The Battalion. (College Station, Tex.) 1893-current, January 29, 2004, Image 9

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Thursday, January 29, 2004
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senate approves legislation for employer pensions
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By Jim Abrams
THE ASSOCIATED PRESS
WASHINGTON — The Senate, act-
; with rare election-year concord,
a bill Wednesday to reduce by
1)6 billion the payments companies
will have to make into their pension
ans this year and next.
Sponsors said the measure, passed 86-
will help preserve pension benefits for
illions of workers by discouraging
t|iancially strapped companies from ter-
inating plans as no longer affordable.
"Our pension plans are being battered
|)\ a perfect storm of declining interest
iltes, stock market declines and a weak
J onomy,” said Sen. Edward Kennedy, D-
llass. The bill, he said, “will help the
lird-earned pensions of millions of
I mericans to weather this storm.’’
The Senate must still work out dif-
•rences with the House, which passed
'ate wii m ji ar legislation late last year, and
answer administration objections to a
collesi J ovision that would excuse airlines
theyca lid steelmakers with chronic pension
Fryv. I iderfunding problems from $16 bil-
ents n I an in catch-up payments,
degree'! For thousands of companies, speed
onalojp cruc ' a *' They face huge increases in
goti,n Payments to their pension funds if the
acII as! ieasurc doesn't become law- by April,
g-y ■ "A lot of companies have suffered"
. co |i B ready as a result of congressional
trove mftl a y, saK * Ly nn Dudley, vice president
o the American Benefits Council, a
business group representing employers
"^“Tid retirement-plan providers.
She said her group’s “members are
withholding opening plants, not
increasing new hires and avoiding
improvements to their programs until
they know what their liabilities are.”
Unions have also lobbied for the leg
islation. Although the legislation will
result in smaller payments to pension
funds over the short run, it gives some
financial breathing space to companies
that might otherwise go bankrupt, lay
off workers, freeze their pension plans
or renege on the promised benefits.
Failed pension plans are turned over
to the Pension Benefit Guaranty Corp.,
a government agency that insures pen
sions for some 44 million people in
more than 30,000 defined-benefit pen
sion plans.
The PBGC finances itself with pre
miums it assesses pension plan spon
sors, in much the same way the Federal
Deposit Insurance Corp. collects pre
miums from banks and thrift institu
tions to insure their depositors. Last
year the PBGC took over 152 bankrupt
single-employer pension plans cover
ing 206,000 people, and saw its deficit
rise to a record $11.2 billion.
Workers may lose a portion of their
benefits when the PBGC becomes trustee
of a plan. For example, the agency
announced Wednesday it was taking over
the plan of a bankrupt North Carolina
construction company with 6,300 work
ers, pension plan assets of $95 million
and benefit promises totaling $215 mil
lion. The PBGC estimated it will end up
assuming $104 million of the $120 mil-
Senates buys time
for pension reform
The Senate passed legislation
Wednesday that is a short-term,
two-year fix to protect employers
from what could become
artificially inflated pension
contributions.
Employees participating in
defined benefit pension plans
Total workers
Private sector workers
I
L r>F
38.0
21.9
41.6
1
1981
•91 '93 ’95 97
SOURCE: Department of Labor AP
lion shortfall, with the rest made up by
lower retiree benefits.
Pension plans are in crisis partly
because contributions have been tied to
the interest rate on 30-year Treasury
bonds. But the Treasury Department
stopped issuing the bonds in 2001 and
interest rates fell precipitously, produc
ing smaller returns on pension plan
investments. Underfunding of pension
plans is now estimated to total $350 bil
lion nationwide.
The Senate bill would establish a
new formula that would myke contribu
tions dependent on the investment
return from a blend of corporate bond
index rates. The PBGC says that will
save companies $80 billion over the
next two years while Congress and the
administration work on long-term over
haul of the pension system.
The measure is particularly impor
tant to mature industries such as auto
mobiles, where retirees at some compa
nies outnumber current employees.
General Motors Corp., for example, has
25 retirees for every 10 active employ
ees and will have to pay out $6 billion
in pension benefits this year.
The bill also gives relief and
requires greater transparency for unions
and others involved in multi-employer
pension plans.
Its most controversial provision sin
gles out airlines and steelmakers,
among others who have chronically
underfunded plans, for special breaks.
Currently, such companies must
make deficit reduction contributions,
above their normal payments, to reduce
their underfunded amounts. The bill
would allow these employers to pay
only 20 percent of their required catch
up pay in 2004, and 40 percent in 2005.
The three Cabinet secretaries who
make up the board of the PBGC, Elaine
Chao of Labor, John Snow of Treasury
and Donald Evans of Commerce, said
last week they would recommend a
presidential veto if this provision
remained in the bill.
NEWS IN BRIEF
Leaders praise energy
industry, encourage
diversified sources
AUSTIN (AP) — The state’s top politi
cal leaders on Wednesday described
their vision for a Texas where wind tur
bines work alongside gas wells to cre
ate clean and sustainable power for the
state and the nation.
Gov. Rick Perry and Lt. Gov. David
Dewhurst opened the 54th annual
Texas Railroad Commission's State
of the Industry meeting with praise for
what they called the backbone of the
state’s economy. They also called on
industry leaders to explore new ener
gy sources.
“Through our focus on the develop
ment of clean energy, diversification
of energy supplies and a greater
emphasis on energy conservation,
we can lower prices for consumers,
we can create thousands of new jobs
and we can make Texas and America
less dependent on that foreign supply
of oil," Perry said.
Energy producers, distributors and
government regulators met Wednesday
amid a strong energy market buoyed by
the worldwide stabilization of natural
gas and crude oil prices and increasing
demand for energy.
“Overall, the energy industry is very
bright for Texas,” said Ron Kitchens, exec
utive director of the commission. "There’s
also a lot of interest in new sources of
energy, such as LNG (liquefied natural
gas), wind power and fuel cells."
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