Congressional Record, Volume 152 Issue 106 (Thursday, August 3, 2006)

[Congressional Record Volume 152, Number 106 (Thursday, August 3, 2006)]
[Senate]
[Pages S8747-S8765]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

PENSION PROTECTION ACT OF 2006

The PRESIDING OFFICER. Under the previous order, the Senate will
proceed to the consideration of H.R. 4, which the clerk will report by
title.
The legislative clerk read as follows:

A bill (H.R. 4) to provide economic security for all
Americans, and for other purposes.

The PRESIDING OFFICER. Under the previous order, there are 20 minutes
equally divided between the two leaders.
The Senator from Wyoming.
Mr. ENZI. Mr. President, I allocate myself 7 minutes of the 10 we
have on our side.
A year ago, we were working on a pension bill, and we were working on
the bill in two separate committees. We passed bills out of both
committees. Then the two committees met together, and we merged it into
one bill. There were a lot of difficulties in doing that process. It
took quite a while. At the end of November we still had several
problems and because of that, the media pronounced the bill dead. A
week later, we had revived it and passed it in the Senate with just two
votes in opposition to it and 97 in favor. All that in just 1 hour.
Then it was brought to life on the House side. They passed the bill in
December of 2005.
Then, in March 2006, a conference was named, and we worked on it
diligently for hours virtually every day. A lot of moving parts started
to fit into place. Some wondered if it would never get done.
I looked up the last major revisions we did on a pension bill. They
were not nearly as expansive as this. This is the biggest revision of
pension laws to be enacted in the past 32 years.
I noticed, in 1987, a big pension reform conference started in early
March. The conference committee started a little earlier, but the bill
was enacted until December 22. In 1994, there was a second pension
reform conference. Again, the conference started in March of that year.
The conferees wound up the conference agreement a little earlier than
in 1987. This time, the bill was enacted on December 8, 1994. So we are
way ahead of schedule compared to those two conferences. But we had to
do it in a little different method than we might have liked to get to
this point. Nevertheless, it is the most sweeping amendment to ERISA
and the Internal Revenue Code in over 30 years. It is nearly identical
to the product and agreements made by the members of the conference
committee in a bipartisan manner. I am proud we have before us the most
sweeping changes to our Nation's retirement laws since the enactment of
ERISA itself.
This legislation will provide greater security for our Nation's
workers who have retirement benefit plans and greater stability for the
Pension Benefit Guaranty Corporation. There is little doubt this bill
will be the foundation on which the future of our retirement system
rests.
Today, we secure the future for American workers and their families.
We ensure their hard work is rewarded and their hard-earned dollars go
towards their retirement needs.
At the outset of the pension debate, I laid out three guiding
principles that must be followed when the bill is enacted. Each of
these has been satisfied in this bill that I am proud to have helped
craft as chairman of the conference committee.
The first guiding principle is: The money workers earn for retirement
must be there when they retire. This legislation contains tougher
funding rules to ensure the money is there when workers enter
retirement.
The pension bill puts an end to phony pension accounting rules that
inflated the apparent value of pension plans, relied on inaccurate
measurements of liabilities, and permitted funding holidays through the
use of credit balances when plans were seriously underfunded.
Promises made to workers for their retirement will be promises kept
by assuring the money needed is in the fund and by appropriately
limiting when benefits may be increased, freezing future accruals, and
restricting the rapid out-flow of lump sums and shutdown benefits when
the plan gets into serious trouble. The bill also imposes discipline on
management by restricting new executive compensation when pension plans
are in trouble.
The second guiding principle is: The new rules we craft should not be
so draconian that they become the cause of more bankruptcies and
pension plan terminations.
The conference committee leaders spent nearly 4 months debating this
exact point with regard to ``at risk'' triggers. In the final bill, I
believe we have found a proper balance.
The legality of cash balance and other hybrid pension plan designs is
clarified on a prospective basis under ERISA, the Internal Revenue
Code, and the Age Discrimination in Employment Act, thus ending legal
challenges that have driven hundreds of quality employers out of the
defined benefit system. We have always felt that these plans are valid
under the Code, ERISA and the ADEA.
The final guiding principle is: A taxpayer bailout of the PBGC is not
an option. The full faith and credit of the United States does not
stand behind the private pension insurance systems, and I am committed
to keeping it that way by shoring up the finances of the agency without
a taxpayer bailout.
The legislation repeals the full funding exemption on the variable
rate premium which reduces the deficit at the PBGC by billions over the
next 10 years. With this single vote, we will make the most sweeping
changes to ERISA since its enactment in 1974.
I urge my colleagues to vote in favor of this bill. Our future
generations are counting on it.
I ask unanimous consent that the following letters be printed in the
Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:

Pension Benefit

Guaranty Corporation,

Washington, DC, October 14, 1993.
We write in response to your inquiry. You ask whether the
PBGC adheres to the interpretation of section 4225 of the
Employee Retirement Income Security Act of 1974 (``ERISA''),
as amended by the Multiemployer Pension Plan Amendments Act
of 1980 (``MPPAA''), set forth in its amicus curiae brief in
Trustees of the Amalgamated Insurance Fund v. Geltman
Industries, 784 F.2d 926 (9th Cir. 1986). In its brief, PBGC
addressed the proper application of ERISA Sec. Sec. 4225(a)
and 4225(b) where the withdrawn employer

[[Page S8748]]

satisfies the prerequisites for the application of both
subsections. PBGC expressed the view that an employer meeting
the criteria in both subsections (a) and (b) may elect the
limitation that yields the lesser of the amounts determined
under the two subsections. The Ninth Circuit, however,
reached a contrary conclusion. 784 F.2d at 929-30. For the
reasons set out below, PBGC continues to believe that its
interpretation of ERISA Sec. Sec. 4225 (a) and 4225(b) is
correct as a matter [*2] of law.
Under ERISA Sec. 4225(a)(1)(A), an employer who withdraws
in connection with a ``bona fide sale of substantially all of
[its] assets in an arm's-length transaction to an unrelated
party'' will ordinarily be permitted to retain a portion of
its dissolution value. The Geltman court, however, citing
``the language and . . . structure'' and the ``underlying
policies of ERISA and MPPAA,'' concluded that an
``insolvent'' employer must be denied relief under subsection
(a)(1)(A), because subsection (b) provides a different
liability limit that is explicitly directed to ``an insolvent
employer undergoing liquidation or dissolution.''
This analysis overlooks several pertinent points. First,
when Congress intended to deny classes of employers relief
under section 4225, it did so explicitly. See ERISA
Sec. 4211(d) (prohibiting application of section 4225 to
employers who withdraw from coal-industry pension plans).
Significantly, nothing in the language of section 4225
suggests that subsections (a) and (b) are mutually
exclusive.\1\ The two provisions have separate factual
prerequisites, and provide different types of relief. So long
as an employer satisfies the requirements of both
subsections, [*3] it should qualify for relief under either
rule, and its liability should not exceed the lesser of the
amounts determined under the two subsections.
\1\ Sections 4225(a) and (b) both begin with the phrase
``in the case of an employer.'' The Geltman court suggested
this phrase was ``evidence that the sections are to operate
exclusive of each other. . . .'' This suggestion is
manifestly incorrect. The phrase ``in the case of'' is used
as an introduction to at least 30 provisions of MPPAA; in
each such instance, it is used in its normal statutory sense,
as a synonym for ``when'' or ``if''. 20A Words and Phrases 75
(1959 & Supp. 1983).
This conclusion is further supported by the technical
definition of ``insolvency'' included in section 4225. Under
section 4225(d)(1), ``an employer is insolvent if [its]
liabilities, including withdrawal liability under the plan
(determined without regard to subsection (b)), exceed [its]
assets (determined as of the commencement of the liquidation
or dissolution)'' (emphasis added). Section 4201(b)(1)(D)
defines ``withdrawal liability'' as including adjustment
pursuant to section 4225. Thus, the use of the term
``withdrawal liability'' in the definition [*4] of insolvency
incorporates any reductions in withdrawal liability resulting
from the application of section 4225 (including subsection
(a)) except the reduction set out in section 4225(b), which
is specifically excluded.\2\
\2\ The decision is therefore incorrect when it states that
whether ``an employer is an insolvent employer . . . is done
by looking to the provisions of [section 4225(d)(1)] without
regard to [section 4225(a)].'' Geltman, 784 F.2d at 929.
PBGC believes that its interpretation of section 4225 is
fully consistent with the ``underlying policies of ERISA and
MPPAA.'' Section 4225 is but one of several ERISA provisions
that limit the amount of withdrawal liability imposed upon
withdrawing employers.\3\ Nothing in the congressional
findings and policy declarations that preface MPPAA indicate
that the withdrawal liability limitation provisions should be
construed to maximize the liability of an employer. See MPPAA
Sec. 3, codified at 29 U.S.C. Sec. 1001a. The same is true of
the legislative history.
\3\ See, e.g., ERISA Sec. Sec. 4203 (b), (c), (d), and (f),
4204, 4207, 4208, 4209, 4210, 4217, 4218, 4219(c)(I)(B),
4224, and 4225. The Supreme Court has noted with approval
Congress's efforts to moderate the impact of withdrawal
liability on employers, including Congress's effort in
section 4225. Connally v. PBGC, 475 U.S. 211, 225, 226 n.8
(1986).
Finally, the interpretation offered in Geltman makes little
economic sense. Under the rationale of the decision, an
employer whose liabilities exceeded its assets by only one
dollar is ``insolvent'' and would automatically forfeit any
relief under section 4225(a)(1)(A). In contrast, if the
employer's assets were one dollar greater than liabilities,
the full liability limitation would apply.\4\ As discussed
above, the application of the plain language of the statute
avoids this sort of anomaly.
\4\ The attached table, drawn from the PBGC's amicus brief,
illustrates the dramatic increase in employer liability
caused by the single dollar difference.
In conclusion, the plain wording of section 4225 dictates
that an employer that meets the requirements of both
subsections (a) and (b) is entitled to an assessment of
withdrawal liability that does not exceed the lesser of the
amounts determined under (a) and (b). Neither the legislative
purpose nor principles of statutory construction compel a
contrary conclusion. The PBGC therefore continues to adhere
to the position stated in its brief amicus curiae.
I trust this responds to your question. If you have further
questions regarding this matter, please contact Karen Morris
of my staff.
Carol Connor Flowe,
General Counsel.

