WASHINGTON (Reuters) - Corporate employers and labor unions said on Monday they were worried about a new Capitol Hill proposal to tighten the definition of when pension plans are in such bad financial shape they must add cash.þþThe plan could drive some companies out of the pension system entirely by cracking down on pension plans that don't deserve it, the critics warned.þþIt is one option being discussed behind closed doors by House and Senate negotiators trying to write a compromise bill to put the traditional U.S. pension system on sounder footing.þþ``We're very concerned. This is core to whether companies can stay in (the pension system) or not,'' said Lynn Dudley, vice president for retirement policy at the American Benefits Council. It represents large employers with pension plans.þþ``We hope they are not too harsh too quick,'' said Alan Reuther, legislative director for the United Auto Workers union. The proposal for defining ``at risk'' plans could affect automakers and many other companies, he said.þþLawmakers aim to identify the bad actors in defined benefit pension plans to make them better fund their plans. Some 44 million Americans rely on the system.þþDefined benefit plans, which pay a fixed amount to retired employees, are underfunded as a group by $450 billion. The agency that insures them, the Pension Benefit Guaranty Corp (PBGC), is running a $22.8 billion deficit.þþLawmakers are discussing a proposal to consider a plan at risk of default if it is less than 70 percent funded, aides said. The catch is that the 70 percent funding level would be calculated according to a strict formula which assumes all participants in the plan retire at the earliest opportunity and take the most expensive benefits.þþSpeaking after the latest negotiating session on Monday, House Majority Leader John Boehner said they had ``not quite'' agreed on a definition of which pension plans were at risk of default. He declined to elaborate.þþBoehner, an Ohio Republican, told reporters progress was being made in the talks, which began in March. ``We're getting very close to an agreement and I'm very optimistic.''þþThe Bush administration has urged lawmakers to get tough with pension rules and stop plans being dumped on the PBGC.þþAn organization of pension fiduciary managers also expressed worry about the direction of the House-Senate talks.þþ``We are very concerned about this proposal because it could very easily sweep up plans that are not a danger to the system at all,'' said Judy Schub, managing director of the Committee on Investment of Employee Benefit Assets (CIEBA).þþCIEBA represents nearly 140 of the largest U.S. corporate pension funds. Its members are financial officers who manage the investment of over $1 trillion in retirement plan assets.þþ``We think it is bad pension policy,'' Schub said. ``We also think it's bad economic policy.''þþLast year the Senate passed a pension bill with language to make companies with poor credit ratings such as General Motors Corp add cash to their plans. But many employers opposed the proposal and lawmakers began looking for an alternative.þþReuther said a key issue would be how the lawmakers treat credit balances. These are balances which companies accumulate by putting more money into a plan than required in a given year to meet obligations to retirees. They can then can be assumed to grow at a higher rate of interest than the actual return.þþ
Source: NY Times
