.

Lawmakers and lobbyists have been angling to push through changes to the Pension Protection Act of 2006—either as a stand-alone measure or as part of any Big Three automaker bailout package—that would ease new contribution requirements the PPA triggers this year. But shortly after leaders in the Senate formally introduced proposals at the behest of hundreds of corporations, the Bush administration weighed in with several concerns.

As administration officials noted in a memo circulated to members of Congress and lobbyists late last month, allowing companies to forgo new contribution requirements could cause plans that are already significantly underfunded to grow even more underfunded over time. 

This could translate into an estimated $3 billion in new claims placed on the Pension Benefit Guaranty Corp. over the next decade, the officials estimated. In addition, “workers would lose billions in unfunded pension benefits not guaranteed by the pension insurance system,” according to the memo.

While $3 billion is not insignificant, it pales in comparison with the projected record $280 billion combined pension deficit that large companies currently carry, consultants at Mercer say. Such a deficit could force companies to make up to $150 billion in new contributions next year, according to estimates from the Center for Retirement Research at Boston College. 

Employer advocates argue that corporate earnings could suffer next year because of the stiffer funding requirements, which could force companies to cut back benefits or reduce their workforces. 

“There are always going to be trade-offs,” said Mark Warshawsky, director of retirement research at Watson Wyatt and a former assistant secretary for economic policy at the Treasury Department. “But given the broader economic implications if these relatively modest levels of relief are not granted, that $3 billion [potential burden on the PBGC] strikes me as a fair trade-off.”

The White House opposition to corporate pension relief has intensified over the past week, several sources said, noting there still are individuals in the current administration who helped construct the PPA, widely cited as the most important pension legislation in decades.

“It may be a pride-of-authorship issue,” said Kathryn Ricard, vice president of retirement policy at the ERISA Industry Committee, one of a dozen employer advocates leading the movement to change the new PPA funding provisions. “Any talk about rolling it back may send grave concerns up their backs.”

The opposition to PPA relief is drawing the ire of some lawmakers and lobbyists. No one appears to be more irked than Rep. Earl Pomeroy, D-North Dakota, who is blasting both the administration and the pension insurer for their stances. 

“[The] PBGC and the administration have no plan to help workers and employers except to suggest that Congress should wait and see what happens to pensions over the next few years,” Pomeroy wrote to PBGC Director Charles Millard in a letter dated November 26. “This is as unacceptable as it is irresponsible.”

Pomeroy said in an interview last week that when Millard testified before the House Ways and Means Committee in September, the administration did not have a position on tweaking the funding requirements included in the PPA. 

“It was only at the 11th hour that the administration chose to voice its opposition,” he said, adding that he has arranged for a meeting with PBGC officials this week. “They have been moving, behind the scenes, to try and kill the possibility of granting any form of contribution relief to corporations.” 

PBGC officials declined to comment. The White House press office did not offer a comment.

The PBGC, which takes over plans from corporations when they can no longer meet their pension obligations, has managed to shrink its deficit to $11.2 billion at the end of September from $14.1 billion last year. It’s an improvement, but there’s still a significant deficit. The number also does not factor in the violent October and November market collapses that have further eroded scores of defined-benefit pension plans’ funding levels. 

There should be no immediate concerns about the PBGC’s solvency, insisted Bradley Belt, executive director of the agency until early 2006. The PBGC still has a large pool of available assets—$61.6 billion—to cover $72.3 billion in pension promises that are “very long-term liabilities,” explained Belt, now chairman of Palisades Capital Advisors, an investment firm with offices in New York and Washington.

“There is no need to pay out these obligations right away,” he said, adding that the PBGC has paid out total benefits of just over $4 billion in each of the last two years.

Still, if the PBGC were forced to take over a number of underfunded pension plans in short order—particularly plans that have a large number of retired workers—then the agency would need what Belt called “additional budget authority” from the government to handle the increased workload.

“Although the long-term solvency of the agency would be further impaired, there likely would be no need for an immediate bailout,” he said. “It would take an extraordinary set of circumstances to create a liquidity crisis at the PBGC.”