WASHINGTON — Key House and Senate Republicans are headed for a showdown over the best way to secure funding for pension plans and avert a taxpayer bailout of the Pension Benefit Guaranty Corp.
The PBGC's condition will worsen, the Congressional Budget Office reported last week. The CBO said the agency's true deficit could be close to $71 billion in the upcoming decade, more than three times the $23.3 billion shortfall reported by the federal insurance agency for the fiscal year ended September 2004.
Meanwhile, Republicans and Democrats disagree on whether to clarify the legality of hybrid pension plans through legislation or leave it to the courts. Hundreds of employers with cash balance plans worry that without an addition to federal pension law stating that these plans are not age discriminatory, they will be subject to lawsuits akin to Cooper v. IBM, which forced the Armonk, N.Y.-based computer manufacturer to abandon its hybrid plan.
Another complication is the varying speed with which the two chambers of Congress are working on pension issues.
Employer-friendly legislation from House Republicans last week is expected to be approved by the House Education and Workforce Committee this month and by the full House next month, and then melded into Social Security legislation from the House Ways and Means Committee. Meanwhile, the bill from Charles E. Grassley, R-Iowa, chairman of the Senate Finance Committee, is not expected to be introduced until after Labor Day.
Speculation is that pieces of pension legislation from the House and Senate versions will be tacked on to a behemoth federal budget bill in the fall. Because procedural rules forbid budget legislation from including provisions that do not have a revenue effect, provisions in both versions of the legislation could become casualties.
One observer predicted the wrangling will be contentious, but "we'll end up somewhere in the middle."
Mr. Grassley has made it clear his bill will exclude any provisions that "let companies hide massive pension losses from their employees and the public at large."
He will toe the Bush administration's vigorous approach to changing pension funding rules, outlined in January. But the bill is expected to include the National Employee Savings and Trust Equity Guarantee Act, pending from the last session. That legislation, co-sponsored by Mr. Grassley and Sen. Max Baucus, D-Montana, the ranking Democrat on the committee, includes provisions that aim to prevent another Enron-style collapse from wiping out the retirement savings of employees.