Washington, D.C. – Saying billions of dollars and the survival of hundreds of small and medium-sized companies hinge on Congressional approval of substantive pension reform, U.S. Senator Mike Enzi, R-Wyo., Chairman of the Senate Health, Education, Labor and Pensions (HELP) Committee, today said he expects to prepare a comprehensive pension reform bill before Congresses adjourns for its August recess.
“Both labor and management are coming to Congress seeking reforms that will help them get the financial affairs of their pension plans in order,” Enzi said. “It is essential that Congress understand the scope and cause of their problems and that we have the information and transparency to prevent a pension crisis from sneaking up on us in the future.”
During a Retirement Security and Aging Subcommittee hearing focused on both hybrid single-employer plans and multi-employer plans, Enzi pledged to explore ways to support and promote stability for both hybrids and multi-plans as part of overall pension reform.
“Every member of this Subcommittee and every member of the full Health, Education, Labor and Pensions Committee is committed to the stability and strength of the defined benefit system,” he added. “I fully anticipate that we will be able to produce a bill this summer before the August recess. The issues raised today, assuming consensus can be reached, may also be included in the package of reforms that goes to the Senate floor.”
Hybrid pension plans, such as cash balance and pension-equity plans, are viewed by many as the last best hope for preserving the single-employer defined benefit system. The lower costs, risks, and frustrations presented by 401(k) plans have contributed to the accelerating decline in the number of traditional pension plans. Hybrid plans present a pro-worker alternative that encourages employers to stay in the defined benefit system.
Multi-employer pension plans, which occur exclusively among unionized employers, provide essential retirement security to 9.7 million workers. Although insured by the Pension Benefit Guaranty Corporation, multi-employer plans currently are under funded by approximately $150 billion. Several plans are at or near deficiency status, which triggers punitive excise taxes that divert funds away from the plans and into the U.S. Treasury. Plans that do not meet the minimum funding requirements are penalized by a series of excise taxes that must be paid by employers who contribute to the plans.