|
Not a police state { July 18 2003 } Original Source Link: (May no longer be active)
http://reuters.com/newsArticle.jhtml?type=politicsNews&storyID=3118587http://reuters.com/newsArticle.jhtml?type=politicsNews&storyID=3118587
House Panel Agrees Pension Fix Amid Feuding
Fri July 18, 2003 06:49 PM ET
By Susan Cornwell
WASHINGTON (Reuters) - Companies with underfunded pension plans would get relief for three years under a bill backed by a U.S. House of Representatives committee on Friday, in a session so stormy that Democrats walked out and Republicans called police.
The measure was rushed through by the Republican majority as Chairman Bill Thomas of California called a voice vote while committee Democrats were conferring over last-minute changes in an adjacent library.
When police arrived and said they had been called to clear the library, Democrats were outraged, and tried unsuccessfully to get the committee's action reversed on the House floor.
"This is the United States of America, not a police state," declared Rep. Sander Levin, a Michigan Democrat. But Republicans said they only called in police when one of their members was physically threatened. No one was arrested.
Under the measure that the committee approved, traditional "defined benefit" pension plans would be allowed to assume a more generous return on investments based on an index of high-grade corporate bonds rather than the current formula based on 30-year U.S. Treasury bond yields.
This new measure of pension liabilities would be used for the next three years while a permanent replacement is sought as part of a comprehensive overhaul of pension rules.
The bill raises the amount workers can contribute each year to 401(k) plans, which let an individual choose from company-provided investment options. Next year, workers could save a maximum $15,000 in their 401(k)s, up from $13,000.
Individual Retirement Account contributions could rise to $5,000 a year from $3,000 currently and those over 60 could contribute $6,000 annually to an IRA.
The bill also raises from 70-1/2 to 75 the age at which retirees must start drawing money from retirement accounts.
ADMINISTRATION TO WORK WITH CONGRESS
Total pension underfunding exceeds $300 billion at U.S. companies, with $60 billion in the auto industry, according to the agency that bails out troubled corporate pension plans.
A sluggish economy, lackluster stock prices, low interest rates and a bubble of older workers near retirement have joined to undermine traditional pensions that promise a set payout.
Reps. Benjamin Cardin, a Maryland Democrat, and Rob Portman, an Ohio Republican, had proposed using the returns on corporate bonds as the yardstick for valuing pension funds.
But critics say changing the method of valuing the funds is an accounting device that doesn't address the shortfall.
Companies would have to pay less under the plan, said Howard Silverblatt, an analyst for the credit rating agency Standard & Poors. "This change would free up cash for other corporate uses," he said in a statement.
Treasury Secretary John Snow, who had favored a different approach to pension funding, said the Bush administration would work with Congress to develop accurate funding rules.
Reforms should include "a more accurate measure of pension liabilities, increased transparency of pension plan information, and safeguards against pension under-funding," he said in a statement.
The Bush administration had proposed taking the Portman-Cardin approach for two years, then having companies move to a more accurate way of calculating pensions called a yield curve, which considers when pension bills come due.
But this idea got a chilly reception from lawmakers, who said it would increase volatility in pension funding -- and might make companies stop offering defined benefit plans. (Additional reporting by Donna Smith)
|
|
