Employers Balk at Senate Plan
But businesses halted the process to battle proposed increases in pension plan payments for financially ailing companies. They also object to limiting so-called smoothing of pensiogn assets and liabilities, saying that it would increase funding volatility.
"A lot of companies have run the numbers and understand how the bill will affect their bottom line," says Lynn Dudley, vice president of the American Benefits Council, which represents about 250 large corporations. "We've hit a bump in the road, not a roadblock. Everybody wants more money in the plans, but we have to do it in a way that doesn't cost jobs, that doesn't cost people other benefits."
While corporate leaders make their case with senators, the Senate bill has been held up by Sens. Mike DeWine, R-Ohio, and Barbara Mikulski, D-Maryland, who are trying to build support for an amendment that would allow three-year smoothing of assets and liabilities. The Senate bill would institute a one-year limit.
Their measure also would impose higher "at risk" funding for companies whose plans are less than 60 percent funded. The Senate bill calls for stricter rules if a company's credit rating is less than investment grade.
DeWine wants to avoid socking manufacturing companies with higher pension payments as they deal with the vicissitudes of a cyclical industry. General Motors, for instance, would have to increase its contributions because it has a junk-bond rating, even though the company asserts that its pension plan is not in jeopardy.
The Senate legislation is similar to President Bush's proposal that would define full funding as 100 percent. The administration is worried that continuing multibillion-dollar defined-benefit pension terminations will lead to a taxpayer bailout of the Pension Benefit Guaranty Corp., which has a $23.3 billion deficit.
The Senate may not act this year on pension reform because floor time is limited, according to a senior Republican Senate aide. In addition, the DeWine-Mikulski amendment has thrown a wrench into a delicate two-committee negotiating process.
"There's quite a bit of fatigue that has set in with some members," said the Senate aide, who is not authorized to speak for his boss on the record.
On the other side of the Hill, the House Ways and Means Committee is expected to act in November on pension legislation written by the House Education and Workforce Committee.
"If we can just get a bill to conference, (DeWine and Mikulski's) concerns are going to be on the table because they're the same concerns we have," says Steve Forde, spokesman for the workforce committee.
One other factor in pension reform is whether the White House wants to achieve a breakthrough to give Bush a retirement security victory at a time when Social Security reform is languishing.
If pension legislation does not pass by January 1, plan costs will increase as they begin using the 30-year Treasury bond rate to calculate their liabilities instead of a corporate bond rate.