Motion to Instruct Conferees on Pension Legislation Passes 248-178
WASHINGTON – Members of the U.S. House of Representatives voted yesterday to instruct conferees working on pension reform legislation to support provisions of the Senate bill that protect older workers when a company switches from a traditional pension plan to a cash balance plan. The Motion to Instruct was introduced by Representative George Miller (D-Calif.), who said that the House provisions provide older workers with “very little opportunity to recover retirement nest eggs that…were unilaterally ripped away from them.” The motion passed by 248-178.
“The fact that the motion passed is highly significant,” said Karen Friedman. “In supporting this motion, Congress made a strong statement that cash balance conversions hurt older employees and they voted with their conscience to protect these workers by instructing the conferees to accept the Senate language. This is consistent with previous House votes to protect older employees in cash balance conversions.”
During the 1990s, more than 1,200 corporations converted their traditional pension plans to cash balance plans, affecting the pensions of more than 7 million people. In October 2005, the Government Accountability Office found that most workers, particularly older ones, lose expected benefits in cash balance conversions. Because of controversy over this practice, there has been a moratorium on conversion approvals. In 2004, the Treasury Department submitted a proposal that provides transition protections to older employees in cash balance conversions and that prohibits an unfair practice called “wearaway,” which freezes the benefits of older employees.
Where the House pension reform bill contains no protections for older employees in cash balance conversions, the Senate bill includes modest — but critical – protections, modeled after the Bush administration’s proposal. In exchange for the prospective legalization of cash-balance conversions, the Senate bill provides transition benefits to older employees and stops wearaway of already earned benefits.
“The Senate cash-balance provisions represent a reasonable bipartisan compromise, arrived at after long hours of negotiation,” said Karen Friedman, policy director for the Pension Rights Center. “They strike a fair balance between the interests of employers and employees. Now it is up to the conferees to ensure that these provisions are included in the final bill.”