ADDENDUM

Computation of Withdrawal Liability Under Arbitrator's
Interpretation in Geltman Industries and Amelgamated
Insurance Fund, of Section 4225.
Assumptions: 1. The value of the employer's assets after
the sale is $100,000; 2. The employer's liabilities other
than withdrawal liability are $90,000; 3. The unfunded vested
benefits allocable to the employer prior to the application
of section 4225 are $10,000 in Example 1 and $10,001 in
Example 2.

------------------------------------------------------------------------
Maximum Withdrawal Liability Under Sec.
4225(a) Example 1 Example 2
------------------------------------------------------------------------
1. (a)(1)(A): 30% of the liquidation value of $3,000
the employer = .30X($100,000-$90,000)........
2. (a)(1)(B): unfunded vested benefits ........... N/A
attributable to employees of the employer $0
or undetermined..............................
3. Greater of (a)(1)(A) or (B) (#1 or #2)..... 3,000
4. (b)(1): 50% of allocable unfunded vested ........... $5,000.50
benefits = .50X$10,00........................
5. (b)(2): additional amount due plan N/A 4,999
(remaining liquidation value after #4).......
6. Total collectible under (b) (sum of #4 and ........... 10,000
#5)..........................................
7. Amount paid to Plan........................ 3,000 10,000
8. Amount paid to creditors other than Plan... 90,000 90,000
9. Amount retained by employer................ 7,000 0
------------------------------------------------------------------------

Congress of the United States,

Washington, DC, July 27, 2006.
Dear Conferee: Throughout the last 18 months as Congress
has worked on pension reform legislation, we have crafted a
bipartisan compromise that addresses needed reforms to
identify and rehabilitate troubled multiemployer pension
plans. Under this compromise, workers and employers can be
assured of predictability and transparency in their pension
plans.
This compromise includes new, accelerated funding
requirements for all multiemployer pension plans. It provides
for enhanced disclosure for workers, retirees, and employers
who contribute to these pensions. And it requires pension
plans with financial difficulties on the horizon to meet
strict goals to avoid these problems.
The most troubled pension plans--the so-called ``red zone''
pensions--would be required to adopt a rehabilitation plan to
reach healthy funding status. The plan may require a
combination of employer contribution increases, expense
reductions, funding relief measures and restrictions on
future benefit accruals. In certain extraordinary
circumstances a rehabilitation plan may also reduce or
eliminate certain ancillary pension benefits for workers who
have not yet retired. This limited authority is necessary to
ensure the continued viability of the most poorly-funded
plans. These changes must be adopted by all bargaining
parties, both management and labor trustees.
Our bi-partisan compromise also requires multiemployer plan
trustees to impose upon contributing employers, within 30
days after the plan provides the notice of reorganization
status, a series of automatic contribution surcharges. The
surcharge will end when a new collective bargaining agreement
is implemented that adopts a schedule of benefits based on
the rehabilitation plan.
We believe that all of these reforms are critical to
safeguarding the multiemployer pension system and protecting
workers' benefits. We look forward to working with you to
address the challenges facing America's workers and retirees.
John A. Boehner,
Majority Leader, House of Representatives.
Edward M. Kennedy,
Ranking Member, Senate HELP Committee.

Mr. ENZI. Mr. President, this bill is nearly identical to the product
and agreements made by members of the conference committee in a
bipartisan manner. I am proud that we have before us the most sweeping
changes to our Nation's retirement laws since the enactment of ERISA
itself.
This legislation will provide greater security for our nation's
workers who have retirement benefit plans and greater stability for the
Pension Benefit Guaranty Corporations, PGBC. There is little doubt that
this bill will be the foundation on which the future of our retirement
system rests. Today, we secure the future for American workers and
their families. We ensure their hard work is rewarded and their hard
earned dollars go towards their retirement needs.
I would like to review some important aspects of this legislation.
For more than a year we have been working on a package of pension
funding rules that will strengthen defined benefit plans and thus,
protect plan participants from the fear of poverty in their retirement
years. When I have concluded that, I will speak about the process
surrounding the pension reform bill.
We were motivated to make these changes for several reasons. First,
plans were underfunded. This occurred due to numerous and complicated
reasons. A key factor was the combination of low interest rates and
lowered equity values that began in the year 2000. The intersection of
these two economic events caused both defined benefit

[[Page S8749]]

plans and the federal agency that insures them, the PBGC to show big
deficits. More money needed to go into the plans regardless of
fluctuations in the economy.
Underfunding was not caused solely by a drop in interest rates and
equity values. It was also caused by loopholes in pension funding
rules.
Second, as plan deficits rose, required contributions to plans
skyrocketed. This put struggling companies in financial peril. When the
terrorist attacks occurred on 9/11 the cash flow of many of those same
companies froze up. Without big reserves in the plans, they could not
make their pension payments any longer. Some of them just declared
bankruptcy. In turn, they dumped their pensions on the PBGC. Those
pension plan failures were quite large. Among them were some steel
companies and a couple of big airlines.
PBGC premiums and asset recoveries from failed pension plans are not
enough to cover the cost of paying benefits to participants of the
failed plans. Every time there has been a pension plan failure, the
PBGC's deficit worsens.
Finally, a taxpayer bailout of the PBGC is not an option. Congress'
adverse experience with the savings and loan problems of the past
taught us a lesson: A taxpayer bailout of the PBGC is not an option. A
taxpayer bailout of the pension insurance agency could only occur if
the Congress provided for it. We did not provide for a taxpayer bailout
of the PBGC in this bill. Instead, we corrected the pension funding
rules.
There have been murmurings in the media and on Capitol Hill that the
bills produced in the House and Senate were somehow ``weaker than
current law''. The facts plainly show that neither the House nor the
Senate bill is weaker than current law and this new bill that the House
introduced and passed on Friday July 28, 2006 is not weaker than
current law either.
Here are just a few examples of how the pension reform proposal is
tougher than current law.
Under the reform proposal: plans must be funded to 100 percent; plans
must amortize their debts over 7 years; plans must use updated and
accurate mortality tables; plans may not add inflated credit balances
to deflated plan assets; liabilities must be valued using a modified
yield curve that will better ``duration match'' assets and liabilities
of the plans; smoothing for both assets and liabilities may be only 24
months in duration; plans that are seriously underfunded must pay an
additional contribution for ``at-risk'' plans. If plans are at-risk for
a long enough period of time, they will be subject to an additional
requirement to pay a ``load factor'' into the plan which assumes the
plan may be at risk of terminating; benefit increases, lump sum payouts
and additional accruals are prohibited for certain seriously
underfunded plans; payment of shutdown benefits are severely restricted
for plans that are underfunded; funding of executive compensation is
prohibited when the plan covering rank-and-file workers is underfunded;
and premiums payable for pension insurance are dramatically increased
and will add billions of dollars to the coffers of the PBGC.

