The Republican-backed bill heading for passage would require companies to meet their obligations to retirees while boosting the financial future of the federal agency that takes over abandoned plans.
"Without reform the system may very well collapse under mounting deficits," said Rep. Tom Price, R-Ga., in urging support for the GOP bill.
Democrats argued that the bill would lead to more companies freezing or dumping their plans, depriving workers of promised benefits. "We've made the problem worse," said Rep. George Miller, D-Calif. "We make it easier for corporations to simply get rid of these pension benefits without negotiations."
The bill would set guideposts for companies that don't have enough money in their pension funds to catch up. Defined-benefit plans, which give retirees a fixed amount based on salary and years of service, are now underfunded by up to $450 billion, putting in question whether promised benefits will be available when workers reach retirement.
The Senate passed its version of pension reform last month, and House action would be a step toward what could be the most important retirement security legislation of President Bush's second term in office. Prospects currently appear dim for movement on the top retirement priority for the White House, overhauling the Social Security system.
House-Senate negotiations on a compromise bill probably won't take place until Congress reconvenes next year. A House vote this year became a reality only after Republican leaders on Tuesday announced that the United Auto Workers, after winning several concessions, was now actively supporting the legislation.
The backing of unions desirous of protecting retirement benefits for their workers is crucial to winning needed Democratic votes. A majority of Democrats are still expected to oppose the bill.
Rep. Sander Levin of Michigan, a senior Democrat on the House Ways and Means Committee, said he believed the bill would impact negatively on manufacturers, "both in terms of the short-term competitiveness of companies and the long-term terminations of worker pensions."
White House press secretary Scott McClellan said Wednesday that Mr. Bush supports pension reform but has "made clear he was not going to sign anything that would weaken our pension systems."
The Pension Benefit Guaranty Corporation, the self-financed federal agency that insures pension plans for 44 million workers, has seen its single-employer participants drop from 95,000 in 1980 to less than 30,000 today as companies drop defined-benefit plans or replace those plans with 401(k) programs and other defined-contribution plans.
The PBGC now has deficits of $22.8 billion, mainly a result of having to assume the benefit responsibilities of bankrupt airline and steel companies.
When Delta Airlines filed for bankruptcy, it
"Did they pull the plug on us in a way that I just think is despicable? Absolutely," Gray says.
The concern is that the PBGC will have to turn to taxpayers for a bailout if that deficit continues to increase in coming years.
The House and Senate bill would help restore solvency to the PBGC by raising the annual premium companies must pay from $19 to $30 per employee.
The House bill would require employers with underfunded plans to meet a 100 percent funding target, phased in over five years starting in 2007. It would set up an interest rate formula thought to more accurately measure a company's pension liabilities and require accelerated contributions if a plan is less than 60 percent funded.
It would clarify the law governing hybrid plans such as cash balance plans under which employers set aside money each year for an employee with a guarantee that it will grow at a specific rate.
The House, unlike the Senate version, also takes up some non-pension retirement issues, including encouraging employers to offer automatic enrollment in 401(k) plans and allowing taxpayers due an income tax refund to ask the IRS to deposit a portion of that refund in a retirement account of their choosing.