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The Bush administration unveiled its pension reform proposal Monday, saying it has commitments from lawmakers in the House and Senate to take up the issue this year. The president’s plan includes three key elements: reforming the funding rules, which govern how much money an employer must put in a pension plan; reforming the premium system; and increasing disclosure to workers, investors and regulators to ensure greater transparency and accountability. “These proposals will ensure the financial integrity of the federal insurance system that protects these plans. And they will help ensure that defined-benefit plans remain an option for workers,” said U.S. Labor Secretary Elaine Chao, who unveiled the reform proposal in a speech at the National Press Club Monday in Washington. Chao sits on the board of directors of the Pension Benefit Guaranty Corp., the quasi-governmental agency that guarantees corporate pension plans. Defined-benefit plans — also known as corporate pensions — are single-employer, private-sector plans that cover about 20 percent of the U.S. work force, or about 34 million workers. Other employee retirement vehicles include 401(k)s and individual retirement accounts, or IRAs, neither of which is guaranteed by the PBGC. The PBGC currently has a record $23.3 billion deficit. Even so, it’s still required to pick up responsibility for the pension assets of companies — many of which are bankrupt — that have terminated their plans. “I’m pleased the Bush Administration recognizes the urgent need to strengthen the defined-benefit pension system and has put forth a comprehensive reform proposal,” U.S. House Education & the Workforce Committee Chairman John Boehner, R-Ohio, said in a statement. “We plan to review the Administration’s proposal very carefully as we move ahead with the process of putting together a comprehensive legislative package for Congress to consider,” he said. Regarding pension funding rules, the administration proposes to do away with the multiple measures of pension liabilities and replacing it with one basic measure to give an earlier warning sign of an underfunded plan. Moreover, employers would be able to make additional contributions to their pension plans during good economic times, which is currently discouraged by the U.S. Tax Code. Furthermore, the pension premium payment system would be revamped to better reflect the real cost and risk of a particular company’s plan, Chao said. Financially troubled companies with underfunded plans would be required to pay heftier premiums. As for more disclosure, the Bush administration proposals require timelier reporting of company information on the funded status of the plans and making available to the public more information that is filed with the PBGC on underfunded plans. Copyright �2005 TDD, LLC. All rights reserved.

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