COMMITTEE ON EDUCATION AND THE WORKFORCE
U.S. HOUSE OF REPRESENTATIVES

December 9, 2005

Without Pension Reform, More Workers & Retirees Will Lose Pension Benefits

Support Common-Sense Pension Reforms; Support the Pension Protection Act (H.R. 2830)

Dear Colleague:

Soon the House of Representatives will vote on the Pension Protection Act (H.R. 2830), comprehensive legislation that addresses a key retirement security crisis that is jeopardizing the pension benefits of workers and retirees across the country.  Moreover, this crisis presents a looming, billion dollar threat to American taxpayers as well.  A wholesale modernization of outdated pension laws is long overdue, and here are the reasons why.

WHY THE PENSION PROTECTION ACT IS NEEDED

The recent financial troubles and pension terminations at United Airlines, US Airways, and Bethlehem Steel underscore the need for fundamental reform.  Indeed, today’s outdated federal pension laws are putting critical worker and retiree pension benefits at risk.

• When pension plans are terminated and the financial burden is placed on the federal government, workers and taxpayers both stand to lose. 

• When such terminations occur, the burden is assumed by the federal Pension Benefit Guaranty Corporation (PBGC), which has an operating deficit of nearly $23 billion.

• As the financial condition of the PBGC continues to worsen, the prospect of a multi-billion dollar taxpayer bailout looms larger with each passing day.

• Comprehensive reform of our pension system is essential to ensure that millions of hard-working Americans who rely on these pension benefits can continue to count on them.

• Without comprehensive reform to fix outdated federal pension laws, more companies will default on their worker pension plans – increasing the likelihood of a multi-billion dollar taxpayer bailout – and more companies will stop providing defined benefit pension plans to their workers entirely.

PENSION PROTECTION ACT: SIX PRINCIPAL REFORMS

The Pension Protection Act focuses on six key reforms to fix outdated pension laws, strengthen workers’ retirement security, and reduce the prospect of a future multi-billion dollar taxpayer bailout.  They include the following:

• Certainty.  H.R. 2830 establishes a permanent interest rate to more accurately calculate employers’ pension liabilities to ensure they fund their worker pension promises.

• Common Sense.  The bill gives employers incentives to help build up a cushion in their worker pension plans during good economic times, raising the maximum deductible amount for pension plans contributions.

• Stability.  The measure closes funding loopholes and reduces volatility in worker pension plans by ensuring employers make adequate and consistent cash payments to their plans.

• Transparency.  The bill ensures workers and retirees are given timely, accurate, and straightforward information about the health of their plans and, thus, their own financial future. 

• Honesty.  With hundreds if not thousands of significantly underfunded pension plans across the country, H.R. 2830 includes reasonable restrictions to ensure employers and union leaders cannot dig the pension hole even deeper by promising extra benefits if a plan is less than 80 percent funded.

• Portability.  The bill helps resolve legal uncertainty to ensure hybrid plans such as cash balance pensions, which offer portable benefits that allow workers to earn more generous benefits steadily throughout their careers, remain a viable part of the defined benefit system.

The Pension Protection Act is critical because significant and widespread pension underfunding is placing at risk the long-term financial security of millions of American workers and retirees.  Congress has a responsibility to act on their behalf, and this bill will help bring them the pension security they need.  Please call the Education & the Workforce Committee at x5-4527 or the Ways & Means Committee at x5-3625 if you have any questions about this issue, and join us in supporting the bill when it comes up for a House floor vote.

Sincerely,