Reply #266: As I said:

[Hannah Bell]

April 16, 2004
Final Pension Agreement Places Corporate Interests Above Taxpayer Interests
by David C. John
Executive Memorandum #924

President George W. Bush's signing of the recently passed Pension Funding Equity Act (H.R. 3108) was both a serious mistake and a step toward a multibillion-dollar taxpayer bailout of underfunded corporate pension plans. President Bush should have stood by his original objections to the bill's corporate welfare provisions and vetoed it. While the final version is better than the earlier Senate proposal, it still sends a dangerous message that inconvenient pension-funding requirements can be twisted--and even avoided--through special-interest provisions.

Corporate Welfare in the New Law

The White House deserves some credit for insisting that Congress remove some of the special-interest provisions that were contained in the Senate version of H.R. 3108. The Senate bill (S. 1550) would have granted virtually every underfunded pension plan--whether sponsored by a single-employer or by several employers and a union--a two-year holiday from having to contribute most of the additional money required to strengthen the plan.

The law also provides limited relief to about 4 percent of underfunded, multi-employer pension plans. To qualify for this relief, a plan would have to have investment losses of at least 10 percent in 2002 and actuarial certification that it will be underfunded in any year between 2004 and 2006.

...Since taxpayers will be called upon to shoulder the cost if their pension plans fail, the net effect of pension relief is to shift some market failure risk from stockholders and lenders to taxpayers. If this is allowed for the airline and steel industries today, which "deserving" industry will be able to persuade a weak Congress to grant it equal relief tomorrow, citing this legislation as a precedent?

Already, the agency that insures this type of pension plan, the Pension Benefit Guarantee Corporation (PBGC), is itself seriously underfunded. According to numbers released earlier this year, the PBGC is running a record $11.2 billion deficit in its single-employer program. That number could climb to $85.5 billion if all of the pension plans that could be "reasonably" expected to fail did so. In addition, PBGC's multi-employer program reported a deficit for the first time.

By allowing companies to avoid funding their pension plans' deficits, the new law makes it likely that taxpayers will have to pick up that liability.

http://www.heritage.org/Research/SocialSecurity/em924.cfm