House passes pension reform bill

updated 12:24 a.m. ET July 29, 2006

WASHINGTON - The House approved an ambitious overhaul of the nation’s pension laws late Friday, hoping to prolong the traditional employer-based pension plans relied upon by millions while also promoting new savings options and protecting the government from future taxpayer bailouts.

The reforms in the bill “represent the most sweeping changes to America’s pension laws in more than 30 years,” said House Majority Leader John Boehner, R-Ohio.

He said the bill “will ensure that workers and retirees can continue to count on their hard-earned pension benefits.”

The 279-131 vote came only hours before the House was expected to begin a five-week summer break.

The legislation now moves to the Senate, which is expected to take it up next week before it departs for its August recess, sending it to the president for his signature.

Opponents, mainly Democrats, said the bill did too little to prevent employers from eliminating their defined-benefit plans and favored some industries over others.

“This tilts the table toward the decisions by companies to terminate or to freeze those plans,” said Rep. George Miller, D-Calif.

The legislation, which tightens controls on companies that fall behind in their contributions to defined-benefit plans, gives special repayment breaks to the airline industry and is of particular urgency for several airlines threatening to terminate their plans.

“If passed, the airline provision currently before the Congress will save Northwest Airlines employees’ hard-earned pension benefits,” the airlines said in a statement.

After the pension vote, the House moved to consider its last major task before adjourning, a bill coupling a $2.15 increase in the $5.15 hourly minimum wage over three years with lower inheritance taxes on multimillion-dollar estates.

While the wage-tax measure was expected to pass the House, its fate in the Senate, which will take it up next week, was anything but certain.

Senate Democrats and moderate Republicans favor the minimum wage increase, but many conservatives oppose it. And the idea of cutting inheritance taxes lacks the 60 votes needed in the Senate to overcome parliamentary hurdles expected to be erected by Democrats.

The 900-page pension bill, the product of several years of congressional effort, would force employers that have fallen behind in their defined-benefit pension payments to catch up within seven years and close loopholes that have allowed companies to underfund their plans by an estimated $450 billion.

The measure also promotes pension alternatives, such as 401(k) plans, through such steps as automatic enrollment. It would give financial firms greater latitude in steering investors toward high-earning savings programs.

The legislation would give airlines that have frozen their pension plans, Northwest Airlines Corp. and Delta Air Lines, an additional 10 years to meet pension obligations. American and Continental, the only two major airlines with active defined-benefit plans, would get an extra three years.

The fear is that if they abandon their plans — Delta is already seeking to terminate its pilot pensions — it will add billions in deficit to the Pension Benefit Guaranty Corp., which already has amassed a deficit of $22.8 billion.

The PBGC now operates on premiums and interest earnings, but a big jump in the deficit could shift its burden onto taxpayers. The agency takes over benefit payments for terminated plans.

MORE FROM RETIREMENT

Retirement Section Front

BusinessWeek: The case against retirement Deficit doubles for government pension insurer Amid panic, uncertainty, they retired anyway Out of work, out of options, into retirement Obama seeks $250 payments for seniors Your Career: As work force ages, employers lag When golden years include a commute The new ‘retirement’ plan: Keep working Vote, discuss: When do you plan to retire?   Slideshow: Famous workers who won't retire Retirement Section Front   Add Retirement headlines to your news reader: