Senate, House Get Together For 30-Year Bond Replacement
>House Speaker Dennis Hastert (R – Illinois) appointed nine conferees to the House-Senate conference committee on pension reform, according to a news release issued by Education & the Workforce Committee – Chairman John Boehner’s (R-Ohio) office. Boehner was one of the nine House conferees tapped by Hastert. The others include:
- Sam Johnson (R-Texas)
- Howard McKeon (R-California)
- Pat Tiberi (R-Ohio)
- George Miller (D-California)
- Rob Andrews (D-New Jersey)
- Bill Thomas (R-California)
- Rob Portman (R-Ohio)
- Charlie Rangel (D-New York).
The main purpose of the measure would be the implementation of a temporary replacement to the 30-year Treasury bond that expired last year. Once expiring, the defunct bond’s interest rate began dropping precipitously, which in turn, under an inverse relationship, causes required pension contributions to increase. To remedy the situation, both the House and Senate version include a temporary benchmark of blended corporate bond rates for pensions to use.
With passage of the bill, the nation’s private pension insurer, the US Pension Benefit Guaranty Corporation (PBGC) estimates the legislation could save $80 billion over the next two years, according to a news release by the office of the bill’s sponsor Senator Judd Gregg (R – New Hampshire). “By resolving this key interest rate issue, Congress can help preserve employee pension plans in the short-term while we look at long-term solutions to reform and strengthen the defined benefit system on behalf of workers and employers. Reforming and strengthening the defined benefit system over the long-term will help avoid a taxpayer bailout of underfunded pension plans in the future,” Boehner said in a news release.
Legislative Difference
However, before the measure can go to President Bush for his signature, differences have to be ironed out. The main sticking point between the two versions of the legislation is the inclusion of a deficit reduction contribution (DRC) holiday – the Senate’s version has it, the House’s version does not. Under the DRC provisions of the Senate bill, roughly $16 billion in breaks are granted to companies via a reduction in DRC to those companies hit hardest by the recent pension underfunding storm. For those companies, the DRC holiday means they could waive 80% of their DRC payments the first year and 60% the second year (See Details Emerge on DRC Provision of Senate Bill ).
This provision does not sit well with either the PBGC or the White House. The PBGC called the a mendment to include DRC rules “irresponsible” since the provisions would “significantly further exacerbate systemic pension plan underfunding.” If the Senate does include DRC provisions, then the PBGC board said it would seek a Presidential veto of the legislation (See PBGC Calls Out DRC Modifications ). Even though the White House agrees with PBGC’s concerns, President Bush has refused to issue his own veto threat.
All of the hemming and hawing, and subsequent legislative slowdown, has caused many lawmakers used to the fast-paced world inside the Belt to lose interest, and formal negotiations on a compromise never began, even though the two versions have been ready to go since January (See Senate Passes Pension Funding Bill ).