The Senate Finance Committee today approved a comprehensive pension bill that bases pension liabilities on the interest-rate curve of corporate bonds, raises premiums to the PBGC to $30 from $19 per participant and requires companies with credit ratings below investment grade to pay higher "at-risk" insurance premiums.
The bill would also affirm the legality of cash balance pension plans not named in lawsuits and would require companies to put into place protections for older workers when converting a traditional plan to a cash balance plan. It also lets airlines extend contributions to their pension plans for 14 years if they freeze their underfunded plans.
The committee also approved an amendment introduced by Sen. John Kerry, D-Mass., that would restrict deferred compensation for a company's top executives unless its pension plan is at least 80% funded. "It's time Washington understood that a worker's pension is just as important as a CEO's golden parachute," Mr. Kerry said in a statement.
Committee Chairman Charles E. Grassley, R-Iowa, acknowledged that some observers have complained that reforming the rules will make companies abandon their pension plans. "It's understandable that businesses don't want to shell out more money to fund their pensions," he said. "Their goal is to make money, not spend it. But at the same time, everyone plays a part in pension income security. This bill treats both companies and workers fairly. It's a reasonable approach that's meant to prevent a real crisis."
The full Senate will get the legislation sometime after the Labor Day recess.