Bills tackle 'delicate balance' of pension protection
By Jim Abrams
Associated Press
WASHINGTON — Companies like Hawaiian Airlines that are burdened by their pension obligations would get temporary relief while their workers would win new retirement-plan protections under legislation approved yesterday by the Senate Finance Committee.
Senior House Republicans also introduced a narrower bill aimed specifically at helping the private pension plan system, which is reeling from low interest rates, the sluggish economy, stock market losses and an increase in retirees.
Both measures would change the formula under which companies calculate how much they must set aside in their worker pension plans.
The Senate bill would give the nation's 32,000 pension plans three years of less costly contributions before putting in place a more permanent and tougher system for calculating payments. The sponsors are Sens. Charley Grassley, R-Iowa, chairman of the Senate Finance Committee, and Max Baucus of Montana, the committee's top Democrat.
The measure could help Hawaiian Airlines, which last week was allowed to put off a $4.25 million payment to its pilots' pension fund. Hawaiian bankruptcy trustee Josh Gotbaum said the airline would not have enough cash to get out of bankruptcy if it had to make the required contributions.
A bankruptcy court judge gave the airline until Oct. 24 to renegotiate the payment with its pilots or explain why it cannot make payment.
Gotbaum said in a statement yesterday that Hawaiian supports the Senate committee's pension plan relief and has discussed it with the pilots' union.
"Unfortunately, the bill passed today is far from a complete solution to the pension problems affecting the airline industry, and we are concerned that it may be used as an excuse to avoid broader reforms," he said.
The House legislation provides a two-year fix while committing Congress to come up with a more permanent solution. The bill is offered by two committee chairmen — Reps. John Boehner, R-Ohio, of the Education and the Workforce Committee, and Bill Thomas, R-Calif., of the Ways and Means Committee.
The Pension Benefit Guaranty Corp., which insures pensions, estimated that a three-year grace period would reduce contributions by about $30 billion.
The agency added that total pension underfinancing could worsen by about $40 billion if deficit reduction contributions required of chronically underfinanced plans are suspended for three years.
"Congress cannot allow this issue to be put on the back burner," Boehner said. "It is too important for the long-term retirement security of our nation's working families."
With Congress rushing to finish its legislative work for the year, prospects appeared better for the less ambitious House bill.
Congress is moving with some urgency on the pension issue. The impetus comes from the scandals involving Enron and other companies that left employees without their promised retirement benefits and from rules that have added to the financial crisis of airlines and other industries hard hit by the recession.
The 30-year Treasury bond used to serve as the basis for calculating future pension obligations.
But the government stopped issuing such bonds in 2001, and a temporary replacement will expire at year's end.
Grassley said his plan "phases in an interest rate that will accurately reflect the underlying defined benefit plan's liability to its employees."
But Shaun O'Brien, assistant director for public policy at the AFL-CIO, said his group was concerned that the permanent financing equation in the Senate bill, which is similar to ideas being proposed by the Bush administration, would end up creating incentives for companies to stop offering pensions.
Advertiser staff contributed the information relating to Hawai'i.
