Senate approves pension reform bill

WASHINGTON – The Senate approved and sent to the White House pension legislation to give millions of Americans a better chance of getting the retirement benefits they’ve earned while sparing taxpayers from possibly paying for failed pension plans.

The legislation, passed 93-5 late Thursday, also provides new incentives for young workers to enroll in 401(k) plans, reflecting the trend away from traditional employer-based pensions.

The vote was the last before the Senate leaves for a four-week summer break. Washington Sens. Maria Cantwell and Patty Murray, both Democrats, voted for the bill, as did Idaho’s Republican Sens. Larry Craig and Mike Crapo.

The bill sets new funding rules for employers with defined-benefit pension plans and clamps down on companies that have fallen in arrears in meeting their funding obligations. In order to make a dent in underfunding now estimated at $450 billion, the bill requires plans to be 100 percent funded, up from the current 90 percent level, giving companies seven years to reach that goal.

The legislation carves out special treatment for the airline industry, giving airlines that are in bankruptcy court and have frozen their pension plans an extra 10 years above the seven years for other plans to become financially whole.

That would directly benefit Delta Air Lines and Northwest Airlines Corp., although two others with active defined-benefit plans, American Airlines and Continental Airlines Inc., would be eligible for the same break if they decide to freeze their plans.

The legislation promotes automatic enrollment into 401(k) plans, expected to boost the number of people with savings plans, particularly young workers who tend not to save. It gives financial firms greater latitude in offering advice to 401(k) and IRA investors on how best to shape their investments and makes permanent provisions in a 2001 tax cut law that raises annual contribution limits for IRAs.