Employer groups decry the bill for not giving companies enough time to set aside money to fund up their pension plans, assuming too strict a method for calculating liabilities, and linking the credit ratings of employers to the Pension Benefit Guaranty Corp. insurance premium they must pay. Moreover, they say failure to grant protection to employers from lawsuits for the hundreds of existing cash balance plans is going to hasten their exit from the defined benefit system.
Some pension experts, such as Michael Peskin, managing director of global capital markets at Morgan Stanley, New York, fear the bill does not deliver strong enough medicine to halt the PBGC's yawning deficit, and lawmakers "have compromised in a way that is unsatisfactory and allows the problems to grow."
Among the possible amendments that could ease a bit of the pain for employers are provisions clarifying that companies that automatically enroll workers in their retirement plans may invest that money in funds that pay a higher return than money market funds. Also, companies will be protected from employee lawsuits if they automatically enroll all workers in their retirement plans.
Other provisions would enable pension funds to cross-trade with each other and loosen rules regulating pension fund investments in hedge funds. Sen. Richard Burr, R-N.C., had introduced these and other provisions on the securities industry's wish list as an amendment to the Senate Health, Education, Labor and Pensions Committee pension bill, but withdrew it at the last minute. Last week, Sen. Charles Schumer, D-N.Y., whose constituents include Wall Street firms, tried to broker a deal on the provisions with key members of both Senate committees, according to an aide who declined to be identified. "There's a lot of support for including ERISA provisions" in the broader pension bill, the aide said.
Mr. Schumer has vetted the amendments with regulators at the Labor Department and the Securities and Exchange Commission, and held discussions with labor union officials about their objections to the amendments, his aide said. Labor unions oppose reducing participant protections in the Employee Retirement Income Security Act. However, the provisions stand a good chance of passage either as an amendment to the Senate bill or during the Senate-House conference because they're in the pension bill that cleared the House Education and the Workforce Committee in June. (Committee Chairman John Boehner, R-Ohio, said recently the full House could vote on a pension bill by the end of October.)