By contrast, under current law a pension need be funded only to 90
percent; liabilities are valued upon the four-year weighted average of
a long-term corporate bond and assets are smoothed over as many as five
year; a single accelerated payment is required for underfunded plans,
but there is no load factor; credit balances are added to assets and
can result in inappropriate contribution holidays and there are many
other weaknesses in current law that have been corrected in the reform
legislation.
One industry that made a compelling case for special transition rules
is the airline industry. Because airlines are vital to our economy,
Congress agreed that different rules should apply to the plans of the
legacy airlines. I am a little disappointed in the language from the
House bill because it fails to treat all the legacy airlines equally. I
admire the courage of a plan sponsor that makes the tough decision to
freeze its plan. When a company is suffering from financial distress or
the risk of it, it needs to freeze accruals. But if the company has
made other financial sacrifices or the employees have made other
concessions in order to keep the plan in place that should, (within
limits), be a decision of the company.
The Senate bill gave amortization extensions to all four legacy
airlines but required the non-frozen plans to pay into their benefit
plans at the ``at-risk'' rate. The frozen plans received a more
favorable arrangement--but all the legacy airlines received some more
or less equivalent treatment.
Under the House bill, frozen plans receive 17 years to amortize their
plan debt and an interest rate of 8.85 percent. The frozen plans would
be prohibited from having a follow-on DB plan or a DC plan in which
they pay matching contributions. If their plan should terminate within
the next 10 years, for any reason other than a terrorist attack, or
other similar event, severe termination premiums are to be imposed on
the sponsoring company. This language controverts the provisions of the
recently enacted reconciliation act, P.L. 109-171, that did not impose
a termination premium on plans whose sponsor declared bankruptcy prior
to October 18, 2005.
By contrast, nonfrozen plans receive some limited leeway. They would
obtain an amortization of ten rather than seven years for the
liabilities accrued to date under their plan. They would not have to
pay the deficit reduction contribution, DRC, for 2006 or 2007. That
waiver of the DRC would be a big help to their finances until the new
rules phase in.
I prefer the language of the Senate passed bill, S. 1783. I am very
sorry that the House did not see fit to accept the Senate language, as
it was the result of many and long negotiations. The Nation cannot
afford any more airline bankruptcies or terminations of airline pension
plans. I hope this legislation will not worsen the finances of the
legacy airlines or the pension plans they sponsor.
The language we have before us makes other changes to law as well.
For example, it provides clarification regarding the use of automatic
enrollment programs for defined contribution plans. It establishes a
new portable defined benefit plan that we refer to as the ``DB(k)''
plan. This retirement savings vehicle is especially appealing to small
and medium sized companies. The legislation improves portability of
retirement savings. It contains many beneficial changes to tax law
affecting the provision of health care benefits for public safety
officers of state and local governments and for savings in long-term
care plans.
There are also rules that recognize the unique situation of rural
cooperatives that are very common in my home State and are vital to all
rural parts of this Nation.
In addition, the rules for calculating lump sum distributions have
finally been updated in this legislation. The change for this
calculation will be phased in very slowly so that participants will not
be disadvantaged by any sudden change in the rate used to make these
calculations. As is the case under current law, the new law allows a
plan sponsor to use different assumptions, interest rates and/or
mortality tables, to determine lump sum distributions so long as the
plan provides that a participant's lump sum amount is no less than the
present value determined in accordance with the provision in effect
under this legislation.
While single-employer pension funding problems have been quite
visible, the funding problems of multiemployer pension plans, that is,
plans that are sponsored by big labor unions and the employers who have
an obligation to contribute to them, have been invisible. Ironically,
the agency that is charged with protecting the integrity of the pension
insurance system has consistently declined to recommend changes to the
funding rules for these plans. Their argument is that the multiemployer
plans are not a threat to the insurance system.
I respectfully submit that, over time, these multiemployer plans have
become an unseen threat to the pension insurance system and to the
participants in the plans and the employers who must fund them. If
there were not risk inherent in these plans, the plans would never have
come to Congress asking for changes in their rules. The changes in the
pension reform bill will postpone the possible collapse of some
multiemployer plans, but it they will not cure it. Much remains work
remains to be done in terms of multiemployer reform.

[[Page S8750]]

Unlike the single-employer pension system which has been amended
numerous times since its enactment in 1974, the rules governing
multiemployer plans have been virtually untouched since the enactment
of the rules covering these plans in 1980.
In 2003 the multiemployer plans came up to Capitol Hill and asked for
a blanket extension of amortization of their plan gains and losses.
Congress pared back that request in the provisions applicable to
multiemployer plans that appear in the 2004 Pension Funding Equity Act,
PFEA.
Since then, the unions and management agreed upon changes to ease the
multiemployer pension funding standards for financially distressed
plans. The changes made here identify plans that are seriously
underfunded. They also establish benchmarks for improvement.
The two special categories are for plans we consider to be
``endangered'' versus those that are worse funded. Those are the plans
in ``critical'' condition. At the behest of the union and management
multiemployer coalition, we urge these plans to increase funding.
Multiemployer plans are funded through contributions specified in
collective bargaining agreements. The plans look like a defined
contribution plan to the employers who pay for them since they pay a
certain number of dollars per hour each participant worked under the
plan. But, these plans function like, and they are, defined benefit
plans for the individuals covered by them. Because the plans are funded
by, in some cases hundreds of, collective bargaining agreements,
improvements to overall funding cannot necessarily occur quickly.
The new rules do not set painful improvement standards for
underfunded plans. On the contrary, these new benchmarks for
improvement are established with the complete approval of the
multiemployer coalition. The new rules allow the plans to make modest
increases in their overall funded status without necessarily making
other sacrifices. There is one exception to this rule. That occurs when
a plan is in so-called ``critical'' status. Under that circumstance,
the multiemployer coalition asked for the right to eliminate early
retirement subsidies for participants who are still working. Early
retirement subsidies are an accrued vested benefit and under current
law. They are protected from reduction or elimination by a plan
amendment. Labor and management clearly felt that the underfunding in
some multiemployer plans was so severe that the only way some of the
plans could survive was to eliminate early retirement subsidies of
those who are still working.
It is no secret that I resisted that change. Cutbacks of early
retirement subsidies were not reported out of the HELP Committee.
Cutbacks were not passed by the Senate. The provision allowing cutbacks
was added by the House of Representatives' bill.
The issue of the cutback of previously accrued benefits is very
controversial and a few clarifying points are needed. First, the
drafters took great care to ensure that the decision to cutback accrued
benefits is one that must be made by the plan trustees, and as part of
the collective bargaining process. The language of the bill is clear, I
believe, that any reduction of adjustable benefits can only be
accomplished through a separate schedule. The language of the bill does
not permit cutbacks in the default schedule.
The legislation also provides a floor for benefit reductions, i.e.,
the so-called 1 percent rule. The bill makes clear, however, that the
plan sponsor retains the ability to prepare and provide the bargaining
parties with alternative schedules to the default schedule that
establish lower or higher accrual and contribution rates than the rates
otherwise required under the provision. Thus, the plan sponsor may
supply schedules to the bargaining parties for their consideration that
raise employer contributions higher than the default schedule or reduce
benefit accruals below the specified 1 percent level. The legislation
does not require the plan sponsor to go below the 1 percent benefits
floor, but that is expressly permitted if the trustees and bargaining
parties so choose.
In the Health Education Labor and Pensions Committee, we worked on
multiemployer funding reform legislation over the last year and a half.
We heard testimony regarding the impact of existing multiemployer
pension rules on small, privately held trucking-related companies that
participate in multiemployer pension plans.
These businesses participate in pension plans that are badly
underfunded as a result of changes in the trucking industry and poor
decisions by some of the plans' trustees--decisions that the smaller
companies had virtually no knowledge of, much less control over.
Despite the fact that these companies have made every pension
contribution required of them, the withdrawal liabilities attributable
to them has skyrocketed, and in several cases exceeds the entire net
worth of the company by two and three times.
I worked diligently with my colleagues to include withdrawal
liability reforms for these companies in the pension bill, and to
protect those small employers who came forward to voice their opinions
from retaliation from the pension plan. I am pleased that we were
successful in securing some modest reforms.
One additional issue which is vitally important to these employers
involves the proper interpretation of current law. ERISA section 4225
provides limitations on withdrawal liability for an employer that
withdraws from the plan in connection with a bona-fide arms-length sale
of assets to an unrelated third party. As the interpretation of this
section has been subject to some legal dispute (Trustees of the
Amalgamated Insurance Fund v. Geltman Industries, 784 F.2d 926 (9th
Cir. 1986)), it is important for Congress to reiterate its
interpretation of this law.
Therefore, I have included for the Congressional Record a copy of
PBGC Opinion Letter 93-3. In this opinion letter, PBGC explains that,
``the plain wording of section 4225 dictates that an employer that
meets the requirements of both subsections (a) and (b) is entitled to
an assessment of withdrawal liability that does not exceed the lesser
of the amounts determined under (a) and (b).'' Further, PBGC says,
``that neither the legislative purpose nor principles of statutory
construction compel a contrary conclusion.''
As the Chairman of the Health Education Labor and Pensions Committee,
I believe this letter provides a clear and concise interpretation of
Section 4225 which is completely consistent with the intent of
Congress.
The pension reform bill amends the anti-retaliation section of ERISA
to provide protection for employers who contribute to multiemployer
plans and others. Specifically, the language adds a new sentence to
ERISA Section 510 that states: ``In the case of a multiemployer plan,
it shall be unlawful for the plan sponsor or any other person to
discriminate against any contributing employer for exercising rights
under this Act or for giving information or testifying in any inquiry
or proceeding relating to this Act before Congress.''
The new sentence is necessary to close a loophole in the existing
whistleblower protection. Over the course of the debate over
multiemployer pension reforms, several companies approached Congress
with concerns about how proposals would adversely affect their business
operations. In June 2005, John Ward, of Standard Forwarding in East
Moline, IL, speaking on behalf of those companies, testified before the
Retirement Security & Aging Subcommittee of the Senate Health,
Education, Labor & Pensions Committee.
On several occasions after that date, the committee heard allegations
of threats of retaliation against Mr. Ward for testifying before
Congress and for petitioning the Congress for redress of grievances.
The fact is that Mr. Ward's and the small trucking companies offered a
dissenting point of view on the proposed multiemployer reforms. The
other companies for whom Mr. Ward testified are: Fort Transfer of
Morton, IL; Midwest Drivers of Bloomington, MN; Billings Freight, Inc.
of Lexington, NC; Miller Transporters of Jackson, MI; Schwerman
Trucking Co. of Milwaukee, WI; and Steel Warehouse Co., Inc. of South
Bend, TN. Among those allegations was the concern that all or most of
the companies had been targeted by a large multiemployer fund.
The conference committee believes that such actions, if proved, would
amount to unlawful retaliation under

