WASHINGTON - The General Agreement on Tariffs and Trade bill exempts Trans World Airlines Inc. and The LTV Corp. from legislation requiring speeded-up funding of underfunded pension plans.
Sen. Ernest Hollings, D-S.C., is expected to hold a two-day hearing on the entire bill starting Nov. 14. The bill will go to a vote the week of Nov. 28.
Officials of the Pension Benefit Guaranty Corp. said they needed the exemption to safeguard agreements made with TWA and LTV. TWA's two pension funds are underfunded on a termination basis by $1.05 billion as of December 1992; LTV's three pension plans have an unfunded liability of more than $1 billion.
Some lobbyists were surprised to learn about the exemptions. They had been involved in extensive meetings with the PBGC, congressional staffers and other administration officials.
"Certainly it was not a part of our negotiations," said Jim Kaitz, vice president of government relations for the Financial Executives Institute, Washington. "It was an absolute surprise to us, so it must have been a private, behind-the-scenes negotiation. ... But it really doesn't have broad policy implications for us."
Under the TWA agreement, reached last year, Pichin Corp. is responsible for the annual minimum funding contributions, estimated at $30 million to $35 million. Pichin is owned by former TWA owner Carl Icahn.
Mr. Icahn, in return, has the right to terminate the two underfunded plans if minimum funding requirements go above a certain level. A PBGC spokeswoman said the level is confidential.
Without the exemption from the legislation, however, TWA's minimum funding contribution would exceed the expected levels in the agreement, giving Mr. Icahn the option to terminate the plans.
"Because of the specific settlement involving these underfunded pension plans, the minimum funding reforms could potentially create a situation that would lead to termination of the plans, doing more harm than good," a PBGC spokeswoman said.
Under the agreement, Mr. Icahn would pay $240 million if he terminated the plans - but that would still leave the PBGC with a shortfall of several hundred million dollars.
"Once you've done a settlement, it doesn't make sense to come in and change the equation," said Gary Ford, an attorney who represented TWA in the negotiations with the PBGC.
In LTV's case, the funding level agreed upon last year would be lower without the exemption, a PBGC spokeswoman said. The exemption for LTV protects an agreement between the PBGC and the Cleveland steel company that was approved by a bankruptcy court.
Under the agreement, LTV made an initial $2 billion contribution, and will fund the remaining liabilities - based on the company's cash flow - over 27 years.
"Some of the requirements of the agreement are more stringent than the funding rules" contained in the GATT bill, the PBGC spokeswoman said.
"The administration concluded that pension funding could be best achieved by continuing to follow the terms of the agreement."
Both companies would not be exempt from premium payments to the PBGC. The legislation phases out the cap on the variable rate premium, now $53 per participant.
This is not the first time legislation has made special cases for certain pension funds, said Mr. Ford.
In 1987, when Congress passed stricter funding rules, steel companies were allowed to phase in the new rules through this year.
