Senate panel votes leeway for airlines on pensions

Several bills in the works to aid guarantor agency

July 27, 2005|By COX NEWS SERVICE

WASHINGTON - The Senate Finance Committee agreed yesterday to give major airlines 14 years to fully fund their retirement plans as it approved legislation to shore up the nation's private pension system.

Among provisions affecting a broad range of employers, the bill would toughen funding requirements for pension plans and bolster the pension insurance system by increasing company premiums.

Two carriers with underfunded plans, Delta Air Lines Inc. and Northwest Airlines Corp., had lobbied for the right to spread their pension payments over 25 years, up from roughly four years at present, to conserve cash and help avoid bankruptcy.

Delta's plans are underfunded by about $5.3 billion, and Northwest's is short about $3.8 billion.

The committee also approved a provision allowing airlines to use their own actuarial assumptions when calculating liabilities, rather than the stricter actuarial assumptions to be imposed on other companies' underfunded pension plans.

To take advantage of these breaks, airlines would have to freeze any future benefit accruals.

Sen. Johnny Isakson, a Georgia Republican who has been a primary supporter of airline relief, said the committee's action was a "good first step," but said he would continue trying to get a longer period for funding pensions written into the final legislation.

Anthony Black, a spokesman for Delta, likewise called the bill "a good start," and said the company appreciates "the committee's recognition that airlines need a unique rule that addresses their problems."

The pension bill, written by Sens. Charles E. Grassley, the Iowa Republican who is the committee chairman, and Max Baucus of Montana, its top-ranking Democrat, could reach the Senate floor this fall. But the Senate Health, Education, Labor and Pensions Committee is working on its own pension reform bill, which it hopes to pass in September.

In the House, the Education and Workforce Committee has approved its version of pension reform, but it doesn't include airline relief. The House Ways and Means Committee is expected this fall to include that legislation in a broad retirement security package.

However it shakes out, Grassley said Congress must act because the pension system is in a "fragile state." In June, the Pension Benefit Guaranty Corp. said pension plans are underfunded by $354 billion.

Many business groups oppose pension funding increases and fear the new formula would increase the volatility of pension calculations, making it more difficult to plan.

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