Transcripts

Congress Develops Yet Another Pension Plan

SUSIE GHARIB: On Capitol Hill tonight, work is under way to find a compromise on a pension bill and it could be ready as soon as Monday. The agreement would help head off under funding of the nation`s traditional defined benefit pension system, but it might also impose new costs that could force employers to freeze or drop their plans. Washington bureau chief Darren Gersh reports.

DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: One of the few unanswered questions about the pension bill is just how much relief airlines will get. Senators are offering the troubled industry 20 years more than other industries will get to fully fund their pension promises. Analysts say lawmakers from the House also want to help, but not that much.

TIM VANDENBERG, SENIOR POLICY ANALYST, WASHINGTON ANALYSIS: No doubt about it, the airlines are going to get special treatment under this legislation -- both airlines that have frozen their pensions -- and there`s even options for plans that have not frozen their pensions.

GERSH: Lawmakers have agreed that beginning in 2008, most companies other than airlines, would have seven years to fund 100 percent of their pension promises. Plans that are poorly funded would be allowed to gradually increase their contributions. Now they are required to come up with more money up front. Pension funding levels would be calculated over a shorter time period using a corporate bond rate. Businesses worry that will hurt their bottom line.

LYNN DUDLEY, V.P. AMERICAN BENEFITS COUNCIL: When you shorten the amount of time that you look at interest rates, you increase the chances that the interest rate will go up and down dramatically, and that will make it harder for them to predict how much they owe to their plans.

GERSH: But with the Federal Pension Benefit Guaranty Corporation running a $23 billion deficit, Congress wants to catch companies before they get into serious trouble funding their plans. Lawmakers also want to make it harder for companies to use bankruptcy court to stick the government with their pension obligations.

RON GEBHARDTSBAUER, PENSION ANALYST, AMERICAN ACADEMY OF ACTUARIES: There is a provision in this new pension law that allows the government insurance company to say, I`ll lower your contributions in order so that you can keep your pension plan. We want to keep you, the company, responsible for the pension plan. And by the way, not only are we going to lower your contribution, we`re also going to freeze benefits.

GERSH: The pension bill will also affect workers with 401(k)s and IRAs, making it easier for mutual funds to offer investment advice. Darren Gersh, NIGHTLY BUSINESS REPORT, Washington.