Pension Resolution Near?

[CaptBud330]

Dow Jones Business News
US House May Consider Airline Pension Relief Plan
Wednesday November 19, 9:45 pm ET
By John Godfrey, OF DOW JONES NEWSWIRES


WASHINGTON (Dow Jones)--The U.S. House Thursday will likely consider legislation giving airlines a substantial break on pension funding requirements in the next two years.
The proposal was introduced Wednesday night by House Ways and Means Committee Chairman Bill Thomas, R-Calif. It has not been agreed to by the Senate, which is still wrangling over the issue. It may come to a vote in the House as early as Thursday, a Ways and Means Committee aide said.

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The proposal would give those airlines with substantially underfunded pension plans a break on the accelerated pension fund contributions they would otherwise be required to make. Specifically, those accelerated payments - called deficit reduction contributions - would be reduced by 80%.

The airlines have been seeking a total holiday from DRC payments for three years. Many lawmakers say the proposal was excessive, but there is broad consensus that airlines should - or at least will - get at least some pension funding relief.

A complete DRC holiday would save four major air carriers $610 million in pension contributions in 2004, according to analysis published last week by Bear, Stearns & Co. Inc. Specifically, a DRC holiday would save AMR Corp. (NYSE:AMR - News) an extra $240 million in pension fund contributions in 2004, Bear, Stearns said. The same analysis shows Delta Air Lines Inc. (NYSEAL - News) saving an extra $160 million, Northwest Airlines Corp. (NasdaqNM:NWAC - News) saving an extra $209 million and Continental Airlines Inc. (NYSE:CAL - News) saving an extra $8 million.

The break would come in addition to the pension funding relief provided all employers under the bill to be considered by the House.

That funding relief would come from replacing the 30-year Treasury bond with a corporate bond index in pension funding calculations. The rate on the 30-year Treasury bond has been declining since it was discontinued and a temporary fix is set to expire at year's end.

The bill would allow businesses to use an index of long-term corporate bond rates in pension funding calculations through 2005.

House Education and Workforce Committee Chairman John Boehner, R-Ohio, has concerns about the DRC holiday, but said he will back Thomas's plan because overall it will be good for the health of the nation's pension system. Boehner does not like the idea of singling out the airline industry for a break, but is glad the holiday is at least limited to two years, said spokesman Kevin Smith.

Thomas's decision to move the bill comes even as the White House stepped up its opposition to the DRC holiday.

In a letter to Thomas, and other key lawmakers, three cabinet-level secretaries warned that suspending the DRC rules would mean a significant further reduction in the ability of the effected pension plans to "meet the promises made to existing and future retirees." The letter was signed by Treasury Secretary John Snow, Labor Secretary Elaine Chao, and Commerce Secretary Donald Evans.

Pension Benefit Guarantee Corporation Executive Director Steven Kandarian has previously warned "giving a special break to weak companies with the worst- funded plans is a dangerous gamble."

But lawmakers wanting to give airlines relief have ignored those warnings and will likely ignore Snow's, Evans', and Chao's admonitions, too.

"It will not be determinative," House Ways and Means Committee member Jim McCrery, R-La., said of the secretaries' letter to Congress and its impact on the debate.

The partial DRC holiday and the 30-year Treasury bond are attached to a package of legislation extending for one year a number of expiring tax provisions.

Those provisions to be extended include:

-Tax breaks for business investing in downtown Manhattan around the former World Trade Center;

-Tax breaks for hiring certain people on welfare, felons, at-risk youth, and other hard to employ individuals;

-A deduction for teachers' classroom expenses;

-Enhanced deductions for the charitable contributions of computers;

-Extended ability to offset current losses against gains in previous years so as to gain a tax refund; and

-A zero percent capital gains tax rate for certain investments in the District of Columbia.

The Senate Finance Committee also announced Wednesday night its version of tax extender legislation. The bill does not include the pension provisions, and most of the tax provisions are extended for six months, instead of one year.

-By John Godfrey, Dow Jones Newswires; 202-862-6601

 

[USA320Pilot]

Yesterday ALPA president Captain Duane Woerth reported to the Board of Directors the Bush administration has now launched a last ditch, all out effort to torpedo our efforts to protect defined benefit pension plans through legislation proposed by the Senate Finance Committee, commonly referred to as the Grassley-Bachus bill. Most recently, the administration has three cabinet members-Labor Secretary Chow, Treasury Secretary Snow, and Commerce Secretary Evans-through the PBGC, right to the leadership of the Senate, basically urging them to stop their efforts to pass deficient reduction contribution relief that is in the Grassley-Bachus bill. To do this, they continue to grossly distort the facts about what is actually proposed in Grassley-Bachus, stating, for example, that the bill, and I quote, "would result in an additional $40 billion in plan underfunding." This is patently false and the administration, including the PBGC, knows it is false. Grassley-Bachus does not waive all required pension contributions for three years. To the contrary, this temporary relief being proposed will still require funding of active employees' accrued benefits being earned during the period under both normal funding rules and under DRC rules.

