WASHINGTON – Senators backed by an alliance of manufacturers and unions blocked action Thursday on a pension overhaul bill in protest over requirements that companies with less than stellar credit ratings pay more into their pension funds.
"We're talking but we're not getting anywhere," said Sen. Mike DeWine (search), R-Ohio. With Sen. Barbara Mikulski (search), D-Md., DeWine used a procedure that allows individual senators to stop legislation from advancing to the full Senate.
DeWine said the auto and steel industries in his state were among those that could be hurt by requirements.
Senate leaders had hoped for a short debate and quick vote on the bill before the Senate left Friday for a weeklong recess.
The bill would tighten rules to guarantee that employers fully fund their pension programs. The measure also would shore up the financial position of the federal agency that insures those plans.
At issue are proposed higher funding burdens on pension plans that have noninvestment grade credit ratings.
Cyclical industries in the manufacturing sector occasionally fall into junk bond status and credit rating "is not an appropriate way to determine their funding obligations" or their ability to fund their pension plans, said Dorothy Coleman, vice president for tax policy at the National Association of Manufacturers.
The bill imposes additional liabilities on a company with lower credit rating "even if such a company's plan is well-funded and poses little if any risk" to the federal Pension Benefit Guaranty Corporation, said James Klein, president of the trade group American Benefits Council.
Mikulski said companies that want to provide pension plans for their workers should not be penalized because of their credit ratings. She said some of these plans are far more viable than those in the airlines industry, which under the Senate bill receives concessions in meeting pension obligations.
Labor groups applauded the intent to require employers to live up to their promises to retiring workers. But they said the credit rating proposal could force weak companies into bankruptcy or into terminating their pension plans.
"It makes no sense to provide relief for companies in the troubled airline industry while at the same time imposing draconian funding requirements on auto and auto parts companies," UAW legislative director Alan Reuther wrote senators.
The AFL-CIO's legislative director, William Samuel, added, "The immediate cash contribution required by this provision could unnecessarily send an employer into bankruptcy."
DeWine and Mikulski are pushing an amendment that would remove the link between plan funding and credit ratings.
But Senate Finance Committee Chairman Charles Grassley (search), R-Iowa, said he did not want to reopen negotiations on a 600-page bill developed by Republicans and Democrats from his committee and the Senate Health, Education, Labor and Pensions Committee.
The bill, which still requires House action, would give most companies with defined benefit plans three years to reach a 100 percent funding target and raise the premiums they pay to the PBGC.
Last year, the agency recorded liabilities of more than $23 billion as it took over the pension plans of bankrupt airlines and steel companies.