The House and Senate are trying to settle on a final bill that would make technical corrections to the Pension Protection Act, which was signed into law in 2006.

Most are relatively minor and not controversial. One that is drawing fire centers on an accounting technique called smoothing, which reduces volatility by permitting the use of expected returns on pension assets when calculating liability.

The reform bill limited smoothing to 24 months instead of the previous four years. The Bush administration was concerned that the practice, which it wanted to eliminate altogether, allowed companies to undervalue their pension liabilities, contributing to huge defaults.

Treasury Department regulations implementing the pension law would repeal asset smoothing and force companies to average asset values over two years.

The Senate version of the technical corrections bill would clarify that smoothing is allowed. The House version doesn’t contain a similar provision.

There are some members of the House who say such a revision would be a substantive, rather than technical, change to the pension law.

Business groups are working hard on Capitol Hill to get the smoothing fix done now rather than waiting to make the change through separate legislation—in part because quarterly pension payments are due April 15.

“Smoothing is huge for employers,” says Lynn Dudley, senior vice president for policy at the American Benefits

Council, an organization representing large companies. “Smoothing is the No. 1 issue with respect to whether they’re going to keep their plans.”

Averaging can undervalue pension assets and raise liability, according to Phil Chan, a director at Deloitte Consulting in New York. Without any revisions to the pension bill, clients “would rather just use the market value because most of the time, averaging [produces] rates less than market value,” he says.

Congress didn’t set out to make asset averaging the law, according to Dudley. “In the legislative history, it’s obvious they intended smoothing,” she says. “They didn’t mean to punish people for having a defined-benefit plan.”

But companies aren’t engaged in the fight to secure smoothing. “I’m not seeing a groundswell of support,” says a pension consultant who has been involved in Capitol Hill discussions. “The employers need to step up.”

The underlying bill was the first major reform of pension law since 1974. Among its many provisions, it requires companies to cover 100 percent of their pension liabilities within seven years, beginning this year.

A Watson Wyatt study in November showed that high-risk pension plan liabilities at Fortune 1,000 companies had fallen to 8 percent in 2006 from 17 percent in 2003. The deficit of the Pension Benefit Guaranty Corp., the federal insurer, was $14 billion at the end of September. It had been as high as $23 billion in recent years.

—Mark Schoeff Jr.