Pension Rights Center Urges Senate to Make Changes
WASHINGTON – The Pension Rights Center called on the U.S. Senate today to amend the House-passed pension bill, the Pension Protection Act of 2006 (H.R. 4), to strengthen protections for workers. The Center is the nation’s only consumer organization dedicated solely to protecting and promoting the retirement security of American workers, retirees, and their families.
“The House passed a 907-page bill late Friday night that few Members had time to skim, let alone read and understand,” said Karen Ferguson, Director of the Pension Rights Center. “While H.R. 4 has a handful of positive provisions relating to disclosure and ‘vesting’ requirements — as well as protections for certain women and incentives for individual savers — it also contains harmful provisions that could result in broken pension promises and conflicts of interest.”
The Center is also concerned that the bill would give unnecessary and costly tax breaks to higher-paid employees at the expense of others, and that the bill’s overarching goal to improve pension plan funding could be undercut if employers, daunted by what they perceive as onerous requirements, exit the system. Finally, the bill misses two of the biggest issues of the day by doing nothing to stop plan freezes or prevent companies such as United Airlines from using bankruptcy courts to renege on promises to workers.
The Pension Rights Center urges the Senate to amend the bill to:
Strengthen the cash balance language:
H.R. 4 legalizes cash balance plans without providing sufficient protections for older employees. While the Pension Rights Center applauds the elimination of the practice of “wearaway,” (a particularly egregious practice that allows companies to freeze the benefits of older employees) and the addition of 3-year “vesting,” the Senate should include the transition protections contained in its original bill to ensure that pension promises made to older employees are protected when companies switch from traditional defined benefit plans to cash balance plans.
Strike the “Red Zone” multiemployer cut–back provisions:
H.R. 4 includes a provision that could wipe out earned “early out” pensions of tens of thousands of truck drivers, construction workers, and other rank-and-file workers. Cutting already-earned benefits is not only unfair, but unprecedented and unnecessary. The original Senate bill did not contain this provision and the Senate should act to remove it from the bill.
“When Congress first took up the issue of pension ‘reform,’ the stated goal was to promote retirement security by ensuring that ‘pension promises made would be pension promises kept,” said Ferguson. “Instead, there is a very real danger that if the Senate does not act to strengthen the bill, it will break pension promises and promote retirement insecurity.”