WASHINGTON – Pension legislation meant to give retirees greater financial security and prevent airlines from dumping their plans on the government could be on the president's desk as early as next week, under a plan announced by GOP congressional leaders Friday.
The House, leaving for a five-week recess at the end of this week, could take up the massive pension bill as early as Friday evening, moving it to the Senate, which has one more week of work before its summer break.
The bill, the product of several years of congressional effort, would force employers that have fallen behind in their defined-benefit pension plan payments to catch up within seven years and close loopholes that have allowed companies to underfund their plans by an estimated $450 billion.
The measure also promotes pension alternatives, such as 401(k) plans, through such steps as automatic enrollment. It would give financial firms greater latitude in steering investors toward high-earning savings programs.
The legislation would give struggling airlines, primarily Northwest Airlines Corp. and Delta Air Lines, more time to make their pension plans whole. The fear is that if they abandon their plans — Delta is already seeking to terminate its pilot pensions — it will add billions in deficit to the Pension Benefit Guaranty Corp., which already has amassed a deficit of $22.8 billion.
The PBGC now operates on premiums and interest earnings, but a big jump in the deficit could shift its burden onto taxpayers. The agency takes over benefit payments for terminated plans.
The pension bill aims to strengthen and improve the financial status of single-employer and multiemployer plans covering some 44 million Americans.
It also would give legal certainty to future cash balance and other "hybrid" defined-benefit plans. Such plans have faced lawsuits over charges they discriminate against older workers.
Pension plans that are less than 80 percent funded would not be allowed to increase benefits during contract negotiations. Companies with plans that are at risk or in bankruptcy would be restricted in increasing executive compensation.
The legislation also gives financial firms that manage investment plans rights to offer advice to people with 401(k) and IRA plans. Advocates argued that individual investors today often don't have access to good advice, while critics questioned whether portfolio managers might give biased advice.
The GOP leaders' decision to bring the pension bill to the House floor came after House-Senate negotiations on a larger bill linking pension overhaul with tax breaks collapsed Thursday night.
House Republicans sought to strip the tax measures from the bill so they could be used as sweeteners to push a permanent estate tax cut through the Senate. The Senate side rejected that approach, and House Republicans boycotted a Senate-convened meeting to vote on the package.
Under the leadership strategy, the House and Senate were to take up a separate bill combining the estate tax cut, already rejected by the Senate, with the popular tax breaks and a minimum wage hike, a top priority of Democrats.
Senators on the pension conference balked at this two-bill approach. "This plan throws months of work in the trash, throws Senate procedure out the door and puts us back at square one," said Sen. Max Baucus, D-Mont., top Democrat on the Finance Committee.
Baucus, Finance Committee Chairman Charles Grassley, R-Iowa, and Health, Education, Labor and Pensions Committee Chairman Mike Enzi, R-Wyo., were writing House negotiators urging them to endorse the combined pension-tax break bill. "We have spent many months discussing the vital issues that this bill addresses," they said.