– Shoring Up Pensions

Pension shortfall is a BIG issue in the US.. with the impending Baby Boomer returements looming on the horizon.. and companies like Delphi and GM getting the heat (Delphi went bankrupt on that issue) – taking longer to fix this problem will be catastrophic on the US economy!

Hoping to reverse the deterioration of pension plans covering 44 million Americans, the Senate voted Wednesday to force companies to make up underfunding estimated at $450 billion and live up to promises made to employees.

The action came a day after the federal agency that insures such plans reported massive liabilities and predicted a troubled future.

The Senate legislation, passed 97-2, takes on the daunting task of compelling companies with defined-benefit plans to live up to their funding obligations — without driving those companies into abandoning the plans and further eroding the retirement benefits of millions of people.

“This bill honors a promise that we made way back in 1974” when Congress passed legislation to protect pensions, said Finance Committee Chairman Charles Grassley, R-Iowa. “If you’ve been promised a pension, we are going to make sure that you receive it.”

Broad support of the bill reflected its bipartisan origins. Grassley and the top Democrat on the committee, Max Baucus of Montana, crafted it with Sens. Mike Enzi, R-Wyo., and Edward Kennedy, D-Mass.

The White House, in a statement, said it supported passage of the Senate bill but opposed some provisions, including extended relief for the airline industry. It warned that the president would be advised to veto any bill that resulted in weakening pension funding requirements.

The House could take up a companion bill in early December, although it remains to be seen whether the two chambers can reach a compromise on the legislation, which runs hundreds of pages, by the end of the year.

The vote came a day after the Pension Benefit Guaranty Corporation, which insures defined-benefit plans of 44 million people and takes over the plans of bankrupt companies, reported a deficit of $22.8 billion at the end of the 2005 fiscal year on Sept. 30.

The PBGC said it assumed responsibility for the pension benefits of an additional 235,000 workers and retirees in 2005, bringing the total to 1.3 million, and paid benefits of $3.7 billion, up from $3 billion in 2004.

Premiums per participant, paid by companies, totaled $1.5 billion. Those premiums would increase from $19 to $30 a year under the Senate bill.

That legislation, unlike the House version, also would extend special relief for debt-ridden airlines. Bankrupt steel and airline companies have been a major source of the PBGC’s mounting financial problems.

The PBGC is now financed entirely by premiums and interest on investments, but there is growing concern that the agency may one day have to turn to taxpayers for a bailout that could rival the Savings and Loan crisis of the 1980s.

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