Congress Adjourns Without Passing Pension Relief Bill

Senators were attempting to pass the legislation to provide a two-year break on DRC – accelerated payments required of employers with substantially underfunded pension plans.  The proposal would have also allowed businesses over the next two years to use a rate based on investment-grade corporate bonds when making pension calculations, according to a Reuters report.

>Senate leaders are now aiming to address the underfunding problems with defined benefit plans when lawmakers return to work in January.   Business groups, though, said the delay will force companies to direct billions of dollars into their pension that could have gone into things such as new jobs or investment.

>The prospect of getting a proposal through Congress before dismissal looked grim after the US Senate recessed for Thanksgiving after failing to pass the proposed legislation (See  Senate Fails to Pass Pension DRC Act ).   Passage before the Thanksgiving break was important since the Senate’s version of DRC relief differed from the US House of Representative’s earlier approved DRC bill.  While the House bill would provide relief only to airlines (See House Approves Pension Relief Bill ), the Senate’s version contains DRC proposals that are stricter than the House’s language and would be available to all businesses.

>As before the Thanksgiving break, in the latest round of debates, the Senate was unable to unite behind one approach and leaders agreed to postpone. Senate Republican Leader Bill Frist said the chamber would take up the House bill providing the $25.5 billion in temporary relief to companies “at a time to be determined” in the new year.

White House Road Blocks

>However, even if a proposal had been passed and differences between the House and Senate versions reconciled, the measure still required President Bush’s signature before it could be enacted; something that was far from guaranteed. The Bush administration had previously come out strongly against a moratorium on pension deficit-reduction contributions, saying it would only worsen the funding crunch companies eventually face and increase the risk that pension plans would collapse down the road (See  PBGC Board Cautions Senate on DRC Action ).

Overall, the Bush administration opposes special breaks for companies with badlyunderfunded pensions, but supports temporary relief for traditionalpension plans while moving to a longer-term solution.  That long-term solution includes the use of a “yield curve” that would considerthe age of a company’s workforce when figuring pension liabilities.

Any attempts at reaching longer term relief were also left on the table until 2004, as Congress was also unable to reach an agreementon a measure to replace the 30-year Treasury interest rate with a composite corporate bond rate for pension funding calculations.   Even though this part of the measure faces no real opposition on either side of Congress, the DRC provisions have weighed down the measure.   The House passed the rate replacement in October as a stand-alone bill (HR 3108) (See  US House Solidly Approves Pension Funding Bill )and in November as part of a tax extenders’ bill (HR 3521).   That tax extenders bill also included the DRC provisions.