Pension,
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Pension Update 8/4/2006
Senate Approves Pension Overhaul

The pension reform bill passed the seante last night and is going to Bush for his signature. It is not the bill we wanted. Whether Bush signs it or not remains to be seen. How the bill works out in the long run and what effect it has in both the short term and the long term for the TWU and AA also remains to be seen.

Gary Moffitt
Legislative Director
TWU Local 567

Senate Approves Pension Overhaul
Measure Seeks Better Company Funding, Stronger Insuring Agency
By Amy Goldstein
Washington Post Staff Writer
Friday, August 4, 2006; Page A04

The Senate last night overwhelmingly approved the most significant changes to the private pension system since Congress created comprehensive rules covering employee retirement plans three decades ago.

The bill, which goes to President Bush for his signature, is intended to bolster the system for more than 44 million workers and retirees who receive traditional pensions that provide defined benefits. It would require employers that operate such plans to fund them more completely and would put on sturdier financial footing the federal insurance agency that gives Americans some protection if their pension plans collapse.

The legislation, which passed the Senate 93 to 5, also could accelerate the trend in which companies have been switching to newer retirement systems that blend a traditional pension with savings arrangements such as 401(k) plans. Virginia's and Maryland's senators voted for the bill.

Other aspects of the bill would offer special help to parts of the airline industry. Taken together, these and other provisions in the bill's nearly 1,000 pages represent the first substantial pension changes in a dozen years -- and the largest step the government has taken to protect retirement benefits since 1974, when Congress established such rules.

Sen. Barbara A. Mikulski (D-Md.) said the measure will "protect workers from losing their pensions, protect taxpayers from having to pick up the tab if companies dump their plans" and "ensure that the rules of government don't unintentionally jeopardize jobs and pensions."

Majority Leader Bill Frist (R-Tenn.) said, "We have protected the interests of retirees by strengthening pensions' funding rules and making permanent the retirement security provisions from the 2001 tax bill."

The Senate vote came less than a week after the measure cleared the House on a bipartisan 279 to 131 vote. The White House has indicated that Bush supports the bill.

The legislation is a response to trends in which many employers have been weakened by a changing economy and a flat stock market, prompting them to pare retirement benefits -- or to pay less money into traditional pension plans.

Specifically, the legislation would compel companies to, over seven years, increase the payments they make into their pension plans to cover 100 percent of their liabilities, instead of the current 90 percent. The Labor Department has reported that companies have underfunded pensions by more than $450 billion.

The change would mean that about 30,000 companies would need to devote more money to their retirement systems. The bill also seeks to strengthen the Pension Benefit Guaranty Corp., the federal insurance that covers partial benefits for retirees whose pensions fail. The agency has said it has a $22.8 billion deficit this year, because of companies, including airlines, that have left their pension obligations to the government.

Critics, including some Democrats, have said the extra money the measure would require companies to spend would further erode an already fragile system, leading more employers to drop traditional pensions and forcing workers to rely more on savings and 401(k) arrangements that some finance experts predict will leave more Americans poor in old age.

The bill would give legal protections to companies that move into so-called hybrid retirement systems that combine pensions with savings plans. Under the legislation, employers that switch to such systems would be protected -- in the future but not retroactively -- from age-discrimination lawsuits alleging that such a switch is especially harmful to older workers, who do not have enough years for their savings to accumulate.

In another contentious aspect, the legislation would ease conflict-of-interest rules by giving financial firms that manage private retirement accounts some ability -- but not complete freedom -- to give people advice about their investments.

In the hours before the vote, last-minute negotiations centered on the help the legislation would give to airlines in financial trouble. The bill passed by the House would give airlines that have frozen their pension plans -- namely Delta and Northwest -- 17 years to fund their plans fully. Other airlines with traditional pension systems, American and Continental, would get 10 years.

Staff writer Charles Babington contributed to this report.

Pension Bill Clears After Estate-Tax Effort Fails Senate Republicans Fail In Effort for 'Trifecta' Vote; Frist Can Revive the Fight

By DAVID ROGERS
August 4, 2006

WASHINGTON -- Landmark pension legislation cleared Congress after being freed of an election-year fight in the Senate over proposed cuts in the federal estate tax.

The action came as Republicans fell three votes short of the 60 needed to limit debate and proceed to their "trifecta" bill, combining estate tax cuts with billions in new spending and a $2.10-an-hour increase in the minimum wage.

Majority Leader Bill Frist (R., Tenn.) preserved his ability to renew the fight in the fall. But anxious to go home for the summer, senators turned immediately to the pension bill under an agreement allowing the House-passed measure to be sent directly to President Bush for his signature without amendments.

In the estate-tax debate, Senate Minority Leader Harry Reid of Nevada set the tone early, in a blistering floor speech deriding the tax-and-wage bill as a "shell game" and challenging Republicans to have an immediate vote on their cloture motion. "We're ready to end this circus," Mr. Reid said.

Three Democrats heavily targeted by Republicans -- Sens. Maria Cantwell of Washington, Mark Pryor of Arkansas and Daniel Akaka of Hawaii -- stood with Mr. Reid despite strong pressure from business interests and the favors promised under the bill. The single notable changed vote was Sen. Robert Byrd (D., W. Va.), up for re-election this year and attracted by provisions in the bill to help the coal industry and miners in his state.

