House, Senate Panel Passes Pension Stopgap Measure

April 1, 2004 ( - U.S. House of Representatives and Senate conferees have adopted a stopgap pension proposal that now goes to the floors of both chambers before it can head to President Bush for his signature.

>Time was of the essence in the passage of the bill.   Not only does the measure need to be approved by the President before companies make their quarterly contributions on April 15 th , but the House is scheduled to adjourn at the end of this week, meaning action on the pension relief bill had to be completed by tomorrow.

>The last sticking point that threatened to seriously impede the bill’s progress heading into the legislative recess tomorrow was the treatment of multiemployer defined benefit plans.   In the version passed by the joint House and Senate committee this morning multiemployer plans are allowed to defer the amortization of 80% of the plan’s 2002 net experience losses for two years.    However, “in order to target funding relief only to those multiemployer plans most in need – those plans that experienced significant losses as a result of low interest rates, sizable market investment losses, and an expanding number of retirees,” multiemployer plans would only qualify if they meet the following thresholds: 

  • the plan had a net investment loss of 10% or more for 2002
  • the plan’s actuary certifies that the plan is expected to have a funding deficiency in 2004, 2005, or 2006.  The certification must be based on the same actuarial assumptions used in the 2003 plan year
  • the plan had not failed to timely pay any excise tax imposed by the IRS
  • the plan had not had a funding holiday for contributions in excess of $0.10 per hour
  • the plan had not previously received waivers from the IRS.

>Further, conferees agreed to specify that multiemployers could not increase benefits during the deferral period, unless the benefit increase was already negotiated under an existing collective bargaining agreement or if contributions to the plan exceed the annual charges attributable to the benefit change.

>Aside from the multiemployer language, the two sides are in general agreement about provisions of the bill.  The final bill includes agreed-upon, targeted relief for steel and airline companies, as well as a broader two-year provision changing the standard that employers must use to determine their pension liabilities. Instead of the 30-year Treasury bond interest rate, which has been the test, employers could use corporate-bond rates, which have a higher yield and therefore reduce the present value of their pension liabilities.

>However, earlier in the day S enate Democrats expressed their displeasure with the measure.   A spokesman for Senator Edward Kennedy (D – Massachusetts) told Reuters the latest offer is too similar to the one rejected on Friday.   “It’s difficult to imagine something like this getting through the Senate,” spokesman Jim Manley said.

>House Republicans though insist they are not are not intentionally trying to be difficult, but insist the latest proposal reflects pressure from the White House.   With the release of previous version of the bill, President Bush has threatened to veto anything with even the word “multiemployer” in it.  

“The proposal adopted by conferees today is a fair and responsible proposal that meets the goal that conferees agreed upon, which was to target multiemployer relief only to those plans most in need.  Most importantly, I believe this compromise is a proposal the President will sign,” Representative John Boehner (R-Ohio), chairman of the joint panel, said in a news release.