ALPA, through the office of the president and the Government Affairs department, will be working closely with Senators Grassley, Bachus, Frisk, and Daschle, and others, to urge them to continue their efforts to help American workers save their pension plans over the objections and obstacles imposed by the Bush administration through the PBGC. A copy of the letter from the Bush administration to these senators will be posted on ALPA's website. Please urge your members to go to the website to see for themselves written evidence of the lengths this administration will go to to defeat our vital legislation that now has broad-based bipartisan support and would almost certainly pass before Congress adjourns, absent White House pressure to prevent it.

As to the FAA Reauthorization bill, which still includes the cargo cabotage provision via Anchorage inserted by Republican Senator Stevens, it is almost impossible to predict what will happen next. On Monday night, because of a threatened Democratic filibuster over the bill over this cargo provision and because of ATC privatization language, the Republicans tried to prevent a filibuster by calling for what is known as a cloture vote, which requires 60 votes to end debate and force the vote and thus cram the bill down the Democrats' throats. The Republicans failed in that effort Monday night. However, they vow to try again at a later unspecified date.

Regards,

Chip

 

[USA320Pilot]

ALPA Denounces Effort to Gut Pension Bill

WASHINGTON (PRNewswire) - The head of the Air Line Pilots Association today blasted an administration attempt to gut the pension bill now in the Senate.

"They are making a last-ditch, desperate push to torpedo the short-term relief provisions in the Senate bill for pension reform. They've sent a letter to the Senate leadership, packed with mischaracterizations and outright falsehoods," said Capt. Duane E. Woerth, president of ALPA.

The letter was signed by the three cabinet secretaries comprising the governing board of the Pension Benefits Guaranty Corporation and sent to the Senate majority and minority leaders, plus the chairman and ranking member of the Senate Finance Committee.

"These members of the administration's inner circle continue to grossly distort the facts about what actually is proposed in the Grassley-Baucus bill. For example, PBGC claims that the proposed pension changes would result in an additional $40 billion in pension underfunding. This is patently false and the PBGC and the administration know it," Woerth said.

"The Grassley-Baucus bill does not waive all pension contributions for three years. On the contrary, it still would require the normal funding of active employees' accrued benefits during that period. All we are talking about is a short deferral of 'catch up' amounts that are required when a plan's funding falls behind. In terms of the PBGC's funds, it is a drop in the bucket; but for airlines struggling to emerge from, or avoid bankruptcy, this could be the difference between survival and failure," Woerth said.

The irony is that the PBGC's stated goal is to avoid getting stuck with obligations that might be incurred, somewhere down the road, if maybe a company fails and terminates its defined benefit pension plan. However, by failing to give companies this short-term relief on deficit reduction contributions, they are greatly increasing the near-term probability of company failures, in which case PBGC will be stuck with exactly what it's trying to avoid.

"We will be working closely with Senators Grassley, Baucus, Frist, Daschle and others to support their ongoing bipartisan efforts to help American workers save their pension plans -- despite the objections and obstacles imposed by the Bush administration through the PBGC," Woerth said.

 

[airlineorphan]

Yesterday ALPA president Captain Duane Woerth reported to the Board of Directors the Bush administration has now launched a last ditch, all out effort to torpedo our efforts to protect defined benefit pension plans through legislation proposed by the Senate Finance Committee, commonly referred to as the Grassley-Bachus bill.

Seems pretty clear the Bushies are hellbent to wipe out the very notion of Defined Benefit plans (except, of course, for the upper echelons of government office and the corporate suite). I expect the push from the White House to be pretty strong. This parallels other efforts to place social security benefits on the casino of the stock market. This pension thing is a pretty big game with some big dog players.

In solidarity,
Airlineorphan

 

[ClueByFour]

The republicans don't want to kill defined pension plans. THey don't want the PBCG to get stuck with underfunded pensions (like the airline pensions that are being bailed out).

I think the more salient point is that no other industry is benefiting from a generous offer to play fast and loose with the numbers.

 

[savyinvestor]

The republicans don't want to kill defined pension plans. THey don't want the PBCG to get stuck with underfunded pensions (like the airline pensions that are being bailed out).

I think the more salient point is that no other industry is benefiting from a generous offer to play fast and loose with the numbers.

Excellent post. Approving this type of legislation sets a dangerous precedent. Who will be next in line asking for the same type of exception? Savy

 

[a320av8r]

The republicans don't want to kill defined pension plans. THey don't want the PBCG to get stuck with underfunded pensions (like the airline pensions that are being bailed out).

I think the more salient point is that no other industry is benefiting from a generous offer to play fast and loose with the numbers.

But they do. Bush said he didn't want any DB plans. Bad for big business.

 

[Busdrvr]

"But they do. Bush said he didn't want any DB plans. Bad for big business."

And even WORSE for employees....