House Panel Passes Pension Bill

The same day a federal agency assumed control of United Airlines' pension plans (search), House Republicans advanced legislation aimed at reducing similar defaults in the future.

The House Committee on Education and the Workforce, in a roll-call Thursday that Democrats protested by voting "present," approved a bill that:

—Requires corporations to use a new interest rate when measuring their future pension obligations, which is expected to force some companies to set aside more reserves to pay retiree benefits (search).

—Curbs increases in benefits promised from underfunded plans.

—Increases premiums paid to the Pension Benefit Guaranty Corp., the federal agency that insures pension plans.

—Enhances public disclosure of information about severely underfunded plans.

In addition, the bill creates funding targets for multi-employer pension plans, in which companies band together to provide a single pension plan for laborers who may bounce between them. The legislation also establishes "yellow" and "red" zones for especially underfunded pension plans and outlines steps and timetables for rehabilitating them.

Democrats complained they did not have enough time to review the bill, announced only June 9, before voting.

Rep. John Boehner (search) of Ohio, the committee's Republican chairman, said he expected the multi-employer language "to be the rocket fuel that will propel this through the Senate." He also said that if the bill is not folded into larger House retirement security legislation, including Social Security changes, he will seek to have the House vote on a stand alone bill.

Boehner said the measure "puts us on the fine line" between bolstering protections for employees expecting pensions and avoiding regulation that discourages employers from offering continuing defined-benefit plans, in which an employer guarantees a set monthly payment upon a worker's retirement. Roughly 34 million people — about 20 percent of the nation's work force — expect to receive such retirement payments.

In May, United defaulted on $9 billion in pension obligations, which will be shifted to the PBGC. The corporation, which has a deficit of $23.3 billion, will only pay about $6.6 billion in benefits to 120,000 current and retired United employees because of limits in its insurance coverage.

The House legislation now moves to the House Ways and Means Committee for review.

Democrats on the Workforce Committee, led by their highest-ranking member, Rep. George Miller (search) of California, unsuccessfully sought more time to review the legislation. They also saw the panel's Republican majority steamroll all of their proposed amendments on party-line votes.

"This is not casual legislation," Miller said before the final 27-22 roll-call vote on the bill, in which all Democrats voted "present." "This is legislation that is seriously dealing with the retirement nest eggs and the futures of millions of Americans."

Neither the bill nor stiffer legislation proposed by the White House outlaws such "distressed terminations," under which a court can allow a company to default on its pension obligations if that will enable it to emerge from bankruptcy.

Committee Democrats argued that other airlines may follow United's lead. Among their defeated amendments were ones that proposed executive and rank-and-file pension plans suffer equally in the event of a termination, and that the committee scrap language allowing firms that provide investment advice to executives to also provide advice to employees.

Unions in particular objected to that proposal, saying it could encourage a conflict of interest between a corporation's goals and an employee's interests.

"There's no reason to change from the current rules to provide conflicted advice," said Rep. John Tierney (search), D-Mass., who offered the defeated amendment.