Years in the making, the pension bill, approved 93-5, represents the most sweeping attempt in decades to shore up defined-benefit retirement plans and map rules for the newer world of 401(k) plans and individual retirement accounts.

Its core provisions seek to close the $313 billion funding gap in the nation's employer-sponsored pension plans and make it more difficult for companies to make pension promises they can't keep. The legislation would boost employer contributions to many pension plans and require that all plans have 100% of assets to cover their liabilities within seven years.

Airlines are promised extra time and relief, and final enactment now is timely for two troubled carriers: Northwest Airlines and Delta Air Lines. AMR Corp.'s American Airlines also stands to receive major relief from the package, but both it and Continental Airlines are bargaining for further concessions this fall.

The maneuvering last night capped a remarkable 10-day period in which Republican leaders effectively tore up a potential agreement on the same pension legislation in order to promote their efforts to cut estate taxes affecting some of America's wealthiest households. Small business and agriculture have an interest as well in estate-tax relief, but the decision to jeopardize the pension bill surprised many in both parties at a time when retirement security is such a concern for voters.

Over the angry protests of Senate Finance Committee Chairman Charles Grassley of Iowa, a House-Senate conference on the pension bill was abruptly abandoned, and a new bill was initiated that didn't include about $35 billion in popular tax breaks that had been destined to be part of the package.

It is that new bill, adopted by the House a week ago, which the Senate sent to the president. The 900-plus pages keep faith with most of the agreements already made in the prior House-Senate negotiations, but unlike a formal conference report, the measure was vulnerable to last-minute changes, requiring Mr. Frist to negotiate side deals with members to assure passage.

The Republican gamble on estate taxes -- even at the expense of the pension bill -- reflects both the conservative passion for the issue and an extraordinary willingness to pile on new spending, tax breaks and even a minimum-wage increase -- to garner Democratic support.

The "trifecta" package easily cleared the House, but the strategy suffered from the failure of its chief architect, House Ways and Means Committee Chairman Bill Thomas of California, to consult more with individual senators. "Thomas tends to calibrate people, and senators like to be consulted," said one Republican aide.

The minimum-wage increase was flawed by the fact that it threatened to disrupt wage laws in seven states, including Ms. Cantwell's home state of Washington. Even those senators who welcomed the enticements offered to them were uncomfortable with the impersonal style, and as the 10-year costs climbed to $310 billion, it fed concerns about future budget deficits. "We're heading toward a train wreck," Mr. Pryor said.

By contrast, Mr. Reid threw himself into the fight in the most personal style, especially after House Republicans boasted of having "outfoxed" the Democrats.

He sought out members privately and limited his public appearances. By Wednesday evening, the Democratic leader felt confident enough to say he was prepared to vote early -- a sure sign that he felt he could block Republicans from getting the 60-vote super-majority needed to end debate.

The following was released today from our International office. I will keep you informed as further details become available. Please visit this link on our web site for fax and voice phone numbers as well as email addresses, http://local567.twuatd.org/uploadpages/legDir/writepol.htm .

Gary Moffitt
Legislative Direcetor

FOR IMMEDATE POSTING

July 28, 2006
TO: All AA locals &. Members 501-590
RE: Pension Bil

lDear Brothers & Sisters:
The pension bill as currently proposed would be inequitable for American Airlines and our members. Therefore, we are requesting that you immediately contact your Representative(s) and urge opposition to this bill.

Fraternally,
John M. Conley
AA System Coordinator International Representative

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C: G. Yingst
R. Gless
T. Gillespie
D. Videtich

Urgent Pension Action Required

July 25, 2006
Re: Pension Legislation
Dear Fellow Members:

Our Legislative Director, Roger Tauss, has issued an urgent call for us to phone or fax our Representatives and Senators. The pension bill is likely going to the floor for a vote this week. It is imperative that the bill contain provisions that our TWU members, American Airlines and Continental see as necessary to serve our needs.

We favor the final bill to contain a ten year amortization schedule and a discount rate of 8.25%. This discount rate represents an assumption about return on pension assets. Presently we are forced to use an assumption closer to 5%, when the return on assets is more than 9% per year. Representative William Thomas of California, Ways and Means Chairman opposes our position. We want the Speaker of the House and House Majority to push back against the position taken by Representative Thomas.

We are asking that our Members urge their Representatives and Senators to exhort The Speaker of the House, Dennis Hastert, and the House Majority Leader, John Boehner to take charge of the bill's final passage and ensure that the bill contain a ten year amortization schedule with an 8.25% discount rate for American and Continental.

You are urged to call the Capital Switchboard at 202-244- 3121. When you do, tell your Representative and Senators that you want the final bill to contain a ten year amortization schedule and an 8.25% discount rate for American and Continental. Urge your Representative and Senators to exhort The Speaker of the House and Majority Leader to take charge and get the bill passed with the provisions we demand.

Your support of this issue is vital to our Members and Retirees!

Sincerely and Fraternally,
Curtis R. Gentry
Legislative Committee Chairman

The latest information is that Congress would like to wrap up the pension bill prior to the 4th of July break. Please keep pressure on our local Congressmen and Senators by sending them letters, faxes and making phone calls.

Sincerely,
Gary Moffitt
Local 567 Legislative Director

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