Pension Measure Approved by Senate

Legislation aimed at strengthening traditional corporate pensions and shoring up the deficit-ridden pension insurance agency was easily approved Wednesday by the Senate. It included a generous exemption for struggling airlines.

Senators gave distressed airlines up to 20 years to repair their underfunded pension plans, in addition to the seven years provided by the bill to all companies to fix pension shortfalls.

A similar bill rewriting pension rules has passed two House committees but contains no special relief for airlines. Its sponsor, Rep. John A. Boehner (R-Ohio), said he expected the House to vote on it in December.

The Senate measure would require companies with pensions to set aside more money for retirees over time and pay higher premiums to the deficit-ridden agency that insures the plans, the Pension Benefit Guaranty Corp., or PBGC. It passed 97 to 2 despite a White House warning of a veto if Congress does not produce a tougher version of the legislation that leaves out targeted relief for any industry.

Across the country, traditional pensions are underfunded by $450 billion. The pension insurer, which takes over failed plans, is $22.8 billion in deficit.

Senators said it was critical to keep pension promises to workers as well as to avoid a taxpayer bailout of the pension agency.

“If you’ve been promised a pension, we’re going to make sure that you receive it,” co-sponsor Sen. Charles E. Grassley (R-Iowa) said during debate.

“I do not want another savings and loan situation like we had in the late ‘80s, coming out of bad policy with the PBGC,” Grassley added. “As we’ve watched this corporation deteriorate rapidly in recent years, the possibility of such a bailout has become increasingly real.”

The agency insures defined benefit pensions, which have a fixed payout at retirement, based on salary and years of service. It guarantees benefits up to certain limits when companies’ pension plans collapse.

The agency said its financial problems would actually worsen in the short term under either the House or Senate bill as they start with short-term relief for companies, and phase in tougher funding rules over several years.

But business still hopes to water down some provisions. The bill was held up for weeks in a feud over one of these, which would require tougher funding rules for companies with poor credit ratings. The provision stayed in the bill, but its opponents vowed to try to remove it in talks with the House.

Airlines have been lobbying for months for special aid in the pension bill, with Delta Air Lines Inc., which is in bankruptcy proceedings, and Northwest Airlines Corp. leading the effort.

“I know that it is critical to some of our airlines that we have this language,” Sen. Trent Lott (R-Miss.), said before the vote.

Senators also voted 58 to 41 to approve an amendment that opponents said would actually increase the pension agency’s deficit by about $1 billion. It would require the agency to take into account that pilots by law are forced to retire at age 60, instead of 65, when the agency is calculating benefit payouts to pilots.