House Committee Backs Measure to Place

PBGC on More Solid Financial Foundation, Help Protect Agency from Massive Taxpayer Bailout

Boehner Reiterates Need for Broad, Comprehensive Pension Reform 

WASHINGTON, D.C. – The U.S. House Committee on Education & the Workforce today approved a measure to strengthen the financial condition of the Pension Benefit Guaranty Corporation (PBGC), the federal agency that insures the pensions of 44 million American workers and retirees in some 29,000 traditional pension plans.  Committee Chairman John Boehner (R-OH) emphasized his commitment to completing action on comprehensive pension reform this year, but said the measure would help boost the PBGC in the short-term.

“Taxpayers should not be called upon to bail out the PBGC if its financial condition continues to deteriorate, and this measure was crafted with that in mind,” said Boehner, noting the agency’s $23 billion deficit.  “However, it is far more important that we enact comprehensive pension reform to not only improve the condition of the PBGC, but to save our traditional pension system as well.”

“Comprehensive reform is critical to strengthening our worker pension system, and I remain confident that the House and Senate can complete our work on broad reforms this year,” Boehner added.

The measure would provide the agency with about $6.2 billion in additional financial resources over five years and has been reported to the House Budget Committee as part of the FY 2006 budget reconciliation process.  The proposal would not go into effect if a comprehensive proposal to reform pension funding rules, update disclosure requirements, and strengthen PBGC finances were signed into law by the end of the year.

While Congress oversees the PBGC, the agency is funded through regular employer premiums rather than tax dollars, and the last time premiums were adjusted was in 1991.  The Committee plan would phase-in increases in employer-paid premiums, first by increasing them from $19 to $30 per pension plan participant beginning in 2006 – the same as a Bush Administration proposal – and then giving the PBGC the discretion to increase these premiums up to 20 percent annually thereafter.  The PBGC must make its case in order to raise premiums, and Congress would reserve the right to disapprove the increase in a straight up-or-down vote each year.

The plan also would establish employer-paid termination premiums of $1,250 per plan participant for companies that have gone through bankruptcy and terminated their pension plans.  Termination premiums would be paid by these companies for three consecutive years once a company emerges from bankruptcy.

“I’m pleased we have been given the opportunity to revisit the need for comprehensive reforms to our nation’s pension system,” said Rep. John Kline (R-MN), vice-chairman of the Employer-Employee Relations Subcommittee.  “The benefits of comprehensive reform are far superior to those of increasing premiums alone, and I remain committed to enacting broad-based reforms before the end of the year.”

Kline joined Boehner and other Republicans on the Education & the Workforce Committee in passing the Pension Protection Act (H.R. 2830) on June 30, 2005.  While all 27 Republicans on the panel backed the measure, Committee Democrats voted “present” when given the chance to support the bill.  The bill is expected to be voted on by the House Ways & Means Committee within weeks, with consideration by the full House to follow.

“The health of our nation’s worker pension system is a bottom line concern for American taxpayers,” noted Boehner.  “While today’s vote to strengthen PBGC funding is an important reflection of that fact, it is far more critical that we enact a comprehensive measure to overhaul our antiquated pension laws on behalf of workers, retirees, and taxpayers.”

For more information on the Education & the Workforce Committee’s efforts to rein-in federal spending while protecting the needs of students, workers, retirees, and taxpayers, see the Committee’s “Plan for Fiscal Responsibility” at http://edworkforce.house.gov/fiscalresponsibility.pdf.  And for additional information on the Committee’s efforts on comprehensive pension reform, visit http://edworkforce.house.gov/issues/109th/workforce/pension/pension.htm.

# # # # #