WASHINGTON – The House sought to reassure millions of baby boomers worried about retirement benefits, passing legislation on Thursday that supporters said would revitalize employer-based pension plans.
"Our nation's pension laws are outdated and broken, placing at risk the retirement security of millions," said Rep. John Boehner, R-Ohio. He was a chief sponsor of the bill that tightens pension funding rules and helps the federal agency that insures pension plans.
"Today we have an opportunity to change this by voting for the most comprehensive reforms to worker pension laws in more than a generation," said Boehner, chairman of the House Education and the Workforce Committee.
The legislation, backed by an array of corporate groups and unions, passed 294-132. Ahead are negotiations, probably early next year, with the Senate, which last month passed a similar version.
The goal is to give some peace of mind to the millions of people in traditional defined-benefit plans, which give retirees a fixed amount based on salary and years of service.
Such plans are now in decline as older manufacturing industries try to reduce pension costs and many companies move toward 401(k) and other defined-contribution plans.
Defined-benefit plans are now underfunded by an estimated $450 billion. The Pension Benefit Guaranty Corporation, the self-financed federal agency that insures such plans, recently reported a deficit of $22.8 billion as it takes over payments of abandoned plans, particularly in the airlines and steel industries.
Most Democrats opposed the House bill, arguing it would prompt more companies to freeze or eliminate plans.
Rep.Charles Rangel of New York, top Democrat on the House Ways and Means Committee, said the measure tightens rules on companies with pension liabilities "without simultaneously eliminating loopholes that would allow these companies to easily dispose of their pension obligations in bankruptcy."
Beyond the future of the pension plans and the 44 million covered by the agency, the legislation has political import for the Bush administration.
The administration fell short in pushing for an overhaul of the Social Security system and sees the pension changes as a way of contributing to the economic security of older people.
The White House expressed support but also said in a statement Thursday it wanted the final bill strengthened with respect to the level of required plan contributions and premiums needed to keep the pension agency solvent and avoid a taxpayer bailout.
If the net effect of the final bill is to weaken funding requirements, the president will be advised to veto it, the statement said.
The bill would:
—require companies, over a seven-year period, to meet a 100 percent funding target.
—establish a new interest rate measure by which companies can more accurately calculate their liabilities.
—stipulate that plans that are less than 80-percent funded cannot use credit balances to avoid minimum required contributions.
—bar the funding of executive compensation plans when worker pension plans are severely underfunded.
—raise from $19 to $30 per participant the annual premium that companies pay the financially faltering agency.
—try to clarify the law concerning cash-balance plans, under which employers set aside money each year for an employee with a guarantee that it will grow at a specific rate. Such plans have been challenged in court by labor groups charging they discriminate against older workers.
The House Ways and Means Committee added several nonpension proposals to the bill, including making permanent a 2001 law increasing contribution limits on Individual Retirement Accounts.
The Senate bill, unlike the House's, makes exceptions for financially troubled airlines, giving them a longer period to fill underfunded plans.
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