The legislation now goes to the full Senate for a vote. The Senate Committee on Health, Education, Labor and Pensions has also held hearings and is working on a parallel pension measure, and a similar pension proposal is under consideration by the House Ways and Means Committee, Bloomberg reported.
“The fragile state of our nation’s pension plans has caught the attention of Americans everywhere,” said US Senator Charles Grassley (R-Iowa), Finance Committee chairman. The Congressional Budget Office estimates that companies underfunded their pensions last year by as much as $600 billion.
An amendment added to the legislation Tuesday gives airlines 14 years to pay overdue pension obligations. Delta Air Lines Inc. and Northwest Airlines Corp., the third-and fourth-largest US carriers had asked for 25 years (See Senate Pension Reforms Won’t Give Airlines Enough Time ). The rest of the 29,651 companies that offer defined-benefit pensions would have seven years to catch up on any backlog, according to the news report.
Also added to the measure Tuesday is a plan that would allow companies to offer cash-balance plans as long as they don’t discriminate against older employees. The 1,700 cash-balance plans already in existence have been in legal limbo since a 2003 federal court ruling that deemed International Business Machine Corp.’s plan illegal because benefits for younger workers exceeded those of older workers for the same employment period (See IBM Strikes a Deal on Cash Balance Suit ).
The House version of the legislation, which is before the Ways and Means Committee, eliminates the use of credit balances for companies that are less than 80 percent funded.
The Senate measure approved Tuesday, the National Employee Savings and Trust Equity Guarantee Act, (NESTEG), would require companies to fully fund their plans or face increased penalties (See Senate Bill Takes On Private Pension Pickle ). The bill would also increase premiums that companies pay to the PBGC for insurance to $30 per plan participant per year from $17.
More information about the US House Republican pension plan is here .
More information about the Bush Administration’s pension proposal is here .