This bill was substantially changed before being enacted into law. Only the Senate vote on the original bill is graded.
The Legislation:
The Pension Funding Equity Act of 2004 amends the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code of 1986 to temporarily replace the mechanism by which single-employer pension plans calculate the rate of return on their assets, thus stabilizing faltering pension plans. The Act also provides relief to certain industries hit particularly hard by the recent economic downturn, allowing them to temporarily reduce their required contributions to their under-funded pension plans. This provision particularly helps the airline and steel industries. The original Senate version of HR 3108, which is the vote graded by this Scorecard, would also stabilize all multi-employer pension plans, which cover 25 percent of all participants in defined benefit plans, including many employees of small businesses and many union members. The provisions relating to most multi-employer plans were stripped out of the bill in conference committee, leaving only the deficit reduction contribution relief and the fix for single-employer plans to be enacted into law.
The Middle-Class Position:
The Middle Class Supports: A secure retirement after a lifetime of hard work is one of the cherished goals of the American middle class. Yet the decline of the stock market, large-scale corporate fraud by companies like Enron and Tyco, low interest rates and the growing number of retirees have combined to produce shortfalls in the defined benefit pension plans of many American companies. This bill is a stop-gap measure that shores up pension plans for two years to enable businesses to build up their pension resources and gives Congress time to formulate a more permanent solution for the pension deficit. Without this temporary solution, more of the 34 million mostly middle-class Americans who have a defined benefit pension plan paid for by their employer would see their plans discontinued or their benefits frozen. Yet the fix offered by this bill does little to ensure that businesses meet their pension obligations in the long term. The retirement security of millions of middle-class workers and current retirees depends on Congress taking further action to reform the laws meant to keep the plans solvent.
From the Experts:
“We urge Congress and President Bush to help us reach this important goal of retirement funding reform by signing this agreement into law as soon as possible and then to quickly begin work on a permanent solution.” —James A. Klein, President, The American Benefits Council (April 1, 2004)
“This fair and necessary legislation will give U.S. airlines the relief they need to sustain their economic viability, help save many airline workers’ retirement benefits, and protect thousands of jobs.” —Capt. Duane Woerth, President, the Air Line Pilots Association (January 28, 2004)
Beyond this Bill:
In the coming year, Congress will have the opportunity to enact a lasting solution to pension shortfalls. At minimum, legislators should enact transparency guarantees mandating that companies disclose the financial condition of their pension plan to employees and investors. Combined with full and independent audits of pension financial statements, this measure would allow employees and investors to have an accurate picture of a company’s financial condition, reducing the risk of hidden pension maneuvers that pump up the bottom line or the type of outright fraud perpetrated by companies like Enron. In the meantime, President Bush’s proposed 2006 budget imposes heavy new obligations on defined benefit plans, increasing the premiums they must pay to the government by almost $2 billion in the next year. Legislators concerned about middle-class retirement security should not impose this burden on the very plans they found in need of relief in 2004.
Number of Americans who have a defined benefit pension plan paid for by their employer: 34 million
Minimum number of private employer-sponsored defined benefit pension plans in 1975, when the Employee Retirement Income Security Act (ERISA) became effective: 100,000
Maximum number of plans today: 31,000
Percentage of large employers that would either freeze their defined benefit pension plan or convert it to a defined contribution plan if the interest rate change in this legislation were not enacted: 39
Percentage of large employers who have frozen their pension plans in the last two years: 15
Size of the private pension deficit: $450 billion
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