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08-27-2006, 04:00 PM
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Bush Signs Sweeping Revision of Pension Law
By Peter Baker
Washington Post Staff Writer
Friday, August 18, 2006; Page D01
President Bush yesterday signed the most extensive revision of the nation's pension law in three decades as the federal government moved to shore up often-shaky private retirement programs for 44 million Americans and head off a crisis like the savings-and-loan bailout of the 1980s and 1990s.
The new law will force most private employers that provide traditional pensions to their workers to pump tens of billions of dollars more into those systems over seven years while making it easier to expand 401(k) and IRA retirement plans. But the law cuts a break to the financially troubled airline industry, where the pensions of tens of thousands of workers have been endangered.
Sen. Edward M. Kennedy (D-Mass.), a vociferous Bush critic, offered rare praise for the president's support of the pension legislation. "In this case, Democrats and Republicans worked together and America's workers and retirees came out the winners," he said.
But critics of the law, such as Rep. George Miller (D-Calif.), called it a smokescreen, warning that some companies would face fewer requirements to fund their pensions. The Congressional Budget Office reported Wednesday that the new law would "lead to an increase in underfunding among plans that will be terminated over the next decade."
The new law is aimed at restoring stability to corporate pensions. More than 700 pension plans have collapsed in the past five years, and the federal insurance program that steps in, the Pension Benefit Guaranty Corp., has gone from a $10 billion surplus to a $23 billion deficit. Altogether, private pension plans are estimated to be underfunded by $300 billion to $450 billion, and some officials feared a collapse requiring massive taxpayer bailout.
The law enacted yesterday requires companies to fully fund defined-benefit pension plans over seven years, closes loopholes allowing underfunded plans to skip payments and forces companies that underfund their plans to pay higher premiums to the pension corporation. Funding provisions of the law will not take effect for two years to provide time for a transition, and the airline industry and certain government contractors were given a break in meeting them. Airlines that have frozen their pension plans, Delta and Northwest, will have 17 years instead of seven to fully fund them, while others will get 10 years.
Two little-noticed features of the law was praised by gay rights groups. Under the law, a person's retirement benefits could transfer to domestic partners or other beneficiaries such as sibling or parent. And workers could draw on retirement funds for medical or financial emergencies involving domestic partners or other beneficiaries.
The Human Rights Campaign, a gay rights group, said it was the first time federal legislation has on a broad basis treated same-sex couples similarly to married couples."Today marks an important day for fairness under the law in America," said its president, Joe Solmonese.
The new law also contained provisions aimed at stimulating charitable donations and curbing abuses. The most significant provision will allow older taxpayers to make annual tax-free donations up to $100,000 from their IRAs to charitable causes. The provision, long sought by charities, is expected to generate $400 million in new charitable giving over the next two years, the United Way of America said.
Bush Signs Sweeping Revision of Pension Law
By Peter Baker
Washington Post Staff Writer
Friday, August 18, 2006; Page D01
President Bush yesterday signed the most extensive revision of the nation's pension law in three decades as the federal government moved to shore up often-shaky private retirement programs for 44 million Americans and head off a crisis like the savings-and-loan bailout of the 1980s and 1990s.
The new law will force most private employers that provide traditional pensions to their workers to pump tens of billions of dollars more into those systems over seven years while making it easier to expand 401(k) and IRA retirement plans. But the law cuts a break to the financially troubled airline industry, where the pensions of tens of thousands of workers have been endangered.
Sen. Edward M. Kennedy (D-Mass.), a vociferous Bush critic, offered rare praise for the president's support of the pension legislation. "In this case, Democrats and Republicans worked together and America's workers and retirees came out the winners," he said.
But critics of the law, such as Rep. George Miller (D-Calif.), called it a smokescreen, warning that some companies would face fewer requirements to fund their pensions. The Congressional Budget Office reported Wednesday that the new law would "lead to an increase in underfunding among plans that will be terminated over the next decade."
The new law is aimed at restoring stability to corporate pensions. More than 700 pension plans have collapsed in the past five years, and the federal insurance program that steps in, the Pension Benefit Guaranty Corp., has gone from a $10 billion surplus to a $23 billion deficit. Altogether, private pension plans are estimated to be underfunded by $300 billion to $450 billion, and some officials feared a collapse requiring massive taxpayer bailout.
The law enacted yesterday requires companies to fully fund defined-benefit pension plans over seven years, closes loopholes allowing underfunded plans to skip payments and forces companies that underfund their plans to pay higher premiums to the pension corporation. Funding provisions of the law will not take effect for two years to provide time for a transition, and the airline industry and certain government contractors were given a break in meeting them. Airlines that have frozen their pension plans, Delta and Northwest, will have 17 years instead of seven to fully fund them, while others will get 10 years.
Two little-noticed features of the law was praised by gay rights groups. Under the law, a person's retirement benefits could transfer to domestic partners or other beneficiaries such as sibling or parent. And workers could draw on retirement funds for medical or financial emergencies involving domestic partners or other beneficiaries.
The Human Rights Campaign, a gay rights group, said it was the first time federal legislation has on a broad basis treated same-sex couples similarly to married couples."Today marks an important day for fairness under the law in America," said its president, Joe Solmonese.
The new law also contained provisions aimed at stimulating charitable donations and curbing abuses. The most significant provision will allow older taxpayers to make annual tax-free donations up to $100,000 from their IRAs to charitable causes. The provision, long sought by charities, is expected to generate $400 million in new charitable giving over the next two years, the United Way of America said.