The Senate and the Pension Bill

Making the rounds of news outlets, blogs and other assorted internet reading, this article struck a chord with me. You see, it represents a point where the government stepping in to help one class of people, always does so at the expense of a different class - where the different class is the taxpayer.

Congress Squabbles Over Pension Bill
Fox News - April 23, 2006

Memorial Day, May 29, is the new target for sending to President Bush a bill to prop up the finances of defined-benefit pension plans covering some 44 million people in the United States.

The Senate passed its bill in November; the House approved its version in December. They opened negotiations last month on a compromise but immediately hit a wall over a Senate plan to make companies with poor credit ratings pay more into their pension plans.

That proposal was part of the overall theme of the legislation: ensuring that companies honor their promises to retirees and restore health to a single-employer pension system now underfunded by an estimated $450 billion.

Here is a link to the House Bill, H.R. 2830, with summaries of its various points; and here are links to S.1783 and S.1953, the Senate counterparts.

I read parts of the Congressional Record, especially November 16, 2005 under "PENSION SECURITY AND TRANSPARENCY ACT OF 2005." Most of the "debate" is agreement that the Senate proposal is good in that it protects workers' pension investments as well as the government's backup in case of failure (typically bakruptcy) of private pension funding, the Pension Benefits Guarantee Corporation (PBRC). The protection comes in the form of higher payments to the PBRC and requirements for increased and more secure "set asides" by private companies, to reduce the risk of pension plan failure in the event of operating insolvency.

The bill passed 97-2, with only Senators Stabenow and Levin voting against (Corzine was the sole non-vote); The Akaka amendment (S.A.2583) passed on a vote of 58-41, quite bipartisan support and opposition. The Akaka amendment gives preferntial pension treatment to airline pilots working for legacy airlines.

At any rate, the following set of comments by Senator Kyl, at page S12918, caught my eye.

Mr. KYL. Mr. President, today the Senate is considering long-delayed legislation to reform our defined benefit pension system. While reforms are certainly needed, I must say that I am disappointed with how watered down this legislation has become since we passed it out of the Finance Committee earlier this year.

Obviously, the current system is in dire straits, with the Pension Benefit Guarantee Corporation, the Federal corporation that insures traditional pension plans, running a $22.8 billion deficit for fiscal year 2005. Moreover, the PBGC said that if events that occurred just after the fiscal year's end had occurred a few weeks earlier, the deficit would have been $25.7 billion. If the Government is going to continue to operate a pension-plan insurance program, we must make sure that employers fulfill their pension promises appropriately so that taxpayers are not asked to bail out the PBGC. ...

What strikes me is the notion that a government operated pension-pan insurance program is not a taxpayer funded bailout program in its own right. In the current regime, the "bailout" (money into the PBGC) comes through companies paying into the government plan, and passing the cost to the company's customers - a little bit at a time. A bailout of the PBGC as a whole would be borne by all taxpayers, similar to the savings and loan bailout.

Pay me now, or pay me later.