Sham Pension Reform

Sham Pension Reform

When George W. Bush isn’t peddling war, he’s been goading the Senate to join the Republican House in passing pension reform.

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When George W. Bush isn’t peddling war, he’s been goading the Senate to join the Republican House in passing pension reform. In August he even took time from his monthlong vacation to travel to WorldCom territory in Mississippi to register how “disillusioned” he was with the corporate scandals and to demand pension protection. What the President did not say is that the House pension “reform” bill would actually deprive millions of workers of billions in corporate contributions to retirement plans.

In the wake of the stock market collapse and the corporate scandals, the House passed a pension reform bill that gutted the legal provisions that require companies to provide benefits to employees as well as executives in order to qualify for tax subsidies for their retirement plans. As a result, companies will be able to exclude far more workers from their retirement plans. The House also extended for two years a provision that enables companies to underfund their current defined-benefit pension plans by projecting higher returns than they have any hope of getting. In the name of pension reform after Enron and WorldCom, the House would make it easier for companies to stiff their workers.

The House action got virtually no press attention. For the most part, the arcane wording of the changes masked their implications. For example, the current rules, dating from a 1986 pension law, provide that to qualify for favorable tax subsidies, pension plans must meet very sophisticated tests designed to insure that benefits go to most employees and not just the executive suite. Corporate tax accountants have invented exotic gambits to get around these provisions, but most qualified retirement plans still end up covering an average of 70 percent of full-time workers. Pension reform, post-Enron, might sensibly have closed the loopholes and strengthened the provisions to insure, as the President put it, that “what’s fair on the top floor should be fair on the shop floor.”

Instead, the Republican majority in the House passed a bill that gutted the detailed requirements and gave the Treasury Department authority to approve plans that don’t meet current standards. As Richard Oppel of the New York Times reported, the provision was “championed by business interests and supported by Representative Bill Thomas,” powerful Republican chair of the Ways and Means Committee. When Treasury had similar authority before 1986, it signed off on plans that covered only 25 percent of employees. Companies were free to lard benefits on executives and middle managers while doing little or nothing for the bulk of their workers. “This provision is an outrage,” said Daniel Halperin, pension-law expert at Harvard Law School.

It is also a slick pilferage that will be noticed only ten or fifteen years from now, when economists report that the percentage of workers without pensions or 401(k) plans has soared and that corporate contributions to those plans have plummeted. Searching for a cause, they will no doubt point to the “unintended effects” of pension reform in 2002.

Now the Senate is taking up pension reform, with Democrats pasting together a modest reform bill that preserves existing protections. The corporate lobbyists haven’t pushed for the House bill’s changes. They figure they’ll do better in the back rooms. Congress is committed to enacting something called pension reform for Bush to sign before it adjourns for the elections. When the Senate passes its bill, its representatives will go into conference with House members to negotiate the differences. Whatever comes out of the conference will slide through both houses of Congress like a wet hog on an oil slick. So the sophisticated corporate strategy is to duck any debate in the Senate and then pressure the conference committee to slip the House provisions quietly into the final bill.

In other ways, the House and Senate bills represent at best modest half-steps toward reform. They prohibit firms from locking employees into holding company stock for more than three years and hold executives liable for misleading employees. But neither does anything for the half of the work force that has no retirement plan at work whatsoever. Neither gives employees the right to protect their money by electing their own representative to the company’s pension fund committee. Neither even requires companies to provide workers with independent investment advice.

Surely, the first requirement of anything labeled “pension reform” is that it should do no harm. And for that to happen, House and Senate members headed into the conference committee must know that an outraged public is watching what they do. Senators Jon Corzine and Paul Wellstone have joined a coalition anchored by the AFL-CIO and others to raise the alarm. The Campaign for America’s Future has launched a website–theretheygoagain.com–that enables citizens to write their legislators and urge them to stop the pension pilfer.

Woody Guthrie used to warn about those who would rob you with a fountain pen. That’s what the House pension “reform” bill will do if it makes it into law. The corporate lobby and its Congressional minions were sufficiently audacious to think they could get away with this sting after Enron. Stopping them will protect millions of workers and could help set the stage for a serious debate on the growing crisis of retirement security in a new Congress.

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