WASHINGTON - It could be deja vu all over again.
With less than three weeks before the midterm elections - and with Republicans looking like they may retain control of the House of Representatives, and the Senate too close to call - retirement and pension legislation could once again become a casualty of a split Congress.
Meanwhile, on the state level, a number of races could have implications for several large public pension plans.
Even if the Republicans wrest control of the Senate from Democrats, they are unlikely to gain more than a wafer-thin majority and won't have the filibuster-proof 60 votes needed to push through legislation. Democrats currently control the upper chamber by one seat, but have little power to carry out their programs. A reversion by a seat or two to Republican rule simply would ensure the gridlock continues into the 108th Congress, sources say.
Republicans will have more control in setting the agenda in the House, where they now hold a slim six-seat majority. Because of the House rules, the party that controls that chamber also controls the composition and the agenda for the powerful Ways and Means Committee, key to pension legislation that typically piggybacks tax bills.
"The Senate will, as it has been this year, likely continue to be the place where issues go to die, and where logjams are created," said James M. Delaplane Jr., the departing vice president of retirement at the American Benefits Council, Washington.
A return to Republican control without a solid majority will be "like watching a rerun" of this year's stalemate, said Brian H. Graff, executive director of the American Society of Pension Actuaries, Arlington, Va.
Should the Republicans win the Senate, Sen. Charles E. Grassley, R-Iowa, would resume chairmanship of the Senate Finance Committee, a position he lost when Sen. Jim Jeffords of Vermont abandoned the GOP in May 2001 and tipped the Senate's balance to the Democrats.
Mr. Grassley, a moderate who is active on pension and retirement issues and has co-sponsored several bipartisan pension bills, is the author of the National Employee Savings and Trust Equity Guarantee Act. The key tax committee adopted that broad-based bill with few amendments in a bipartisan vote July 11, but it has been hung up in the Senate ever since. The Senate Finance Committee tends to work in a bipartisan manner, and Mr. Grassley has a good working relationship with the current chair, Sen. Max Baucus, D-Mont., and other Democratic senators active on retirement issues, including Bob Graham, D-Fla., and Jeff Bingaman, D-N.M.
More change would be seen on the Senate Health, Education, Labor and Pensions Committee if the Republicans were to take the Senate, sources predict. The committee, which traditionally works more along party lines, would be led by Sen. Judd Gregg, R-N.H., a conservative Republican who would favor legislation more palatable to employers than the current chair, Sen. Edward M. Kennedy, D-Mass. Mr. Kennedy's efforts to make it more difficult for companies to load retirement plans with company stock and to protect women's retirement benefits likely would be dead, sources say.
Another casualty of the election could be the Bush administration's proposal to let individuals invest part of their Social Security payroll taxes in the stock market; several Republican candidates are veering from that proposal.
In an ironic twist, the Republican National Committee has raised the proposal as an issue in the House race most closely watched by pension and retirement lobbyists and employer representatives, for the seat now held by Rep. Earl Pomeroy, D-N.D.
Mr. Pomeroy, a member of the House Ways and Means Committee, co-chair of the Democratic Social Security Task Force and a founding member of the bipartisan House/Senate Steering Committee on Retirement Security, faces a stiff challenge from the Republican contender, state tax commissioner Rick Clayburgh. Mr. Clayburgh, with backing from national and state GOP officials, has made a campaign issue of Mr. Pomeroy's earlier support for a Clinton administration proposal to invest part of the trust fund's assets in equities, even though the Democrat consistently has opposed the creation of individual accounts that would permit workers to directly invest part of their payroll taxes in the stock market.
Mr. Pomeroy declined to comment, but Julianne Fisher, a spokeswoman for his campaign, said: "People understand the truth about Earl's record."
Among the races for governor, the highest-profile battle is in New York state, where Comptroller Carl H. McCall, sole trustee of the $112 billion New York State Common Retirement Fund, Albany, is the Democratic challenger against incumbent Republican George Pataki. Mr. McCall has come under fire for using the clout of the pension fund to seek jobs for relatives at companies in which the fund invests. Mr. McCall faced an uphill battle even before that scandal broke, however; he was trailing Mr. Pataki by as much as 11 percentage points, according to a Sept. 25 poll by Quinnipiac University, Hamden, Conn. Spokesmen for Mr. McCall did not return calls seeking comment.
In Massachusetts, state Treasurer and Democratic gubernatorial nominee Shannon O'Brien has been criticized for the losses suffered by the $27.3 billion Massachusetts Pension Reserves Investment Management Board, Boston. She will face off against Republican candidate Mitt Romney for the governor's office next month.
A spokesman for Ms. O'Brien said that PRIM ranked in the 64th percentile in the Trust Universe Comparison Service's universe of public pension funds nationwide for the year ended June 30, and in the 35th percentile for the three years ended June 30. The fund has been in the top fifth percentile for the 10 years ended June 30. "Most voters understand the difficult financial markets we are presently experiencing," said Mike Travaglini, first deputy treasurer under Ms. O'Brien.
Timothy Cahill, Democratic nominee for state treasurer, says if elected he will review PRIM's asset allocation. The pension fund lost 5.3% in 2001, the second year of negative returns. The system redid its asset allocation last year; it now has 42% in domestic equities; 17% in international equity; 3% in emerging markets; 23% in fixed income; 3% in high-yield debt; 6% in alternative investments; and 6% in real estate.
Jerrold Mitchell, PRIM chief investment officer, declined to comment. Mr. Cahill, now treasurer of Norfolk County, also said he would review the schedule for fully funding PRIM, first targeted at 2018 under Gov. William Weld and extended to 2023 under Gov. Jane Swift.
In Vermont's gubernatorial race, Republican Treasurer Jim Douglas is lagging his Democratic opponent, Lt. Gov. Doug Racine, by seven percentage points in polls, although he was behind by 15 points earlier this year. Mr. Douglas has been state treasurer and a trustee of the three state retirement systems since January 1995. If elected, he would push to fully fund two of the Montpelier-based funds - the $1.1 billion Vermont State Teachers' Retirement System, which was about 88% funded, according to a July 2001 valuation, and the $932 million Vermont State Employees' Retirement System, which was 93% funded last year. July 2002 valuations are not yet available, he noted.
In Kansas, where Gov. Bill Graves is prohibited from seeking a third term, Tim Shallenburger, the Republican state treasurer, is running against Kathleen Sebelius, the Democratic state insurance commissioner. In Arkansas, Democratic Treasurer Jimmie Lou Fisher is challenging Republican Gov. Mike Huckabee.
In Minnesota, where Hubert H. "Buck" Humphrey, the Democratic candidate for secretary of state, is calling for the Minnesota State Board of Investment to adopt the same principles adopted in New York, California and North Carolina. Those principles require securities firms to separate investment banking from securities research.
Mr. Humphrey is running against incumbent Republican Mary Kiffmeyer.