~ May 29 is the new target for sending a bill to President Bush.
WASHINGTON -- Squabbles over special treatment for bankrupt airlines and beleaguered auto companies are delaying final action in Congress on a pension bill that would affect millions of workers, retirees and taxpayers.
Lawmakers trying to merge House and Senate versions already have missed one deadline, April 15, when some companies had to recalculate their pension fund obligations.
Memorial Day, May 29, is the new target for sending to President Bush a bill to prop up the finances of defined-benefit pension plans covering some 44 million people in the United States.
The Senate passed its bill in November; the House approved its version in December. They opened negotiations last month on a compromise but immediately hit a wall over a Senate plan to make companies with poor credit ratings pay more into their pension plans.
That proposal was part of the overall theme of the legislation: ensuring that companies honor their promises to retirees and restore health to a single-employer pension system now underfunded by an estimated $450 billion.
The idea was opposed by senators with ties to the auto industry, and faces strong resistance in the House.
Also crying foul is General Motors Corp., laboring under a junk bond rating and high health and pension costs.
GM says its pension plan, with $95 billion in assets, is overfunded by $6 billion. To be penalized for its weak credit rating "with more pension obligation is obviously not a favorable situation. We think the two issues should be decoupled," GM spokesman Christopher Preuss said.
The chairman of the Senate Finance Committee, Republican Sen. Charles Grassley of Iowa, says the provision is needed to prevent massive defaults that would add to the financial woes of the Pension Benefit Guaranty Corp.
The federal agency, financed by premiums paid by companies with pension plans, insures employer-based plans worth $2 trillion and covering 44 million workers. It has taken over paying current and future benefits to more than 1 million workers in more than 3,400 terminated defined benefit plans.
Last fall, the agency concluded that GM was $31 billion short of what it would need to fulfill all its pension obligations if its plan was suddenly ended and its assets transferred to the agency. GM objected, saying the agency's calculations did not indicate GM's ability to continue putting money into the plan.
The agency is already running a $22.8 billion deficit. A GM bankruptcy could add up to $20 billion, according to some Senate estimates.
The AFL-CIO and other unions are worried that companies will go broke and renege on their pension obligations. The labor federation has come out against a credit rating link.
That dispute alone played a role in delaying for three months the start of House-Senate talks on a compromise. They did not begin until Republicans bowed to Democrats' demand that both Sens. Barbara Mikulski of Maryland, with ties to the auto industry, and Tom Harkin of Iowa, a close ally of unions, join the Senate's negotiating team.
Businesses and unions are balking at tougher funding rules that they say will drive more companies to file for bankruptcy or abandon their pension plans. The White House, on the other side, has threatened to veto any bill that weakens funding requirements and pushes the pension agency closer to a fiscal crisis that might require a taxpayer bailout.
"The focus has shifted a lot of times to what would be good for the PBGC, not what would be good for plan participants," said Lynn Dudley, vice president of the American Benefits Council, which represents companies with pension plans. If companies terminate or freeze plans, she said, "not much else matters."
The White House also opposes a Senate plan to give Delta Air Lines and Northwest Airlines -- both in bankruptcy -- 20 years to make up a combined $16.3 billion underfunding in their pension plans.
Senate Democrats say airline relief must be part of the final package and negotiators. In a move that could further displease the White House, they are considering extending industry-specific relief to others, including the auto and steel industries.
The pension agency wants to avoid a repeat of last year's takeover of the pension plans of bankrupt United Airlines, which added $10 billion to the agency's liabilities.
Senate aides say a separate issue -- hybrid, or cash balance, plans -- could be tougher to resolve than the credit rating dispute. Under cash balance plans, companies set aside money each year for employees and generally make a lump sum payment when a worker retires or leaves the company.
The pension legislation tries to clarify the law in the aftermath of a lawsuit against IBM by employees who said the company committed age discrimination when it switched to a cash balance plan. That case was settled in 2004 but with two pending claims that could push the cost of the settlement to IBM to $1.4 billion.
Businesses are pushing hard for this part of the House bill, including making it retroactive. The House, however, has passed a resolution saying the final bill should use Senate language to protect older workers' pension benefits when their companies switch to cash balance plans.
Congress' Government Accountability Office concluded in a study in November that employees whose companies switch to cash-balance plans generally lose benefits regardless of age.
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On the Net:
Information on the bills, H.R. 2830 and S. 1783, can be found at http://thomas.loc.gov/
Pension Benefit Guaranty Corp.: http://www.pbgc.gov/
American Benefits Council: http://www.americanbenefitscouncil.org/
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