[[Page S8751]]

the language added to ERISA by the pension reform bill under section
205. Exercising rights under ERISA, testifying before Congress, and
giving information in any inquiry or proceeding relating to this Act
are protected under this provision. Retaliation in the form of threats,
special audits or singling out of employers and others for adverse or
disparate treatment, will not be tolerated under the law. Let me say
that, had there been a conference report, there was an agreement among
the majority staff to include the specific reference to the small
companies who warranted protection under this antiretaliation provision
because they believe they have been singled out for retaliation by one
of the plans to which they had an obligation to contribute.
Finally, all of Title II of the pension reform bill, except
shortening the amortization from 30 to 15 years, is sunset after
December 31, 2014 although any funding improvement or rehabilitation
plan is permitted to remain in effect.
One of my highest priorities for pension reform is clarification of
the legal status of hybrid pension plans. Since late in 1998 when
sensational stories about these plans first hit the newspapers, the
Congress has been struggling over how to respond. I have never doubted
the legality of hybrid plans. While some conversion practices may have
been questioned, the plans are entirely valid.
Hybrid plans have been criticized on the theory that the design was
per se discriminatory. The theory suggests that the hypothetical
individual account plan design unlawfully favors younger workers over
older ones because younger workers could accrue interest on their
account over a longer period of time than older workers. This theory
amounts to a declaration that the ``time-value of money'' is age
discriminatory.
Not surprisingly, given the confused logic of stating that compound
interest in a pension plan is age discriminatory, most courts that have
reviewed the age appropriateness of hybrid plan designs have found them
to be legitimate. Indeed, the first federal court to review the
question stated ``Plaintiffs' proposed interpretation would produce
strange results totally at odds with the intended goal of the OBRA 1986
pension age discrimination provisions (Eaton v. Onan (S.D. N.Y.
2000)).'' The case law validating the hybrid design includes three
federal court decisions issued since a 2003 rogue decision in the
Southern District of Illinois. These decisions explicitly reject that
court's reasoning and conclusion (Tootle v. ARINC (D. Md. 2004),
Register v. PNC (E.D. Pa. 2005) and Hirt v. Equitable (S.D. N. Y. 2006)
and hold the hybrid pension design to be legal. Consistent with these
numerous federal court decisions, the Internal Revenue Service (IRS)
for 15 years issued approvals for individual cash balance plans and the
Treasury Department and IRS repeatedly issued guidance as to the
validity of the cash balance design. It is not time for the IRS' self-
imposed moratorium on determination letters for sponsors of these plans
to end.

For purposes of applying the age discrimination test, the bill
permits a plan to express an employee's accrued benefit ``under the
terms of the plan'' as an account balance or current value of the
accumulated percentage of the employee's final average compensation.
This rule was intended to limit, for purposes of age discrimination
testing, the use of an account balance to cash balance plans and the
use of a current value to pension equity plans. However, the phrase
``under the terms of the plan'' could create the impression that the
rule applies only to cash balance and pension equity plans that define
in the plan document the term ``accrued benefit'' in this way.
Many cash balance and pension equity plans define ``accrued benefit''
as an age-65 annuity, even though that annuity is determined by
reference to an account balance or current value. In many cases, this
definition has been required by the Internal Revenue Service. It is
important to clarify that Congress does not intend to require a plan
document to include a specific definition of the term ``accrued
benefit'' to apply the standard set forth in this legislation.
This bill sets forth a test for age discrimination in defined benefit
pension plans that compares an employee's accrued benefit with that of
any similarly situated younger employee. For this purpose, an
employee's accrued benefit may be expressed as the current balance in a
hypothetical account for any plan that determines the employee's
accrued benefit (or any portion thereof) by reference to a hypothetical
account, such as a cash balance plan. Similarly, for this purpose, an
employee's accrued benefit may be expressed as a current value equal to
an accumulated percentage of the employee's final average pay for any
plan that determines an employee's accrued benefit (or any portion
thereof) by reference to such current value, such as a pension equity
plan.
But the bill does not elevate form over substance. How a plan
expresses the accrued benefit for purposes of the age discrimination
rules is not contingent upon how the plan document defines the term
``accrued benefit.'' For example, a cash balance plan may, for purposes
of the age discrimination rules, express the accrued benefit as the
current balance of the hypothetical account determined under the terms
of the plan, even if the plan defines the term ``accrued benefit'' in a
different form, such as an annuity commencing at normal retirement age
that is based on the hypothetical account.
Similarly, a pension equity plan may express the accrued benefit as a
current value equal to an accumulated percentage of the employee's
final average pay as determined under the terms of the plan, even if
the plan defines the term ``accrued benefit'' in a different form, such
as an annuity commencing at normal retirement age that is based on that
current value. This flexibility is important because pension plans will
often define the ``accrued benefit'' in different fashions. For
example, the IRS has frequently insisted that plans define the term
``accrued benefit'' as ``an annuity commencing at normal retirement
age'', even though the annuity is determined by reference to a
hypothetical account or a current value equal to an accumulated
percentage of an employee's final average pay.
Any hybrid plan including a cash balance or pension equity plan may
also apply the age discrimination test by expressing the employee's
accrued benefit as an annuity beginning at normal retirement age (or at
the employee's current age, if later), as determined under the terms of
the plan. If a cash balance or pension equity plan were to do so, it
likely would rely on the indexing rules elsewhere in section 701 to
satisfy the age discrimination test.
The pension reform bill also provides new specifications for hybrid
plan conversions. These are entirely new requirements and they have
been worked out among the parties to these discussions. The rule
specifies that for conversions, plans should follow an ``A + B''
formula. This means that the benefit accrued to date under the old
formula, that was in effect prior to the conversion, must be added to
the benefit under the new formula beginning on the date the conversion
takes effect.
Under this A + B formula, any early retirement subsidy that was
accrued up to the date of the conversion would be preserved in the
benefit of the participant. This early retirement benefit would be
payable only if the participant earned the requisite number of years of
service to entitle him or her to the benefit subsidy. The participant
would not be entitled to any additional amount of subsidy, but only the
amount earned to-date could be paid out and only assuming he or she
worked the number of years required under the plan to earn it. The new
rule does not require a plan to pay an early retirement subsidy in lump
sum unless the plan provides that it will do so. This is consistent
with current law and practice.
The hybrid language also corrects the so-called pension whipsaw for
distributions after the date of enactment. The parties to the pension
discussions took the view that the position taken by the IRS in Notice
96-8 was an incorrect interpretation of present law. Many of us who
were engaged in the pension reform discussions noted that Notice 96-8
was never finalized by the IRS in their regulations and we observed
that the Treasury Department had been reviewing the position in Notice
96-8 for some time, but without result.
The approach taken in Notice 96-8 can actually harm many
participants.

[[Page S8752]]

