Labor unions and employers may be strange bedfellows, but they are expected to succeed in their joint push for legislation to trim corporate pension plan costs.
In the House, legislation was introduced on Sept. 17 that would let corporations replace the 30-year Treasury bond with an index of high-grade corporate bonds as the benchmark for valuing liabilities and contributions. The bill would let employers use a four-year weighted average of the interest rate on corporate bonds for two years, during which House lawmakers hope the administration and Congress could agree on a longer-term alternative.
However, Sen. Judd Gregg, R-N.H., and Sen. Edward Kennedy, D-Mass., are said to be close to an agreement on a bill that would let corporations use the interest rate on corporate bonds for three years. A three-year bailout for corporate plan sponsors is also part of the broad pension bill that passed the Senate Finance Committee by a voice vote on Sept. 17.
Proponents of the legislation argue it would prop up the declining defined benefit system and stop employers from freezing or shutting down those plans.
Shaun O'Brien, senior policy analyst at the AFL-CIO, Washington, argues that averaging enables predictability of contributions. "We are supporting what we believe is an accurate measurement of liabilities over the long term," he said.