Congressional negotiators said Wednesday they had agreed on legislation to restore health to the nation’s enfeebled employer-based pension system and ensure the retirement benefits of tens of millions of people.
“I think everything’s resolved, pending getting the exact wording,” Sen. Michael Enzi, R-Wyo., chairman of the Health, Education, Labor and Pensions Committee, said Wednesday.
But aides familiar with the negotiations said they had yet to reach agreement on all parts of the bill, although they should be able to nail down a deal this week. One unresolved issue was the Senate-backed proposal to give special relief to financially troubled airlines.
Negotiators also had not finished work on proposals to extend some popular tax breaks; these would be added to the pension bill. The chairman of the Senate Finance Committee, Sen. Charles Grassley, R-Iowa, said negotiators were under pressure from GOP leaders to fold in a cut in estate taxes.
“I think it’s a gamble to put it in,” he said.
The tentative deal was a product of months of slow-moving talks between the House and Senate. It would impose stricter funding rules on companies that fall behind in contributions to defined-benefit pension plans, which are important source of retirement income for 44 million people in the United States.
Congress has tried to bring more discipline into a single-employer pension system that is underfunded by an estimated $450 billion. At the same time, lawmakers do not want to drive companies to declare bankruptcy and dump their future obligations on the Pension Benefit Guaranty Corp., which insures such plans.
Lawmakers negotiating the bill released few details. They said they planned to meet again Thursday to ensure there were no discrepancies in the oral agreement. House and Senate leaders hope to consider the compromise legislation before Congress leaves for the August recess.
The deal was expected to give specific relief to airline companies that are on the verge of defaulting and unloading their plans on the agency, which is running a $22.8 billion deficit. These airlines would get more time to put their pension plans on a sound footing.
The chief executives of Northwest Airlines Corp. and Delta Air Lines Inc. urged Congress on Wednesday to pass the legislation, warning that they could be forced to terminate their pension plans without action on Capitol Hill.
“A further delay is a functional equivalent of no,” Douglas Steenland, president and chief executive of Northwest.
The pension bill passed in different versions by the House and Senate late last year. But the issue is among the most complex Congress has worked on this year, and talks bogged down because of the intricacies.
The White House said President Bush would not accept any bill that weakened the long-term financial status of the retirement plans. Negotiators gave assurances that they had answered the administration’s concerns.
Among the issues were how to determine when a company is “at risk” of underfunding its pension plan, triggering a process where the company must increase its contributions until the plan is fully funded.
Other topics included how to give legal status to cash balance plans, which are hybrids of defined-benefit and 401(K)-type plans that have been challenged in court over age discrimination issues; and how to strengthen multi-employer plans sponsored by companies and labor unions.
The bill also would establish a permanent interest rate that would more accurately determine a company’s liabilities to its pension fund.
It would restrict the practices of companies giving deferred-compensation payouts to executives of financially troubled companies with at-risk pension plans.
In addition, it would put limits on the use of credit balances, where employers replace contributions with credit balances accrued in past years but which, because of stock market fluctuations, may have fallen in value.
The agreement was also expected to temporarily reinstate some popular tax breaks, including a corporate research and development credit and a deduction for state and local sales taxes. Lawmakers also planned to use the bill to keep some of the president’s temporary tax incentives for retirement savings, first passed in 2001.
A senior GOP leadership aide, speaking on condition of anonymity while negotiations continued, said Senate Majority Leader Bill Frist, R-Tenn., wants an estate tax reduction exempting the first $5 million of an individual’s estate and $10 million of a couple’s.
Under his plan, estates greater than $25 million would start to lose the exemption, and it would disappear for estates greater than $40 million. Estates would be taxed at graduated rates, starting at capital gains tax rates and increasing to 35 percent.