Many employers have reduced the rate of interest crediting under their
hybrid plans due to concerns that over the requirements of the notice.
In addition to its other flaws, the approach taken in the notice
provides a larger benefit to be paid to a participant who takes a
distribution before normal retirement age than for a participant who
waits to take his or her benefit distribution. Thus Notice 96-8 would
penalize an employee who waits to take a distribution. This is a
perverse result for a rule governing retirement plans.
As we developed these new rules for hybrid plans, we were cognizant
that the system is voluntary and as such, it must accommodate the needs
and concerns of employers and employees. A viable pension system must
grant plan sponsors the ability to change their plan designs on a
prospective basis without undue restrictions or mandates on benefit
levels.
This legislation is a clarification of the law; the action in
producing this clarification should not cast any negative inference on
the legality of the hybrid plans.
There are provisions in this legislation that I believe bring our
pension retirement laws into greater sync with our future retirement
needs for financial education and with the operations of our quickly
evolving financial markets. One provision concerns the expansion of
investment advice to workers while other provisions are designed to
allow ERISA plans to achieve similar benefits and efficiency of our
modernized financial markets that is available currently to retail and
other institutional investors.
The investment advice provisions will provide much needed financial
advice and guidance for the millions of workers and their families on
how to invest their hard earned monies for retirement. The compromise
achieved in the legislation would predicate upon the development of
computerized models to help workers to investment monies through 401(k)
accounts. Significant safeguards were put into the legislation to
ensure that the computerized models were certified by independent third
parties. In addition, greater auditing of the use of the computerized
models and enhanced disclosures will ensure that the models are being
used properly and that workers understand how investment advice should
be used and how they can still seek independent advice for guidance and
help.
Everyone at the conference table recognized the significant
differences between the operation of 401(k) accounts and IRA accounts.
While 401(k) accounts within defined contribution plans offer a limited
menu of investment options, IRA accounts may have hundreds of various
investment options and alternatives spanning a vast array of
securities, debt, insurance and other financial products. With respect
to these IRA accounts, I applaud the measures in the legislation that
would encourage the development of computerized models to give
individuals guidance on how to invest their IRA monies. However, I am
afraid that the type and sophistication of the computerized models for
IRA's may not be obtainable and that the computerized models presented
to the Department of Labor for review may be trimmed down to encompass
only ``life cycle'' type of investment options. This should not be the
objective. As IRA accounts are different, the regulatory regime for
giving investment advice guidance should be based upon to overcome the
real world hurdles in getting appropriate investment advice to
individuals.
It also should be noted that the Department of Labor, in 2001, issued
an advisory opinion to Sun America to provide a structure for providing
both traditional advice and discretionary management. It was the goal
and objective of the Members of the Conference to keep this advisory
opinion intact as well as other pre-existing advisory opinions granted
by the Department. This legislation does not alter the current or
future status of the plans and their many participants operating under
these advisory opinions. Rather, the legislation builds upon these
advisory opinions and provides alternative means for providing
investment advice which is protective of the interests of plan
participants and IRA owners.
The legislation also contains provisions to modernize ERISA to align
it with our financial markets of today, not the financial markets of
1974. These modernizations provisions, such as permitting the use of
electronic communication networks, will put ERISA plans in parity with
the current ability of retail and other institutional investors to use
these modernizations. Specifically with respect to the provision on
electronic communication networks and similar trading venues, it was
not the intention to overturn existing interpretations or guidance
granted by the Department of Labor to securities exchanges registered
pursuant to the Securities Exchange Act of 1934. The legislation's
provision is clear that it is applicable solely to electronic
communication networks and similar trading venues and not to securities
exchanges. With respect to the block trading provisions, the
legislation is not intended to be inconsistent with the Department of
Labor's views with respect to the recently amended prohibited
transaction exemption, PTE 75-1.
Should this legislation be enacted into law, I would like to comment
on the history of pension legislation. The negotiations that have given
birth to this new law and its place in time have been very difficult,
but that is by no means unique to the history of ERISA.
This legislation marks the first major, comprehensive reform of the
pension funding rules in 32 years. ERISA, itself, was enacted in 1974,
11 years after the collapse of the Studebaker pension plan in 1963 and
after extremely heated debates in the House and Senate.

The first major reform of single-employer rules after ERISA was
enacted occurred in 1987. Those reforms came only after a long and
contentious conference. The conference began in March 1987, but it did
not conclude easily or amicably. It was not until December 22, 1987
that the legislation was signed into law. The next major reform of
single-employer plans occurred in 1994, seven more years after the '87
amendments. That legislation was not enacted until December 8, 1994.
Multiemployer plans have not been revisited or reformed once since
their enactment in 1980.
It seems that pension legislation is marked by disagreement and
strife, but this should not be the case. There have been times when
partisanship was put aside and when House and Senate, Republicans and
Democrats sought to ``do the right thing'' rather than score points.
One example of that bi-partisan, bi-cameral cooperation is the
pension provisions of EGTRRA. Those provisions would be made permanent
by this legislation. EGTRRA made good reforms and I hope they will
become permanent. They help Americans save for retirement, increase
portability, protect plan integrity, increase the limits on defined
benefit, defined contribution plans and IRAs. EGTRRA allows catch-up
contributions for individuals who are age 50 and older and they make
permanent many other beneficial tax and ERISA provisions.
I hope we can return to those days of pension bi-cameral and bi-
partisan cooperation. Given the graying of America and the on-coming
retirement of the baby-boomers, the American people need Congress to
enact legislation that will improve the day-to-day lives of ordinary
Americans. I hope this legislation can and will make modest steps in
that direction.
Mr. President, I would like to make a special note about the bill
before us. This legislation is essentially the product of the
conference committee of which I chaired. While I am pleased we are on
the verge of passing an historic measure, I must briefly mention
concern, as any chairman should, for how we arrived at the bill before
us today rather than a conference report. It was our intention to make
final decisions on the very last items of the conference and to report
back to both the House and the Senate with a completed, bipartisan
conference report. Unfortunately, the conference process was cut short
and was taken out of our hands. I truly hope that this is not the start
of new precedent on how conferences should be conducted. If future
actions repeat the actions taken here, then the future significance of
chairmen and conference committees are in severe jeopardy. At the very
heart of the Congress as a whole and the Senate, are the traditions and
precedents to ensure that everyone plays by the

[[Page S8753]]

same rules. When those traditions and precedents are usurped, then we
run the risk of making everything before us meaningless. I offer this
statement as one of caution and not one of damnation.
Finally, Mr. President, I want to express my appreciation to the key
people involved in this bill.
The pension bill we are about to pass could not have been drafted if
partisanship and politics had been allowed to intervene. I want to
thank Senators Kennedy, Grassley and Baucus for their extremely hard
work on a complex piece of legislation. I appreciate their commitment
to the private pension system and their willingness to drive onward to
solutions to the many tough decisions we had to make. It has truly been
an honor to work so closely with such fine statesmen.
I also want to thank Senators DeWine and Mikulski for their
extraordinary work as the leaders of the Subcommittee on Retirement
Security and Aging. Their hearings last year created the basis for this
bill. Their commitment to pensions of ordinary Americans and their
sense of fairness greatly improved the bill before us.
There are many people who worked behind the scenes to get this bill
completed. I would like to thank all of my staff for their diligence
and commitment. In particular I thank:
HELP Committee Staff Director Katherine McGuire; Greg Dean, who
played a central role on the investment advice and prohibited
transactions bill language. He expertly managed discussions throughout
the process and brought the various players together time and time
again to move the bill forward; Diann Howland, my pension policy
director, who bravely agreed to come back to the hill and take on her
third major pension reform bill. In light of overwhelming odds, she
brought a fresh perspective to complex issues every day and should be
commended for her leadership in getting this bill done; David Thompson,
he brought a superb understanding of the intricate and complex labor
issues to the table; and Amy Angelier--my crackerjack budget staffer
and policy advisor. She was on top of each and every aspect of the
budget aspects of this bill and helped guide its success.
My staff worked closely with the staffs of my other Senate conferees
and those individuals deserve thanks. They are Michael Myers, Portia Wu
and Holly Fechner of Senator Kennedy's HELP Committee staff; Kolan
Davis, Mark Prater, John O'Neill, Judy Miller and Stu Sirkin on the
staff of the Finance Committee for Senators Grassley and Baucus. I
wanted to especially commend Mark Prater for his leadership over the
last week helping us maneuver through troubled waters.
I would also like to thank the nonpartisan legislative counsels and
staff from the Joint Committee on Taxation for their very long hours
and professionalism. Every person with a pension should join me in
thanking Jim Fransen, Stacy Kern, Carolyn Smith, Patricia McDermott,
and Nikole Flax.
Finally, I want to thank my chief of staff, Flip McConnaughey. He did
an excellent job holding the office together and keeping a focus on
Wyoming-specific issues when the pension conference kicked into full
gear.
In conclusion, I want to express my appreciation to key people
involved in this bill over the past 2 years. The pension bill we are
about to pass could not have been drafted if partisanship and politics
had not been laid aside for the greater good.
I thank Senators Kennedy, Grassley, and Baucus for their extremely
hard work on this complex piece of legislation. I appreciate their
commitment to the private pension system and their willingness to drive
onward to solutions to the many tough decisions we had to make. It has
truly been an honor to work so closely with such fine statesmen. I also
thank Senators DeWine and Mikulski for their extraordinary work as
leaders of the Subcommittee on Retirement Security and Aging.
There are many people who worked behind the scenes to get this bill
completed. I would like to thank all of my staff for their diligence
and commitment. I will go into some of those in greater detail later.
My staff worked with other Senate conferees and other individuals. I
will mention those after we have the vote so people can be on their
way.
I thank the nonpartisan Legislative Counsel's staff, Jim Fransen and
Stacy Kern. And, finally, I thank my chief of staff, Flip McConnaughey.
I urge my colleagues to support this historic piece of legislation
which the President will quickly sign into law. It will save a number
of pension plans, but, more importantly, it will save the people that
need these pensions.
The PRESIDING OFFICER. The Senator from Massachusetts.
Mr. KENNEDY. Mr. President, I believe we have 10 minutes on our side.
I yield myself 7 minutes, and 3 minutes to the Senator from Maryland,
Ms. Mikulski.
I know that the hour is late, but I want to take just a few minutes
to speak on this critical piece of legislation.
First, I want to thank my colleagues who were instrumental to
crafting this bill. Pensions are not an easy subject, and it has been
an extraordinary effort over the last two years to develop this
compromise legislation, which will help to strengthen retirement
security of over 100 million Americans.
I thank our leadership for bringing this important bill to the floor
today--Senators Frist and Reid. Americans are counting on us to act
now, and I thank our leaders for making this possible.
I want to thank Chairman Enzi, who has been both tireless, and also a
gracious and even-handed leader, both of the HELP Committee and of this
conference. I also want to thank Chairman Grassley of the Finance
Committee for his leadership and his integrity in this process.
And tonight all of us are remembering our good friend and colleague
Senator Max Baucus, who has worked so hard over the last few years on
this legislation. Our thoughts are with him and his family and the
people of Montana in their time of loss.
Many other Senators also contributed significantly to this
legislation. Senators DeWine and Mikulski have worked to be sure that
we address the need of manufacturing companies in this country; Senator
Mikulski has been particularly interested in women's retirement
security and protections for older workers, as well. Senator Isakson
and Senator Lott have continued to press issues important to airlines.
And Senator Harkin has tirelessly advocated for older workers in cash
balance pensions.
There have also been many leaders in the House who made this
legislation possible. I particularly thank Majority Leader Boehner for
his contributions and leadership.
I also thank our staffs, who devoted late nights, gave up vacations
and weekends to get the bill done and worked steadily on this issue.
Senator Enzi: Katherine McGuire, Greg Dean, Diann Howland, David
Thompson, and Ilyse Schuman. Senator Grassley: Kolan Davis, Mark
Prater, and John O'Neill. Senator Baucus: Russ Sullivan, Pat Heck, Judy
Miller, and Stu Sirkin. Senator Mikulski: Ellen-Marie Whelan and Ben
Olinsky. From the Joint Committee on Taxation: Carolyn Smith, Patricia
McDermott, and Nikole Flax. And from the Senate Legislative Counsel,
Jim Fransen and Stacy Kern.
I especially thank my own staff for their tireless efforts: Terri
Holloway, Jeff Teitz, Jonathan McCracken, and Laura Capps. Michael
Myers, my staff director, helps guide our work on so many issues. And
special thanks to Holly Fechner and Portia Wu. Portia brings a mastery
of the issues and a dedication to workers that made possible so much
that is in this legislation. And Holly is a true leader who had the
vision and skills to make it all happen. I thank her for her work on
this important bill.
This bill is the most important action to safeguard the retirement of
hard working Americans in a generation. It will help more than 100
million Americans today as they look forward to a financially secure
retirement, and millions more in the future. It means greater
retirement security for workers across the economic spectrum--from
cashiers to flight attendants, from construction workers to auto
workers.
The danger has been obvious. More and more firms are dropping their
pensions. Half of all American workers now have no retirement savings
plan at their job at all.

