November Elections could be Pension Bill Monkey Wrench

Senator Charles Grassley (R-Iowa), chairman of the Senate Finance Committee, told reporters that the closer lawmakers get to November’s off-year elections, the tougher it will be to find common ground on the sweeping pension reform proposals, the Chicago Tribune reported.  

“The closer we get to Election Day, the harder it’ll be to get a bipartisan agreement,” said Grassley, according to the Tribune. “Congress needs to dedicate itself to sending a [pension] bill to the president before Memorial Day.”

Grassley said he had hoped to pass a bill at the end of last year, but “unfortunately, political gamesmanship and special-interest lobbying have interfered with that.” Then lawmakers set April 15 as the goal for reaching an agreement, but that passed with the Senate and House members of a legislative conference committee far apart on key issues.

House-Senate Differences

While members of both chambers have passed major pension-overhaul bills, the Senate version is significantly friendlier to workers and would impose stronger restrictions on companies, while the House version focuses on protecting businesses, according to the news report.

Congressional staff members reported that progress had been made on some issues since members left for their Easter recess two weeks ago, but the outcome still is considered highly uncertain.

Senator Mike Enzi (R-Wyoming), conference chairman, said in a statement that “we are very close to an agreement on the big issues,” but he added that the conferees would be “fine-tuning” most aspects of the legislation.

The Senate measure contains relief for airlines, especially Northwest Airlines, which has threatened to dump more than $3 billion in pension liabilities on the Pension Benefit Guaranty Corp. (PBGC), the agency that insures private pensions.  House Representative John Kline (R-Minnesota.), one of the conferees, said he favors the airline relief because Northwest is in his district and added he hopes to overcome opposition from some conferees who do not like government bailouts of companies that have over-promised their employees.

The House bill, pushed through by now-Majority Leader John Boehner (R-Ohio), left out airline pension relief, which many conservatives oppose.

Cash Balance Conversions

Perhaps the most controversial aspect of the legislation is a Senate provision that would give workers more financial protection when their pension plans are converted to cash-balance plans, under which workers receive an annual cash contribution that grows with interest.

The Senate provision would prevent “wear-away” of pension benefits of older workers when the conversion is made. In effect, the Senate proposal would require that cash-balance plans accumulate benefits to the same degree that traditional pensions do.

Cash-balance plans have been in legal limbo since one court held that they discriminate against older workers; companies have pushed for Congress to legalize them and declare that they are not discriminatory.

Both the House and Senate pointedly rejected business lobbying and declared that the legalization would apply only to new cash-balance plans, not retroactively to old ones, such as a controversial conversion plan at IBM Corp. cited in litigation, according to the news report.