The Bush administration will likely veto any pension reform legislation that gives airlines extra time to shore up their underfunded pension plans, said Mark Warshawsky, assistant treasury secretary.
"It is obvious that allowing underfunded plan sponsors to negotiate a separate regime of weaker funding rules will weaken the incentives for plan sponsors to fund their pension promises adequately," he said in a speech March 8 before the District of Columbia Bar Association.
The Senate version of the pension reform bill now being considered by Congress includes a provision that would give airlines 20 years to fund their pension plans, while companies in other industries would have seven years. The House bill includes no such provision. U.S. airline company pension funds are underfunded by as much as $13.7 billion, according to a report issued last year by Standard & Poor's.
Mr. Warshawsky also stressed that the final version of the bill should contain further provisions to reduce claims to the PBGC. "The administration is concerned that the reforms currently being considered by Congress are inadequate and that stronger action is needed to improve the protection of pension benefits, to ensure the integrity of the pension insurance system, and to avert a taxpayer bailout," he said.
(updated with correction)