[[Page S8754]]

This bill says to millions of Americans who fear their pensions may
disappear that help is on the way. We're helping their pension plans
recover and imposing tough new rules to keep them that way.
It gives workers a greater voice in planning their retirements
instead of just blind faith. It's their money and their hard work, and
they should know what's going on.
This legislation touches almost every aspect of retirement planning,
whether it's a pension, a 401(k) plan or personal savings. We owe it to
our workers to give them the best information so they can make the best
choices for themselves and this bill makes that possible.
The Pension Protection Act will strengthen the financial health of
pension plans by doing as much as we can to guarantee that funds will
be there to pay for employees hard-earned retirement benefits.
It provides opportunities to increase retirement savings by
automatically enrolling people in workplace pension plans, and
improving the Saver's Credit to help moderate-income workers. Workers
who participate in retirement savings plans will have greater access to
investment advice to help them manage their retirement savings.
It protects the retirement benefits of older workers when companies
switch to new types of cash balance pension plans. And it includes
specific provisions to strengthen women's retirement security.
In addition, it includes clear protections to prevent employees from
being stranded by future Enron-type crises because firms force them to
invest their retirement savings in company stock.
The need for action is clear, and it's gratifying that Democrats and
Republicans, House and Senate, have been able to come together to enact
these major reforms.
I urge my colleagues to support this legislation.
I yield the remainder of my time to the Senator from Maryland.
The PRESIDING OFFICER. The Senator from Maryland.
Ms. MIKULSKI. Mr. President, I hope Members take the time to listen
to what we are saying here. We are about to make history. We are about
to pass legislation that is going to make a difference. We are going to
make sure that the lives of over 100 million people will be more secure
because of what we have done tonight. We are going to make sure that
good-guy businesses will have clear, certain rules so that they can
continue to provide pensions. We are going to make sure that
government, through heavyhandedness or unintended consequences, won't
force these businesses into bankruptcy. We are going to protect the
taxpayer to make sure that the pensions of hundreds of thousands of
people aren't dumped into the Pension Benefit Guarant Corporation,
leaving it to the taxpayer to do what the private sector should. And we
succeeded because we worked together.
I thank Senator Enzi for his leadership and his collegiality, his
inclusion and his civility; Senator Kennedy for the leadership he
provided to our side of the aisle and the very competent staff at his
disposal; certainly to my colleague Senator DeWine. We chaired the
Subcommittee on Retirement Security and Aging and held some of the
first hearings out of the box. We tried to go at it with intellectual
rigor and with fortitude. We promised we would do no harm to those who
relied on a pension, to those who provided a pension, and to the
Pension Guaranty.
Do you know what? We did it. Then we moved it through the HELP
Committee. The Finance Committee had already started their work, and
ultimately we merged those two bills. But Senator DeWine and I come
from a manufacturing base, those blue-collar workers with dirt under
their fingernails and bad backs who wonder what they are going to have
at the end of the workday. We stood up for them. There was a concern
that the use of credit ratings in determining whether a pension plan
was at risk would force manufacturing companies going through difficult
economic times into bankruptcy because of their pensions.
We held up the Senate. We said we wouldn't let the bill go on. But
Senators Grassley and Baucus reached out to us and said: Trust us; we
can reach a compromise. Will you work with us? We wanted to know what
that compromise was. They said: We will have to work it out. Do you
know what we did? We trusted our colleagues on the Finance Committee
and before long we had a sensible solution that was actuarially sound,
fiscally reliable, and also met the needs of the pensions.
Tonight we come before you with something that we truly have done on
a bipartisan basis, consulting with experts, working with able staff,
trusting and working with each other, long hours, difficult nights,
sometimes speed bumps and potholes. But now we have come to the end of
the journey. I can't tell you how proud I am to ask my colleagues to
vote for this bill. I am proud not only because I believe tonight we
truly can make a difference, but also so we can use this as a model of
how when we work together, we can do better.
I yield the floor.
The PRESIDING OFFICER. The Senator from Wyoming.
Mr. ENZI. I yield 3 minutes to the Senator from Georgia.
Mr. ISAKSON. Mr. President, tonight I thank a number of people and
acknowledge their very hard work: Chairman Mike Enzi of the HELP
Committee and Ranking Member Kennedy have been indispensable; Senator
Grassley, who has been fantastic, along with his ranking member Max
Baucus; John O'Neill of the staff of the Finance Committee; Diann
Howland and Kara Marchione of the HELP Committee staff; my staff, Ed
Eigee, Glee Smith and Mike Quiello; and, in particular, Senators
Coleman and Lott, who have worked so tirelessly to bring us to this
moment.
For a second I would like to focus on what this moment is. There are
three distinct winners tonight. In the short run, the winners are tens
of thousands of employees in the airline industry confronted within the
next 30 to 60 days with a loss of up to 70 percent of their pensions
with them going on the back of the PBGC. They will be grateful for the
opportunity this bill gives to allow them and their pensions to be
honored.
Secondly, in the long run, tens of millions of Americans employed by
some of the greatest corporations in this country whose pensions have
come into jeopardy over time because of changes in the workforce,
changes in longevity, and the pressures that have been put on the
pension system.
Most importantly, the big winner tonight is the taxpayers of the
United States. Because this Congress, in a bipartisan fashion, has come
together and said: We can modernize our pension laws. We can keep
pensions from being defaulted upon and going on the back of the PBGC.
And we can prevent the type of failures that in the past have cost the
American taxpayers tens of millions of dollars.
We had an earlier bill that failed tonight. It consolidated many
efforts to bring about changes for many Americans. But as we close this
session tonight, with the adoption of this particular piece of
legislation, we will find the best in this Senate, where Republicans
and Democrats have come together to do what is right for the taxpayers.
Lastly, I want to say in particular to the two Senators from Texas
and the two Senators from Ohio--Mrs. Hutchison, Mr. Cornyn, Mr.
Voinovich, and Mike DeWine--how much I appreciate their consent for us
to move tonight and to work with them to see to it that the concerns
they had are addressed in the months and years ahead.
I yield the floor.

