>TheHill.com reported that US Secretary of Labor Elaine Chao leveled the criticism in a letter to US Representative John Boehner (R-Ohio), a key sponsor and author of The Pension Protection Act. The bill passed Boehner’s House Education and Workforce Committee last week and has been sent to the House Ways and Means Committee, where influential chairman Representative Bill Thomas (R-California), who co-authored the bill with Boehner, said he wants to roll it into his Social Security reform plan. (See Boehner Pension Reform Bill Passes Committee on Party Line Vote)
According to the news report, Chao’s disagreement with the Boehner bill revolves around:
- the practice of credit balances that accrue when profits allow companies to make more than the minimum contribution to their pension plans. In leaner years, those businesses can cash in credit balances to avoid making their minimum payments. While the bill only bars use of credit balances by plans funded at 80% or less, the administration has charged that the practice leads to plan underfunding and pension defaults.
- pension smoothing under which businesses shift one year’s pension bills into another year’s liability estimates if profits make full annual funding impossible. The administration has been pushing for a complete prohibition on the practice, but the bill only cuts the smoothing window by one to two years.
“The bill should be improved to better protect the retirement security of American workers, retirees and their families,” Chao wrote to Boehner, according to the report. “The legislation does not address fully the problems facing the defined-benefit pension system.”
>Boehner spokesman Kevin Smith said the lawmaker’s goal with his bill is greater than simply shoring up funds for the nation’s private-sector pension insurer, the Pension Benefit Guaranty Corporation (PBGC). “Chairman Boehner’s goal with this legislation is not just to improve the financial condition of the PBGC but also to improve the overall health of the worker pension system to ensure employers continue to offer these plans and workers can continue to count on their benefits,” Smith responded, according to the news report.
>Chao’s continued pressure on Boehner means that US Senator Chuck Grassley (R-Iowa), chairman of the Senate Finance Committee, could be the next target of White House lobbying on pensions.
More information about the administration’s pension reform proposals is here .
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