WASHINGTON, D.C. - House Republicans today formally introduced comprehensive pension reform legislation - the Pension Protection Act (H.R. 2830) - intended to fix outdated worker pension laws and protect the interests of workers, retirees, and taxpayers.
Education the Workforce Committee Chairman John Boehner (R-OH), Ways Means Committee Chairman Bill Thomas (R-CA), Employer-Employee Relations Subcommittee Chairman Sam Johnson (R-TX), and Employer-Employee Relations Subcommittee Vice Chair John Kline (R-MN) introduced the bill at a press conference this morning.
The workers at United Airlines who've lost significant pension benefits serve as a reminder that protecting workers and taxpayers through fundamental pension reform is needed now, said Boehner. This bill strikes the right balance of establishing tougher funding requirements for employers, enhancing disclosure on behalf of workers, and protecting taxpayers from a possible multi-billion dollar bailout.
Our proposal is consistent with President Bush's proposal for reform, and I look forward to working with both the Administration as well as our colleagues in the Senate to move this process forward, added Boehner.
We are setting realistic new standards for pension funding that are clear and will result in real consequences if pension plans are underfunded, said Johnson. Underfunded plans are bad for workers, employers and the American taxpayer.
One of the most important parts of this bill is that the people most affected by pension plans - the workers who expect to receive that money when they retire - are going to get real-time information about the health of their pensions. This will prevent any unpleasant surprises for workers, added Johnson. I am glad to work with Chairman Boehner and Chairman Thomas on reforms to the traditional pension system which is long overdue for an overhaul.
The Pension Protection Act also establishes a structure for identifying troubled multiemployer pension plans, which are defined benefit plans maintained by two or more employers in a particular trade or industry that are governed by a collective bargaining agreement.
Multiemployer pension plans were designed for a 1940s workforce that assumed the multiemployer labor base would continue to grow, said Kline. In recent years it has become glaringly apparent that this outdated system creates obstacles for employers, thus threatening the retirement security of American workers and putting American taxpayers at risk of being forced to fund a multi-billion dollar bail out.
I am pleased with the legislation we are introducing today and look forward to continuing to work with my colleagues to strengthen retirement security, help employers meet their obligations, and protect American taxpayers, Kline added.
The bill also includes a comprehensive investment advice proposal that has passed the House three times with significant Democrat support, twice in the 107th Congress and once in the 108th Congress. Specifically, the bill allows employers to provide rank-and-file workers with access to a high-quality investment advice as an employee benefit.
Expanding worker access to quality investment advice is one of the most important pension protections we can provide, said Boehner. This is a common sense way to encourage employers to provide their workers with access to quality investment advisers while including tough fiduciary and disclosure protections to ensure that workers receive advice solely in their best interests.
The Pension Protection Act as introduced does not include finalized cash balance provisions. Boehner today also introduced a stand-alone bill - the Pension Preservation Portability Act - as a starting point for discussion on efforts to resolve the legal uncertainty surrounding cash balance plans. Staff is working to resolve details on this issue and expects to finalize it before subcommittee markup.
Boehner has had preliminary discussions with Senate leaders on the issue, including his counterpart Senate HELP Committee Chairman Mike Enzi, and will continue to work with them and other colleagues to move comprehensive pension reform legislation and send President Bush a bill he can sign into law this year.
PENSION PROTECTION ACT (H.R. 2830) BILL SUMMARY
The Pension Protection Act (H.R. 2830) will fix outdated pension rules to help ensure employers properly and adequately fund their worker pension plans, provide meaningful new disclosure to workers about the status of their pension plan, and protect taxpayers from a possible multi-billion dollar taxpayer bailout. Following is a brief summary of the bill.
The Pension Protection Act will:
Provide a permanent interest rate based on a modified yield curve for employers to accurately measure current pension liabilities as they come due.
Require employers to make sufficient contributions for plans to meet a 100 percent funding target.
Require employers to make additional contributions to erase funding shortfalls over seven years.
Trigger accelerated contributions if a plan's funded status falls below 60 percent.
Reduce the smoothing of interest rates to protect plans against market and funding volatility.
Prohibit employers from using credit balances if their plans are funded at less than 80 percent.
Permit employers to make additional maximum deductible contributions of up to 150 percent of current liability.
Ensuring Employers and Unions Don't Make Promises to Workers They Know Cannot Be Kept
The Pension Protection Act will:
Prohibit employers and union leaders from increasing benefits or paying lump sum distributions if a plan is less than 80 percent funded.
Prohibit further benefit accruals for plans funded at less than 60 percent.
Restrict the use of deferred executive compensation arrangements for employers with severely underfunded plans.
Adjusting Premiums Paid by Employers to the PBGC
The Pension Protection Act will:
Raise premiums employers pay to the PBGC but phase the increase in over time. Raise the flat per-participant rate premium from the current $19 to $30 over three years for pension plans that are less than 80 percent funded.
Increase the flat rate premium to $30 for plans funded at more than 80 percent over five years. Index the flat-rate premium annually to worker wage growth thereafter. Index the variable-rate premium, currently $9 per participant per $1,000 of underfunding, annually to worker wage growth.
Ensuring that Cash Balance Pensions Remain a Viable Part of the Defined Benefit System
Boehner has pledged that the Pension Protection Act when passed through Committee will:
End the legal uncertainty surrounding cash balance pension plans and ensure they remain a viable retirement security option for workers and employers.
Staff is working to resolve details on this issue and expects to finalize it before subcommittee markup.
Reforming the Multiemployer Pension System on Behalf of Workers Contributing Employers
The Pension Protection Act will:
Identify underfunded multiemployer pension plans and provide quantifiable benchmarks for measuring a plan's funding improvement.
Change the amortization schedule for any plan benefit amendments from 30 years to 15 years.
Increase the maximum deductible limit to 140 percent of current liability, providing additional funding flexibility for plans each year.
Require plan trustees to improve the health of the plan by one-third within 10 years if a plan is less than 80 percent funded or will hit a funding deficiency within seven years.
Prohibit benefit increases if the increase causes the plan to fall below 65 percent funded status.
Establish new funding standards, possible benefit restrictions, and new notice requirements for multiemployer plans that are funded at less than 65 percent.
Providing Workers with Meaningful Disclosure About the Status of Their Pension Plan
The Pension Protection Act will:
Require both single and multiemployer plans to include more detailed and specific information on their Form 5500 filings, the equivalent of a pension plan's federal tax return. Enhance Form 4010 disclosure requirements and make all Form 4010 information filed with the PBGC available to the public, except for sensitive corporate proprietary information. Require both single and multiemployer pension plans to notify workers and retirees of the funded status of their plan within 90 days after the close of the plan year. Require both single and multiemployer pension plans to provide the summary annual report notice to workers and retirees this notice within 15 days of the Form 5500 filing deadline.
Expanding Access to High Quality, Professional Investment Advice
The Pension Protection Act will:
Implement a comprehensive investment advice proposal that has passed the House three times with significant Democrat support, twice in the 107th Congress and once in the 108th Congress.
Allow employers to provide rank-and-file workers with access to a qualified investment adviser who can inform them of the need to diversify and help them choose appropriate investments.
Include tough fiduciary and disclosure safeguards to ensure that advice provided to employees is solely in their best interest.