Type III supporting organizations and excess business holdings

Mr. ALLARD. Mr. President, I would like to engage my colleague, the
distinguished Chairman of the Senate Finance Committee, Senator
Grassley, regarding a specific point involving the charitable reform
provisions for Type III supporting organizations, particularly the
authority of the Secretary to exempt an organization from the
application of the excess business holdings rules. My colleague has
worked hard to address the unintended consequences that may arise with
regard to some of these changes as they related to the important work
of many fine organizations that support worthy and noble causes. I have
one of these organizations in my State of Colorado--the

[[Page S8755]]

Reisher Family Foundation--that benefits many underprivileged students
throughout my State and provides them the means to attend college in my
State.
Mr. GRASSLEY. Mr. President, I am happy to engage my distinguished
colleague about what the intent with this exemption is, and how we have
worked to limit the unintended consequences for legitimate charitable
organizations. As you are aware, some of us with interest in this
provision in working to address any unintended consequences thought it
would be a good idea to give the Secretary the ability to exempt from
the excess business holdings rules Type III supporting organizations in
certain limited circumstances.
Mr. ALLARD. Mr. President, specifically, I want to draw the
chairman's attention to the excess business holdings provision and the
language that allows the Secretary to waive the application of the
excess business holdings provisions if the holdings of the Type III
supporting organization are held consistent with the purpose or
function constituting the basis for its exemption under section 501. I
want to emphasize that my understanding is correct that the Secretary
should make a final determination very quickly after a currently
existing Type III supporting organization seeks exemption from the
excess business holdings rules. It is extremely important that the
determination be made within 6 months after the organization seeks
exemption so that the organization knows how it must structure its
holdings. Is that my friend's understanding?
Mr. GRASSLEY. Mr. President, I agree with Senator Allard on his
understanding and our intent that the Secretary should make a final
determination very quickly after a currently existing Type III
supporting organization seeks exemption from the excess business
holdings rules. The determination should be made by the Secretary
within 6 months after the exemption is sought. The joint committee will
have a description of several factors that the Secretary should
consider in making decisions to waive. The considered views of the
State Attorney General should be a part of that decision. In addition,
if the shares of the entity and related persons is not controlling or
the individual and related persons are bound to ultimately contribute
all but a de minimus share to the charity and have no direct or
indirect control of that charity and its investments those are
additional factors the Secretary can consider.
Mr. ALLARD. I commend the chairman for his work and for working with
others, such as the distinguished ranking member on the Senate Finance
Committee, Senator Baucus, and Senator Santorum on this much needed
exemption. There is no question that we intend to encourage more
charitable giving in this country. I thank my colleague for engaging me
in this colloquy.
Mr. President, I yield the floor.

credit counseling organizations

Mr. SESSIONS. Mr. President, I want to take a minute to let my
colleagues know what the chairman of the Finance Committee, Senator
Coleman, and I have discussed with respect to the consideration of a
particular section of the Pension Protection Act of 2006--Section 1220.
Namely, that section would establish additional standards in the
Internal Revenue Code for tax exemption for credit counseling
organizations.
The chairman was the genesis of these provisions, and it is through
his hard work and persistence that they were ultimately included in the
bill we are currently considering. The credit counseling reform
language will go a long way toward ensuring that the hundreds of bona
fide tax-exempt credit counseling organizations operating today across
the country that serve an invaluable role in helping consumers
understand, deal with, and manage their credit and debt problems will
be able to continue as tax-exempt under Internal Revenue Code Section
501(c)(3), with all of the important obligations and benefits that this
status entails. Ensuring the continuation of tax-exempt credit
counseling organizations that meet the high standards set by the
Federal Tax Code, along with standards set by state law and by Federal
agencies such as the Federal Trade Commission and the U.S. Department
of Justice, will mean that the necessary counseling, education and debt
management plan services will be available to all financially
distressed consumers who need them for many years to come. It also
means that there will be sufficient tax-exempt credit counseling
organizations available to fulfill the pre-bankruptcy counseling
mandate of the Bankruptcy Abuse Prevention and Consumer Protection Act
of 2005. As for the purpose of Section 1220, I would like to turn to my
colleague, Senator Coleman, who--as chairman of the Permanent
Subcommittee on Investigations--conducted an investigation into abuses
in the credit counseling industry.
Mr. COLEMAN. One provision of Section 1220 of the Pension Protection
Act of 2006 would create a new Section 501 (q)(2)(A)(ii) of the
Internal Revenue Code. This particular subsection contains one of
several new requirements for credit counseling organizations to qualify
for Federal tax exemption under Internal Revenue Code Section
501(c)(3). I wanted to clarify with the chairman that this particular
provision is not intended to impose a limitation on all credit
counseling organization revenues derived from debt management plans,
but rather only on the revenues derived from what are commonly referred
to as ``fair share'' payments from creditors to credit counseling
agencies. These are payments made by creditors to credit counseling
organizations that are attributable to the debt management plan
services provided by credit counseling organizations to consumers whose
debt is being repaid to the creditors. If the limitation were intended
to include both ``fair share'' revenues paid by creditors and revenues
received in the form of debt management plan fees paid by consumers,
then virtually no existing credit counseling organizations, if any,
would be able to qualify for tax-exempt status under Internal Revenue
Code Section 501(c)(3). That is not the intent of Congress.
Mr. GRASSLEY. Mr. President, yes, the provision is intended to get at
fair share type payments, but note that agencies and creditors cannot
get around the provision merely by re-labeling fair share payments as
something else. This is the intent of this provision. I am also aware
of a specific issue affecting a few States and their existing State
law, and the provision before us today specifically includes a
transition period in part to allow the reconciliation of various State
statutes with the new federal provision. I will work with interested
Senators during this period on their concerns regarding existing
organizations. I thank Mr. Coleman and Mr. Sessions for helping to
clarify its intent.

Modifications to Sections 801 and 803

Mr. ALLEN. Mr. President, I would like to engage in a brief colloquy
with the distinguished chairman of the Finance Committee, Senator
Grassley, regarding changes to the limitations on pension deductions in
sections 801 and 803. The legislation, in section 801, increases the
deduction limit for defined benefit plans for years after December 31,
2005. Increasing this limit will encourage employers to contribute more
to their defined benefit plans.
However, if an employer has both a defined benefit plan and a defined
contribution plan there is a separate deduction limit that applies to
employers with a combination of plans. Thus, this legislation in
section 803, also updates the limitation on deductions where an
employer has a combination of such plans effective for contributions
made for taxable years after December 31, 2005. The change in section
803 eliminates the deduction limit for combinations of defined benefit
and defined contribution plans for employers that do not contribute
more than 6 percent of compensation to a defined contribution plan.
If an employer has a combination of plans and wants to contribute
more than 6 percent of compensation to a defined contribution plan, the
legislation also has a provision in section 801 which permits employers
to exclude defined benefit plans whose benefits are guaranteed by the
PBGC, from the limits applicable to combinations of defined benefit
plans and defined contribution plans. But, unlike the other two
provisions I described above which permit employers to increase their
contributions to defined benefit plans

[[Page S8756]]

effective for years after December 31, 2005, it appears that this last
related provision regarding guaranteed plans may inadvertently not have
the same effective date as the other two.
It seems to me that if we are encouraging employers to fully fund
their defined benefit pension plans, that the effective dates for these
provisions should all be effective as of December 31, 2005. I am
hopeful that we will examine this issue and can correct this technical
oversight.
Mr. GRASSLEY. Mr. President, I appreciate my distinguished colleague
from Virginia, Senator Allen, raising this concern. I can assure him
that he is correct that it makes perfect sense for provisions intended
to encourage employers to fund their defined benefit pension plans by
increasing the deduction limits to have the same effective date. I also
agree that this should especially be true for provisions that update
deduction limits for employers with a combination of plans. I look
forward to working with my colleague on addressing this oversight.
Mr. ALLEN. Mr. President, I thank the distinguished chairman of the
Finance Committee for his willingness to work with me to address this
issue.

section 701

Mr. BURR. Mr. President, I would like to ask the chairman of the
Committee on Health, Education, Labor, and Pensions a question
regarding how section 701 of the new bill relates to capital
preservation and loss protection. Would you please explain what types
of plans are subject to each of the two rules and how the rules
operate?
Mr. ENZI. The capital preservation rule applies to applicable defined
benefit plans, such as cash balance and pension equity plans. To
illustrate how the rule operates in the case of a cash balance plan,
the rule requires that the cumulative effect of all the interest
credits to an employee's hypothetical account may not reduce the
account balance below the sum of all the pay credits made to the
account.
Mr. BURR. The bill refers to ``contributions credited to the
account'' rather than pay credits?
Mr. ENZI. Yes. The two terms are synonymous. Since the account in a
cash balance plan is hypothetical, the contributions credited to it are
hypothetical also. Hypothetical contributions is merely another name
for pay credits.
The second rule, the loss protection rule, applies to all defined
benefit plans that use any form of benefit indexing. Thus, the second
rule applies not only to cash balance and pension equity plans but also
to other defined benefit plans that index benefits.
The loss prevention rule would apply in the same way as the capital
preservation rule in the above example of a cash balance plan. However,
because the loss prevention rule applies to a broader group of plans
than just applicable defined benefit plans, the rule is written in more
general terms than the capital preservation rule, which applies to a
narrower universe of plans.
To illustrate how the loss protection rule operates in the case of a
defined benefit plan that indexes benefits by reference to changes in
the Consumer Price Index, the rule requires that the cumulative effect
of such indexing may not cause a decrease in an employee's benefit
below what it would have been in the absence of such indexing. Although
it is very unlikely, this would occur if there were a sustained period
of deflation in which the overall change in the CPI were negative
rather than positive. In that extremely unlikely case, the plan could
not reflect the cumulative negative change in the CPI.
Mr. BURR. At what point are the rules applied?
Mr. ENZI. The capital preservation and loss protection rules are
intended to provide long-term protection to employees, so the
determination of whether the rules are satisfied is made at the time
benefits commence but not beforehand. In the case of plans that index
benefits after benefits begin, the determination is made by reference
to the benefit in effect at the time benefits begin.

