Here are links and excerpts from articles discussing the legislation now approved by the Senate Finance Committee (previous post here):
The Senate Finance Committee, acting to head off a savings-and-loan-style bailout of the federal pension insurer, overwhelmingly approved legislation requiring employers to fully fund their defined-benefit pension plans.But the panel also amended the measure to give the struggling airline industry more leeway than others in funding its pension obligations. . .
The bill, approved by voice vote with no debate, is a closer parallel to the Bush administration’s pension-system overhaul proposals than a more business-friendly bill approved last month by a House committee.
Labor Secretary Elaine Chao praised the committee for advancing the bill but said the Bush administration would like to see some stronger rules imposed on businesses to make sure they fund their pensions adequately.
The version of NESTEG passed by the Senate was a revamping of the bill, S. 219, which was introduced in January by Sen. Charles Grassley, R-Iowa, chair of the finance committee, and Sen. Max Baucus, D-Mont., the committee’s ranking minority member. Grassley and Baucus unveiled the new version of NESTEG on July 22 and included several new reform proposals specifically designed to avoid catastrophic pension failures after the United Airlines $9 billion pension default was announced in May. . .The new Senate measure includes a number of provisions designed to meet goals set by Labor Secretary Elaine Chao earlier this year. One element of the new Senate bill would stop the practice of “smoothing” pension liability, something many employers now do to avoid drastic fluctuations in contributions they make to their pension plans. Critics of smoothing say it can hide insolvencies and allow pension sponsors to reduce contributions when plans actually may need more funding.
The Senate bill also includes a proposal suggested by Chao to require a new accounting standard for pension funds when the credit rating of a plan sponsor is reduced to junk-bond status. The new “at risk” standard would place tougher requirements on plan sponsors to ensure that they make the contributions needed to keep their pension plans solvent. While employer groups have expressed support for both the Senate and House versions of the pension reform proposals, the endorsements have been lukewarm at best. . .
NESTEG will now move on to the Senate Health Education Labor and Pension Committee for consideration. No further action on the measure is expected until after Labor Day, when Congress returns from its August recess.
Pre-markup industry comments regarding the legislation:
See also, the Senate Finance Committee’s description of changes made to the original legislation proposed earlier this week in “Modifications to the Senate Finance Committee Chairman’s Mark of the “National Employee Savings and Trust Equity Guarantee Act of 2005.”
By the way, regarding the House version of pension legislation, see this Tax Analyst report–“Retirement Bill Coming Second Week of September, Thomas Says.“