Wednesday, November 16, 2005


In an effort to shore up deficits in the pension plans that cover 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 Senate legislation, which passed 97-2, would compel companies with defined-benefit plans to live up to their funding obligations, preventing them from abandoning the retirement benefits of millions of Americans. The near unanimous support for the bill, an anomally in Washington these days, reveals the importance of this issue to both parties.

The vote came a day after the Pension Benefit Guaranty Corporation, which insures the 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, and predicted a troubled future. A shortfall has been reported in each of the last four years.

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. In an effort top offset some of the deficit, those premiums would increase from $19 to $30 a year under the Senate bill.

The Senate legislation, unlike the House version, would also extend special relief for debt-ridden airlines. Bankrupt steel and airline companies have been a significant reason for the PBGC's mounting financial woes. But the White House, while saying it supports most of the bill, opposed including extended relief for the airline industry.

Earlier this year, United Airlines and US Airways filed for bankruptcy and forced their employee pension liabilities -- a combined $9.6 billion -- onto the PBGC. Delta Airlines and Northwest Airlines , which both filed for Chapter 11 bankruptcy protection in September, could follow suit.

PBGC-covered single-employer defined-benefit plans, under which workers receive fixed monthly benefits based on their salaries and tenure, declined from 95,000 in 1980 to 30,000 in 2004 as companies either stopped offering plans or switched to 401(k)-type programs.

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