WASHINGTON — Corporate pension plans might have become pawns in an election-year gambit that could cost them $80 billion in additional contributions this year and next if the Senate fails to pass a pension package before it recesses on April 8.
The House passed the legislation on April 2, but Senate Democrats have vowed to defeat the bill because it doesn't offer enough help for underfunded multiemployer plans.
For companies that must make quarterly contributions because of their funding levels, the first one is due April 15. Failure to make the contribution could result in penalties from the Internal Revenue Service and liens on corporate assets by the Pension Benefit Guaranty Corp.
The legislation would lower corporate pension liabilities, and therefore contributions, in 2004 and 2005 by using the interest rate on long term corporate bonds instead of the defunct 30-year Treasury bond.
The bill also would let financially strapped airline and steel companies avoid $1.6 billion in accelerated contributions over the next two years.
But fewer than 4% of underfunded multiemployer pension plans would be helped. The bill would allow only the worst-funded plans to defer amortizing 80% of their investment losses in 2002 for two years. (Multiemployer pension plans do not use the Treasury-bond rate in calculating liabilities; they rely on the plan's own interest rate assumptions, and must pay into the plans each month.)