Even as the federal budget package headed for a certain veto by President Clinton, employer groups and pension lobbyists began regrouping to ensure the survival of key elements for which they had fought long and hard.
At the same time, they also planned on pushing for the removal of provisions they found objectionable.
Among other things, provisions in the gargantuan budget package would:
Let employers tap surplus pension assets to pay for unrelated employee benefit expenses;
Make it easier for employers to prove their retirement plans are not discriminatory;
Give a new definition of who is and is not a highly paid employee;
Let tax-exempt organizations set up 401(k) retirement plans;
Safeguard assets of public sector employees' Section 457 deferred compensation plans by requiring them to be held in trust;
Get rid of much of the regulatory paperwork for small businesses that set up retirement plans; and
Make it easier for Americans to set up tax-deductible individual retirement accounts, a measure widely backed by the mutual fund industry and money management firms.
Under the reversion portion, companies could withdraw pension fund assets to pay for unrelated employee benefit expenses without the prohibitive excise tax employers must now pay. However, the proposal would make it tougher for companies to siphon excess pension assets to pay for medical expenses of retired workers. That's because the budget package tightens the standards for defining excess assets.
Companies currently may tap pension assets to pay for retiree health care expenses if they maintain at least a 25% cushion above their cost for paying off all pension benefits owed pensioners and workers, without taking anticipated pension costs into account.
The budget package also would phase out the ability of companies to claim tax deductions for certain corporate-owned life insurance policies.
While few observers were willing to bet on a post-veto tax package emerging any time soon, employee benefit consultants and lobbyists agreed a slew of provisions tagged "pension simplification" - that have broad bipartisan support on Capitol Hill, as well as the White House's backing - are virtually certain to get into any new legislation. These provisions include an easier way to run 401(k) plan non-discrimination tests and a more relaxed standard for defining highly compensated employees.
"Nothing (in the pension simplification package) that is in the budget reconciliation bill is truly dying, and if it is dying, it will be quickly reincarnated," predicted Jim Klein, president of the Association of Private Pension and Welfare Plans, a Washington-based group representing large companies.
While many of these provisions twice were part of legislation that cleared Congress in the early 1990s but died on President Bush's desk, Mr. Klein is counting on them being part of renewed efforts by lawmakers to craft a budget package that is acceptable to President Clinton.
Expanded IRA provisions also were given high chances of survival in tax legislation that both ends of Pennsylvania Avenue probably will begin drafting later this week.
But the fate of the pension asset reversion proposal was rated as a toss-up.
Optimists suggested the reversion provision would resurface in any subsequent legislation because it raises $4.6 billion over seven years, precious money Republican lawmakers would find hard to raise elsewhere to pay for tax cuts. They also argue the provision has been recast more stringently using standards drafted by the American Academy of Actuaries, a Washington-based trade group, so few can still find fault with it.
"The provision has been drafted pursuant to all of the complaints of the Pension Benefit Guaranty Corp. and the Department of Labor, and it's been effectively blessed by all the actuaries," noted Mark J. Ugoretz, president of The ERISA Industry Committee, an organization representing the largest corporations in the country.
Under the reshaped provision, companies would be allowed to pull out surplus pension assets only if assets exceed a 25% cushion over the greater of a company's termination liability - calculated using PBGC assumptions on life expectancies, retirement ages and interest rates - or accrued benefits.
Termination liability is what it would cost a company to buy insured annuities or to pay lump-sum benefits for all pension plan participants on the date it plans to withdraw the surplus assets, in the same way if it were to shut down its pension plan. Accrued benefits is the cost of all the pension benefits promised by a company to its employees and pensioners as of now, not taking future salary increases or service into account.
Under the budget reconciliation bill, companies also would have to apply this stricter standard to figure out surplus pension assets when they seek to make withdraws to pay for retiree health care expenses.
But, irrespective of what standards lawmakers use to define the pension surpluses companies may tap to pay for other current employee benefit expenses, Martin Slate, PBGC executive director, said the Clinton administration is unwavering in its opposition.
"This position is unacceptable," Mr. Slate said, predicting the provision would be notably absent from any tax package the White House works out with Republican lawmakers.
What's more, many Democrats, and some moderate Republican lawmakers, still oppose the provision on grounds it makes for bad pension policy. Kansas Republican Nancy Kassebaum, chairman of the Senate Labor and Human Resources Committee, for one, intends to lobby her colleagues to prevent the provision from making it into any forthcoming tax package, according to a spokesman.
"I believe strongly....that any changes in this area, and of this magnitude, should be made based on sound pension policy and not to satisfy budgetary demands," Sen. Kassebaum said in a statement on the Senate floor earlier this month.
Moreover, some observers also suggest the provision is not a sacred cow that can't be sacrificed for other prized provisions.
"I think there are chances some version of it might survive, but they are less than 50-50," said Ann L. Combs, a consultant with William M. Mercer Inc. in Washington.
"If it didn't raise revenue, I would be even more pessimistic," she said.