WASHINGTON (AP) -- New rules governing defined-benefit pension plans offered by private employers may join changes to the government Social Security program in a retirement security package now being cobbled together in the House.
Against United Airlines' default last month on $9 billion in pension obligations, a new House bill co-authored by Rep. John Boehner, R-Ohio, would:
- Require employers to eliminate pension underfunding within seven years;
- Prohibit unions from negotiating more lucrative pension packages if their plan is already less than 80 percent funded;
- Increase corporate pension insurance payments from the current $19 to $30 per employee; and
- Allow employees to view the same reports about their plan that their employer files with the federal Pension Benefit Guaranty Corp., the agency that insures the plans.
Currently employees can see only more favorable reports filed with the IRS, which meant that not only airline employees but also previous workers in the steel and automotive supply industries were caught off-guard when their plans were terminated.
All told, 34 million people - roughly 20 percent of the nation's work force - expect to receive retirement payments from defined-benefit plans. The PBGC, though, already faces a deficit of $23.3 billion, raising the specter of another 1980s-style savings and loan bailout without changes to the funding rules.
''The pension terminations at United Airlines underscore the need for fundamental pension reform to protect workers and taxpayers, and the time to act is now,'' said Boehner, who heads the House Committee on Education and the Workforce.
''Without comprehensive reform more companies will default on their plans or simply stop offering benefits to workers altogether, and taxpayers will be at greater risk than ever of being stuck with a multibillion dollar bailout,'' he said.
Boehner's bill echoes a proposal made by the White House in January. However, it is more friendly to big business because it would retain some of the so-called smoothing techniques that allowed United to choose favorable interest rates - and credits for past investment gains - to project a healthy pension fund in the years before its default.
During a Senate hearing Tuesday, David Walker, the head of the Government Accountability Office, said such smoothing leads to a huge expectations gap. And Bradley Belt, the PBGC's executive director, said there is a risk in retaining the practice when determining the amount of money deposited in a pension plan.
Nonetheless, Boehner and his co-sponsor, Rep. Sam Johnson, R-Texas, drafted the measure with assistance from the House Ways and Means Committee. Its chairman, Rep. Bill Thomas, R-Calif., said Tuesday that he wants to produce comprehensive retirement security legislation that not only deals with Social Security, but also defined-benefit plans and private savings vehicles.
Kevin Smith, Boehner's spokesman, said the Workforce Committee is ''walking a bit of a tightrope'' with its bill.
''The balance we've tried to strike is instituting better funding requirements and offering greater transparency for workers, but doing so in a way that doesn't discourage employers from offering these plans,'' Smith said.
While Thomas wants to review the legislation before offering an official endorsement, the spokesman said Boehner and Thomas have discussed the possibility of folding the bill into the Social Security effort.
''It could become, somewhere down the road, part of a broader retirement security package,'' he said.
The measure, passed the same day the federal Pension Benefit Guaranty Corp. assumed liability for United Airlines' pension plans, aims to reduce similar pension defaults in the future.
The 279-131 vote came only hours before the House was expected to begin a five-week summer break.
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 legislation gives special repayment breaks to the airline industry.