The Bush administration today laid out a three-point approach for defined benefit pension reform, focusing on streamlining funding rules, increasing plan transparency and raising premiums to the PBGC for both fully funded and underfunded plans. Speaking to the National Press Club in Washington, Labor Secretary Elaine Chao detailed President George W. Bush's plan, which would also create a single measurement of pension fund liabilities and ensure the long-term solvency of the PBGC. The proposal would require plans to fully fund their accrued liabilities and would give companies seven to 10 years to reach full funding; allow companies to contribute up to 130% of their projected liabilities, instead of 100% as allowed under current law; and force companies in bankruptcy to freeze their pension plans. Companies with a higher risk of plan termination would also pay higher premiums to the PBGC under the plan.
"The proposals announced today will help ensure that the promises made to the 34 million workers with private, single-employer, defined benefit plans are kept," Ms. Chao said. "These proposals will ensure the financial integrity of the federal insurance system that protects these plans. And they will help ensure that defined-benefit plans remain an option for workers."
Reps. John Boehner, R-Ohio, chairman of the House Workforce and Education committee, and Bill Thomas, R-Calif., chairman of the House Ways and Means committee, and Sens. Mike Enzi, R-Wyo., chairman of the Senate Health, Education, Labor and Pensions committee, and Charles Grassley, R-Iowa, chairman of the Senate Finance committee, already agreed to sponsor the administration's pension reform proposal.
