Senate, House at Odds Over Pensions

Squabbles over special treatment for struggling airlines and beleaguered auto companies are delaying final action in Congress on a pension bill that would affect millions of workers, retirees and taxpayers.

Lawmakers trying to merge House and Senate versions already have missed one deadline, April 15, when some companies had to recalculate their pension fund obligations.

Memorial Day, May 29, is the new target for sending to President Bush a bill to prop up the finances of defined-benefit pension plans covering some 44 million people in the United States.

The Senate passed its bill in November; the House approved its version in December. They opened negotiations last month on a compromise but immediately hit a wall over a Senate plan to make companies with poor credit ratings pay more into their pension plans.

That proposal was part of the overall theme of the legislation: ensuring that companies honor their promises to retirees and restore health to a single-employer pension system now underfunded by an estimated $450 billion.

The idea was opposed by senators with ties to the auto industry, and it faces strong resistance in the House.

Also crying foul is General Motors Corp., laboring under a junk-bond rating and high health and pension costs.

GM says its pension plan, with $95 billion in assets, is over-funded by $6 billion. To be penalized for its weak credit rating “with more pension obligation is obviously not a favorable situation. We think the two issues should be decoupled,” spokesman Christopher Preuss said.

Senate Finance Committee Chairman Charles E. Grassley (R-Iowa) said the provision was needed to prevent massive defaults that would add to the financial woes of the federal Pension Benefit Guaranty Corp.

The agency, financed by premiums paid by companies with pension plans, insures employer-based plans worth $2 trillion and covering 44 million workers. It has taken over paying current and future benefits to more than 1 million workers in more than 3,400 terminated defined-benefit plans.

Last fall, the agency concluded that GM was $31 billion short of what it would need to fulfill all its obligations if its plan was suddenly ended and its assets transferred to the agency. GM said the agency’s calculations did not reflect GM’s ability to continue putting money into the plan.