Rep. John Boehner, R-Ohio, chairman of the House Education and the Workforce Committee, today introduced legislation that sets one criterion for all pension plans to be deemed non-discriminatory: they must provide all participants with benefits equal to or greater than those of "similarly situated, younger" participants. The Pension Preservation and Portability Act, which Mr. Boehner expects to fold into more comprehensive pension legislation, also forbids employers from reducing or cutting any accrued vested benefits during cash balance conversions.
The bill would also allow employers to use a three-year weighted average of their liabilities and assets in determining their funded status and contributions, compared with a four-year weighted average under the current law that expires at the end of the year. A proposal by the Bush administration would allow only a 90-day averaging. Employers would value their liabilities using an index of high-grade corporate bonds, based on three broad demographics of their work force: employees within five years of retirement, within five to 20 years of retirement, and more than 20 years from retirement. It would also not take employers' creditworthiness into consideration in determining the level of PBGC premiums they would pay, as proposed by the Bush administration.
Mr. Boehner's bill would let only companies with pension plans funded at 80% or higher take credit for contributions made earlier at market value rather than book value. It also would let employers provide investment advice to their participants under certain circumstances.
Mr. Boehner said he expects the full committee to vote on the bill later this month, before getting wrapped up with Social Security legislation being drafted by House Ways & Means Committee Chairman Bill Thomas, R-Calif. The tax-writing committee also intends to include defined contribution provisions in that bill.