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Senate lawmakers introduced a bipartisan pension reform bill Friday that is intended to curb defaults on corporate pension obligations and will eventually offer aid to the distressed airlines industry. While help for the industry is not currently in the bill Sens. Charles Grassley, R-Iowa, and Max Baucus, D-Mont., it is expected to be included. It is anticipated that airlines will receive the option to stretch out their pension payments over 15 years, a measure the industry has asked for to help several airlines avoid the fate of UAL Corp., the parent of United Airlines, and USAirways, which both filed for bankruptcy. The backdrop for the measure is the industry’s request of Congress to give them 25 years to fulfill their pension obligations. More generally, the National Employee Savings and Trust Equity Guarantee (Nesteg) Act requires companies to allow their employees to diversify out of company stock. The legislation also adopts a permanent yield curve replacement for the 30-year Treasury rate formula for calculating how much companies must contribute to their pension plans, and it simplifies pension laws and regulation. Nonetheless, the bill has several key differences with legislation that the House Education and the Workforce Committee approved in June. Other than the lack of aid for airlines — or any specific industry — in the House bill, the Senate bill also includes an “at-risk liability for financially troubled companies” provision that requires companies that have held junk bond status for several years without improving their financial health to reflect the costs of early retirement in their liability measurements. The House bill contains no such provision. All 27 Republicans on the House committee voted for the measure, while the 22 Democrats merely voted “present,” refusing to vote for or against the bill. The House bill has been bounced to the House Ways and Means Committee for consideration, where Chairman Bill Thomas, R-Calif., is expected to make it part of an overall retirement security legislative package that would also include Social Security reform. Both houses of Congress are expected to push hard for a pension bill this year because a temporary pension bill expires at the end of the year. Many corporate pension plans are currently underfunded, and when they are terminated — most often through a bankruptcy — it falls to the Pension Benefit Guaranty Corp. to pay workers’ pensions. But the PBGC, the federal insurer of corporate pensions, is running a record deficit of $23 billion. “We need to fix the problems within our control,” Grassley said Friday. “One reason for pension erosion is poor funding rules. Companies accept the tax breaks that come with offering pension plans, but pension funding rules allow companies to avoid fully funding them for their workers.” Added Baucus: “The pension bill we have unveiled [Friday] takes strong yet measured steps to strengthening the private pension system. “The hard lessons of corporate scandals and airline pension plan terminations should be applied to build a better, more secure future for hardworking Americans.” Additionally, the bill changes the liability target so that a plan’s goal must be 100 percent funding; corporate pension shortfalls must be amortized over seven years; and premiums paid to the PBGC premiums would be increased to $30. Copyright �2005 TDD, LLC. All rights reserved.

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