Transcripts

What's At Stake In The New Pension Bill

PAUL KANGAS: It took a lot of wrangling, but the nation`s new pension law is finally on its way to the president`s desk tonight. Early this morning, the Senate passed a plan to shore up the Pension Benefit Guaranty Corporation and ensure better funding for the defined benefit plans that cover 44 million Americans. As Stephanie Dhue reports, the measure also singles out some industries for special help.

STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: After much turbulence, Delta and Northwest Airlines finally got the pension relief they wanted. The struggling carriers, which have frozen their defined benefit plans, will have 17 years to fund those pensions and the employees will get the benefits they`ve earned to date.

JASON BORTZ, ATTORNEY, DAVIS AND HARMAN: But for this bill, there`s a real chance that their pensions would have been terminated and turned over to the PBGC and they would have gotten less.

DHUE: American and Continental, which have active plans, will have 10 years to fully fund them. Auto makers and auto parts suppliers also got an extension to fully fund their plans. But most companies will have to boost their funding from the current 90 percent to 100 percent within seven years. James Klein of the American Benefits Council says that will push more employers away from defined benefit plans.

JAMES KLEIN, PRESIDENT, AMERICAN BENEFITS COUNCIL: The bill provides very important relief for the airline industry. But for most other companies that have well-funded pension plans, this bill injects a lot of volatility and unpredictability into a company`s financial obligation.

DHUE: Experts say some of that volatility could make companies move to so-called cash balance plans. These plans pay out if an employee leaves before retirement, benefiting younger workers. But the transition to these plans can put older workers at a disadvantage. Some companies now cushion the blow to older workers, but advocates worry that will change.

KAREN FRIEDMAN, POLICY DIRECTOR, PENSION RIGHTS CENTER: The bill does not require these kinds of transition protections and we`re concerned that what the bill could do is lower the bar and companies that were doing the right thing will actually now do the minimum required of them.

DHUE: This bill may not be the last word on pension reform. Experts say lawmakers will come back and tweak things, including fixing the disparity among the airlines. But it`s unlikely there will be other meaningful changes. Stephanie Dhue, NIGHTLY BUSINESS REPORT, Washington.