Pension Overhaul this week
We can expect changes to pension plan rules. Congress is looking at relief for airlines and possibly allowing advice to be given in 401k plans. They are trying to finalize legislation this week. We'll keep you posted.
ABC News has some details.
Under the proposed legislation, most companies will have seven years to make up pension underfunding. A point of contention has been how much extra relief to give struggling airlines.
Bankrupt carriers Delta Air Lines Inc. and Northwest Airlines Corp. want 20 additional years to pay off the underfunding in their pension plans. The airlines warned that, if they do not get such a provision by August, they may have to default on the pensions of thousands of their workers.
Wise Owl
The House voted 279 to 131 late Friday to approve a plan to stabilize the nation's pension system.
The House version of the bill would allow investment firms to offer advice to participants in 401k plans and also provide automatic enrollment. Los Angeles Times provides an update.
Under the legislation:
• Beleaguered airlines would be singled out for special leniency. Northwest and Delta airlines, both going through bankruptcy reorganizations, would get 17 years to fully fund their plans. Continental and American would get 10 years.
• Other kinds of companies would be expected to fully fund their pension commitments in seven years. Full funding would represent a significant increase from the current requirement for 90% financing. A practice of allowing reduced contributions by firms that made extra contributions to their plans in the past would be restricted.
• Companies would get some legal protection enabling them to shift traditional pension plans to an arrangement known as hybrid or cash balance plans, which grow with contributions but promise a specific benefit like the old-style plans. Older workers would get some legal protection of their benefits. IBM and others have been sued by long-tenured workers, whose benefits decreased after such shifts.
• Employers and unions would be restricted from increasing benefits to plans that are less than 80% funded. Such increases have been criticized as weakening the pension system.