Sweeping new rules aimed at prodding U.S. companies into shoring up their pension plans and ensuring that workers get the retirement benefits they've been promised are about to become law.
President George W. Bush planned to sign the bill Thursday and has already praised it as "the most comprehensive reforms to America's pension system in over 30 years."
The massive legislation reflects the evolution of workers' retirement benefits - the decline in traditional pensions that give retired employees a fixed payment each month and the rise of defined-contribution savings plans that rely on workers to build retirement assets.
It could also save taxpayers from funding a multibillion-dollar bailout of the federal agency that insures pension plans.
Some critics, such as the Pension Rights Center, say the changes do nothing to stop companies from freezing their pensions and, with time, will weaken the pension system.
With its hundreds of pages, the bill seeks to strengthen traditional defined-benefit plans and requires companies to tell workers more about the health of their pension programs. It also nudges workers into putting more money away for their own retirement.
It aims to boost the 30,000 defined-benefit plans run by employers that are now underfunded by an estimated $450 billion (euro351.75 billion). Those plans must reach 100 percent funding, up from the current 90 percent requirement, in seven years.
Seriously underfunded "at risk" companies must contribute at a faster rate and face certain restrictions, such as a ban on increasing benefits.
Lawmakers allowed workers to contribute more to their personal retirement savings accounts, such as IRAs and 401(k)s, in future years. Employers can encourage their workers to save by automatically enrolling them 401(k) retirement accounts.
Financial firms will get greater leeway to offer advice to those 401(k) and IRA savers on how best to invest their retirement nest eggs.
Lawmakers singled out financially struggling airlines when drafting the new rules.
Airlines in bankruptcy proceedings that have frozen their pension plans, an act that stops participants from getting new benefits, get an extra 10 years to meet their funding obligations. That specifically helps Northwest Airlines and Delta Air Lines.
Other airlines could use those provisions if they freeze their pension plans. Two airlines with active defined-benefit plans, American Airlines and Continental Airlines Inc., nevertheless get 10 years after the new funding rules go into effect to meet their obligations, three years longer than other companies.
An additional change gives companies legal ground for hybrid plans known as cash balance plans, which have been challenged as discriminating against older workers. The AARP said the bill does not redress that potential discrimination.
To the benefit of all taxpayers, lawmakers hope the bill puts the Pension Benefit Guaranty Corp. on more stable financial footing. The federal agency, which insures pension plans, has deficits of $22.8 billion (euro17.82 billion), stemming mainly from taking over defunct steel and airline plans.
The agency runs on company-paid premiums and interest earnings, but some worry that a rash of pension terminations could mean an expensive taxpayer bailout.
Lawmakers also wrote in special items for specific industries. Among them, defense contractors won a three-year grace period before being required to comply with the new pension funding rules. They argued that their government contracts don't provide enough flexibility to cover a sudden spike in pension costs.
The bill is H.R. 4
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President Bush on Thursday signed new rules to prod companies into shoring up their pension plans and offered strong words for corporate America: "Set aside enough money now."
The Senate, in its last vote before adjourning for a four-week summer break, approved the 900-page bill that compels employers with defined-benefit pension plans to meet their funding obligations...
The bill, passed 93-5, will help financially troubled Delta Air Lines and Northwest Airlines.
The 279-131 vote came only hours before the House was expected to begin a five-week summer break.