House Panel OKs Pension Fix Amid Acrimony Fri July 18, 2003 01:23 PM ET By Susan Cornwell
WASHINGTON (Reuters) - Companies with underfunded pension plans would get relief for three years under legislation backed by the U.S. House of Representatives Ways and Means Committee, but the minority Democrats complained that House rules had been violated. The Republican majority rushed the measure through on a voice vote while committee Democrats were conferring over last-minute changes in an adjacent room. In the ensuing partisan acrimony, Capitol police were called, but no arrests were made. Democrats questioned whether the committee action was legitimate and said they were furious that police had been called by Republican staff. "There is no question in my mind this is an absolute abuse of power," said Rep. Robert Matsui, of California. Under the measure 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, in the context of a comprehensive reform of pension funding rules. 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 nearing retirement have all combined to undermine traditional corporate pensions that promise a set payout. Treasury Secretary John Snow, whose office had suggested a different approach to pension funding last week, said the Bush administration would continue working with Congress to develop "accurate pension funding rules." "As we work toward a more comprehensive reform of the pension system, the President continues to believe that these changes must 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. Reps. Benjamin Cardin, a Maryland Democrat, and Rob Portman, an Ohio Republican, had proposed using the returns on corporate bonds as the appropriate yardstick for valuing pension funds. Critics say changing the method of valuing the funds is an accounting device that doesn't really address the shortfall. The Bush administration weighed into the subject last week by saying it was all right to take the Portman-Cardin approach for two years, but companies should then move to a more accurate way of calculating pensions called a yield curve, which considers when pension bills would actually come due. But this idea got a chilly reception from lawmakers, who said the administration's proposal would increase volatility in pension funding -- and might make companies decide they did not want to offer defined benefit pensions anymore. Committee Chairman Bill Thomas, a California Republican, said he hoped people would not focus too much on the temporary fix. "Our goal is to create a degree of comfort that there will be a stone in the middle of the stream," he said, "but we've got get on with the work of a permanent replacement."
