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Wednesday, July 17, 2024

Pension overhaul stalls

Agreement on major pension overhaul legislation was put on hold late Thursday when House Republicans boycotted a meeting of negotiators, protesting Senate maneuvers to keep a package of popular tax breaks into the bill.

Agreement on major pension overhaul legislation was put on hold late Thursday when House Republicans boycotted a meeting of negotiators, protesting Senate maneuvers to keep a package of popular tax breaks into the bill.

House GOP leaders want to take out the tax breaks so they can be used as a vehicle to push through an estate tax cut that has so far been rejected by the Senate. Several Senate Republicans involved in the pensions negotiations have stood firm on including the tax measures in the pensions compromise.

House Republican negotiators never appeared at a meeting that Sen. Mike Enzi, R-Wyo., chairman of the House-Senate conference, called to settle the issue with a vote.

“Republican tax politics got in the way of progress for the retirement security of tens of millions of Americans,” said Sen. Edward Kennedy, D-Mass., one of the pension bill’s negotiators.

A spokesman for House Majority Leader John Boehner, one of the negotiators who avoided the meeting, said lawmakers had successfully crafted a bipartisan pension plan and that Boehner “believes we ought to get back to working together in a constructive fashion.”

House and Senate staffers worked through the night to draft language on the pension bill that would restructure, and ideally restore financial integrity to, traditional employer-based pension plans. Last-minute talks were also held on two other major disputes _ special breaks for the airline industry and new rules for financial firms giving investment advice.

There was a sense of urgency because an agreement must be reached Thursday if the House is to pass the bill before its planned departure on Friday. The Senate is in session one more week, planning to be gone until after Labor Day.

The bill, years in the making and under negotiation for five months, has the goal of strengthening traditional employer-based pension plans, crucial to the retirements of some 44 million Americans. It would also provide for steps, such as automatic enrollment, to ensure that 401(k) plans and IRAs, increasingly the main savings option of younger workers, are used by more people.

The bill would require all defined-benefit plans to reach full funding within seven years, presumably shrinking the current level of underfunding estimated at $450 billion. Companies that are seriously underfunded would be required to make extra payments to catch up with their contributions.

The legislation also attempts to protect the fiscal integrity of the Pension Benefit Guaranty Corp., the federal agency that insures pension plans and takes over plans abandoned by companies. The PBGC, running a deficit of $22.8 billion, has so far operated on premiums and interest earnings, but there is concern that it could require a taxpayer bailout if more major employers dump their pension plans.

It also would give legal certainty to future cash balance and other “hybrid” defined-benefit plans. Such plans have faced lawsuits over charges that they discriminate against older workers.

The $35 billion package of tax cuts would revive popular but expired tax breaks, including a business research and development credit, along with deductions for state sales taxes and college tuition. Many of the credits would be renewed for two years.

It would also include revisions designed to prevent charities from abusing their tax-exempt status, a step favored by Senate Finance Committee Charles Grassley, R-Iowa.

Hastert said that with “some tweaking” the negotiators appeared to be nearly finished on the issues of airline breaks and investment advice.

The original Senate bill passed last year gave financially struggling airlines, specifically Northwest Airlines Corp. and Delta Air Lines, up to 20 extra years to reach full funding. Other airlines also would receive breaks in their repayment schedules.

The House demanded less generous breaks for the airlines, and it appeared that Northwest and Delta would end up with a grace period of about 10 years.

Negotiators Thursday also said they had settled an enduring dispute over who is permitted to offer investment advice on retirement plans.

Boehner, R-Ohio, a chief negotiator, has pushed a plan that would give financial firms that manage investment plans the authority to provide advice on 401(k) and IRA plans. But he has met resistance in the Senate amid concern such advise would present potential conflicts of interests.

Under a proposal circulated by the House side, employers with retirement plans would be responsible for selecting and reviewing advice providers. Fiduciaries for employer-sponsored plans such as 401(k)s that provide advice must base their recommendations on a computer model that is certified and audited by an independent party.

© 2006 The Associated Press