Pension support OK'd by Senate

Bill would require full funding, help airlines, pilots

November 17, 2005|By COX NEWS SERVICE

WASHINGTON -- The Senate overwhelmingly approved yesterday legislation that would shore up the nation's troubled private pension system and offer help for bankrupt airlines and retired pilots younger than age 65.

The Pension Stability and Transparency Act, approved 97-2, would require companies to fully fund traditional pension plans, which provide retirees with monthly checks based on their salaries and years of service. Such plans are believed underfunded by as much as $450 billion.

The legislation would help repair the tattered safety net under pensions by forcing companies to pay a premium of $30 per plan participant a year, up from $19, to the Pension Benefit Guaranty Corp., a federal agency that insures pensions.

On a voice vote, the Senate also passed an amendment to give financially troubled airlines 20 years to stretch out payments to their underfunded pension plans.

The Senate voted 58-41 to require the PBGC to provide full benefits for pilots forced by regulations to retire at age 60, five years short of the age for maximum pension insurance coverage.

During the debate, Sen. Johnny Isakson, a Georgia Republican, said his amendment to give airlines grace time for pension payments would help them avoid defaulting and leaving retirees with the drastically reduced benefits provided by the PBGC.

"We give hope for the employees to get their benefits," he said.

Airlines would be able to take more time to pay for their obligations but would have to immediately fund any future pension benefit promises.

Previously, the bill had called for a 14-year extension for airlines. Some lawmakers initially opposed even that, saying no industry should get special permission to delay payments beyond the seven years required for others.

"Today was rewarding," Isakson said after the vote, but his amendment might not survive the next steps in the legislative process.

In the House, two committees have approved pension legislation, but the full House is not expected to vote until next month. That competing legislation contains no special help for airlines or pilots.

If the House approves its current bill, House and Senate negotiators would have to iron out their differences in a conference. The 20-year airline provision could get erased during those negotiations.

Isakson said his amendment will survive such negotiations because a growing number of lawmakers support it.

The White House said in a statement that it supports the overall Senate bill but opposes some provisions, including the airline provision. It warned that President Bush's advisers would urge him to veto any legislation that would weaken funding requirements.

The PBGC said Tuesday that its deficit shrank slightly in fiscal 2005, to $22.8 billion from $23.3 billion in the previous year, but it warned that its financial future remained shaky because of numerous pension defaults by steel companies, airlines and others.

If the PBGC were to go bankrupt, taxpayers would probably be stuck with paying for an enormous bailout.

The airline relief was strongly backed by Delta Air Lines Inc. and Northwest Airlines Corp., which have a combined $16.3 billion in pension-plan shortfalls. The payment extension would help them conserve cash and perhaps help them avoid defaulting on their pensions.

Some retired pilots also stand to benefit if an amendment by Sen. Daniel K. Akaka, a Hawaii Democrat, survives the House-Senate negotiations. That measure would require the PBGC to guarantee full benefits for pilots forced to retire at age 60.

When a company defaults on its pension plan, the maximum benefit provided by PBGC for someone who retires at 65 is $45,614 a year. The maximum for those who retire at 60, as pilots are required to do by federal rules, is $29,649.

"With drastically reduced pensions and a prohibition on re-entering the piloting profession because of age, many pilots are subjected to undue hardship," Akaka said.

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