Senate Tops House on Pension Relief

The U.S. Senate on Wednesday defied Bush administration objections by overwhelmingly approving billions of dollars in pension fund relief for companies, including extra help for airlines and steelmakers.

Responding to pressure from companies struggling to make contributions to traditional pension plans, the Senate voted 86 to 9 to ease a key funding formula, reducing by $80 billion the amount employers would have to pay into the plans over the next two years.

This general relief for 31,000 plans covering 44 million workers has passed the House and been accepted by the Bush administration.

But the Senate bill would further ease contribution requirements by an estimated $16 billion over two years for airlines, steelmakers and other companies with severely ailing pension plans.

The overwhelming vote appeared to blunt a threat by Cabinet officials that they could recommend a veto over this provision.

The House and Senate bills will have to be reconciled before a final version can pass Congress and be sent to President Bush.

Supporters defended the bill as a common-sense approach to easing pension under-funding while Congress searches for a longer-term solution. Nationwide, traditional pensions are underfunded by some $350 billion, the government estimates.

Backers of the bill also warned that without the help, airline and steelmakers could be forced into bankruptcy, landing their pensions with the federal agency that insures them, the Pension Benefit Guaranty Corp.

The agency is already $11.2 billion in the red. And when it takes over insolvent plans, it does not always pay benefits at the level originally set by the plans.

“What sounds like tough medicine turns out to be poison for the airline and steel workers,” said Sen. Norm Coleman (R-Minn.). “With this bill, we are not letting businesses off the hook, but are taking appropriate steps to provide retirement security for our constituents across this nation,” Coleman said.

But critics echoed Bush administration complaints that the Senate should not be adding extra help for a few industries.

“Once again, Congress is poised to give another handout to airlines and steel companies,” said Sen. John McCain (R-Ariz.). He and the other eight senators who voted against the measure were Republicans.

Sen. Charles E. Grassley, an Iowa Republican and chairman of the Finance Committee, said he did not think Bush would veto the bill, partly because senators also intended to produce a proposal for long-term pension reform.

Grassley plans to move a bill out of his committee proposing a “yield curve” that would consider the age of a company’s workforce when figuring pension liabilities. That is favored by the White House, but business groups oppose it.

The Senate-passed bill would ease pension funding for companies by switching from using the 30-year Treasury bond interest rate in pension calculations to a blend of corporate bond rates.