lump sums from hybrid pension plans

Mr. GREGG. Mr. President, I would like to ask the chairman of the
Committee on Health, Education, Labor, and Pensions, to clarify
provisions of H.R. 4 that address the payment of lump sums from hybrid
pension plans.
My first question relates to a clarification of the effective date of
those provisions. As you are aware, under the so-called whipsaw method
of calculating lump sums, younger workers would receive much larger
lump sums than identically situated older workers.
This result is one that Congress never intended. Furthermore, the
practical effect of the whipsaw calculation would be to reduce benefits
for all participants, young and old, in cash balance plans. Therefore,
the intent of the whipsaw provisions is to put this issue to rest.
Accordingly, the provisions are effective for distributions made after
the date of enactment, regardless of why they are made.
Mr. ENZI. Yes. The provisions do apply to all distributions made
after the date of enactment.
Mr. GREGG. My second question relates to the definition of ``market
rate of return'' in the whipsaw provisions. My understanding is that
the term ``market rate of return'' is intended to allow plans to adjust
benefits in ways that benefit participants. For example, a plan could
provide a variable market rate of return and, in addition, protect
participants by preventing the rate of return in their accounts from
falling below a reasonable, minimum level without having to reduce the
variable market rate of return. My further understanding is that the
term ``market rate of return'' is intended to include a fixed rate of
interest that is no greater than the yield on long-term, investment-
grade corporate bonds at any time during a reasonable period before the
rate is first applied under the plan; is this correct?
Mr. ENZI. Yes, it is.

credit counseling

Mr. BINGAMAN. Mr. President, I would like to engage in a brief
colloquy with the distinguished chairman of the Finance Committee,
Senator Grassley, regarding the provision addressing tax-exempt credit
counseling organizations. My understanding is that the provision is
intended to strengthen the standards for credit counseling
organizations claiming exempt status, helping to ensure that these
organizations do not conduct substantial activities unrelated to their
exempt purposes of providing charitable and educational counseling. I
would ask Chairman Grassley to confirm that understanding and to
briefly explain the intent of the provision.
Mr. GRASSLEY. I am happy to confirm the understanding of my
distinguished colleague from New Mexico, Senator Bingaman, regarding
this provision. The provision is intended to buttress current exemption
standards by providing additional standards that must be met for a
credit counseling organization to claim exempt status. As the Senator
knows, the IRS recently has challenged the exempt status of several
credit counseling organizations because they are operated for a
substantial non-exempt purpose, substantial private benefit and private
inurement. Certain of these organizations exist merely to generate
income from the sale of debt management plans, while providing minimal
exempt purpose activities related to credit counseling. The standards
imposed under this provision are intended to augment, not supplant, the
IRS efforts and to ensure that exemption from consumer protection laws
applies only to those organizations that can satisfy stricter tax-
exempt standards. I also want to assure the distinguished Senator from
New Mexico that we will continue to monitor developments in this
industry to ensure that only those entities that serve a sufficient
charitable and educational purpose can claim tax-exempt status and that
such tax-exempt entities do not generate significant revenues from
activities unrelated to their exempt purposes. If it turns out that the
additional standards imposed by this legislation do not have the
desired impact, you can be assured that we will not hesitate to revisit
this area.
Mr. BINGAMAN. I want to thank the distinguished chairman of the
Finance Committee for his clarification and his leadership on these
important issues.

relief for airlines

Mr. NELSON of Florida. Mr. President, while we consider legislation
regarding the hard-earned pension benefits of American workers, we have
before us a good bill, but flawed bill,

[[Page S8757]]

which is long overdue. It strengthens company pension plans and ensures
that money promised is there to pay for millions of workers' and
retirees' benefits. It also enhances retirement savings and retirement
security by encouraging more companies to use automatic enrollment in
401(k) pension plans, which ensures workers save more for retirement.
Yet despite these positive steps and necessary reforms, I have grave
reservations over the inequities contained in the airline relief
portion of the bill.
We are not here to pick winners and losers in certain industries, yet
the differential treatment contained in this legislation would offer
one company an unfair advantage over another. Last year's Senate-passed
bill contained equitable relief for all, which is the correct approach,
and I am appreciative of the work the Senate Finance and the Health,
Labor, Education and Pensions Committees put into that effort. This
House-passed bill takes a different approach and deals a better hand to
some at the expense of others.
It is not my intention to delay or hold up the bill because of this
provision, but I am seeking assurances for the 13,475 American Airlines
workers and retirees in Florida who are counting on us to make changes,
in whatever way possible, that will put them on equal footing.
Mr. DURBIN. Mr. President, although I will support final passage of
the long-awaited pension bill that aims to strengthen millions of
workers' pensions, including those for airline workers, I want to
express my concerns regarding one provision in particular. Similar to
the Senate pension bill passed in October, this measure contains
language that would provide financially troubled airlines more time to
pay out their pension obligations and preserve their employees' pension
plans. However, while the Senate-passed language was carefully crafted
in such a way so as to not pick winners and losers between those
airlines in bankruptcy that are freezing their defined benefit plans
and those who have not entered bankruptcy and are intent on keeping
their defined benefit plans, the House-passed language that we are soon
to consider does pick winners and losers. The House measure gives those
airlines that want to keep their defined benefit plans a much more
unattractive interest rate than those airlines that freeze their plans.
It is simply not fair to penalize those airlines that want to keep
their pension plans.

It distresses me that those airlines that choose to keep their
defined benefit plans will be punished and forced to compete on an
uneven playing field. In June, concerned with the pensions of over
10,000 American Airlines' employees in my State and thousands of others
across the Nation, I joined with Senator Obama and my fellow Senators
from Oklahoma and Florida in sending a letter to the pension conferees
reminding them of the importance of providing airline relief and
treating all airlines equally. Unfortunately, this bill does not treat
all airlines equally.
In talking to my colleagues in the Senate, I believe there is a
general consensus that this differential should be corrected at the
earliest possible legislative opportunity. If that assurance can be
given by the Senate leaders on this pension legislation, I believe we
should pass the House bill this week and work diligently to correct the
inequity upon our return in September.
Mr. OBAMA. Mr. President, this is not a perfect bill. No 900-page
bill could be. But it will push companies to stay true to the promises
of retirement security that they have made to their employees. We have
seen too many people hurt at companies that have gone through
bankruptcy and dumped their pensions on the PBGC. We have also seen
companies like Enron that misled their workers into putting all their
retirement savings into employer stock. This bill takes steps to reduce
the incentives and capacity for firms to take either of those courses
of action.
But as I said, the bill is not perfect. Among the areas that could
have used additional work is the disparate treatment among competitors
contained in the airline relief portion of the bill.
The Senate-passed bill contained comparable relief for all airlines
in an effort to keep from distorting the marketplace against or in
favor of any one or two airlines. That was the correct approach. The
House-passed bill treats different airlines differently and will
distort the market in a way that is unnecessary and unfair to the
10,000 American Airlines workers and retirees in Illinois. Both as a
matter of retirement policy and aviation policy, this bill should not
favor one airline over another, and I join my colleagues who are
calling for parity or near parity in treatment.
Mr. REID. Mr. President, I am glad that we are finally getting to the
point where we can finish this very important pension reform
legislation. It contains a number of measures that will improve the
retirement security for millions of Americans.
One of the things that this bill does is provide targeted funding
relief to the airline industry--an industry that was devastated by the
events of September 11. In crafting the airline relief in the Senate
bill, the managers struck the appropriate balance, being careful not to
favor one group of companies over another. That balance is not
reflected in the airline relief proposal that the House inserted into
this bill at the last minute. Ironically, those airlines, like
American, that want to keep their pension plans for their workers get a
much less favorable interest rate and a shorter amortization period. As
a result, those airlines that have done the right thing for their
workers are penalized relative to those airlines that have opted to
freeze their pension plans. That makes absolutely no sense.
While I agree with my colleagues that the pension reform bill should
move forward this evening, I also strongly support their efforts to fix
this portion of the bill in the very near future.
Mr. LAUTENBERG. Mr. President, this pension bill is a good bill, but
it is not a perfect bill. It will make sure companies put real money
behind their pension promises, in good times and bad. It will give
workers more information about their pension plans so they understand
the risks they face. It will create incentives to encourage more
workers to save for their retirement.
Unfortunately, the bill is not fair to all airlines. The bill gives
advantages for some carriers at the expense of others--especially
disadvantaging those in New Jersey. As a result of this bill, some
airlines will have to contribute hundreds of millions of dollars more
to their pensions than others. That isn't fair, and it doesn't create a
level competitive playing field.
The Senate agreed that this isn't fair, and that is why the Senate's
version of airline relief treated all airlines equally. If the House
Republican conferees had not hijacked this conference, I believe we
wouldn't be in this position. But we have been put in a very difficult
place. We are forced to choose between stopping this bill and
endangering pensions for hundreds of thousands of workers and accepting
an outcome that is blatantly unfair.
I hope and expect that when this bill passes, we will be able to work
together to fix this problem at the first opportunity.
Mr. MENENDEZ. Mr. President, as we consider critical pension reform
to help secure the retirement benefits of millions of our Nation's
workers, I want first to commend my colleagues for all the hard work
they have put into this bill and their efforts to strengthen our
Nation's pension system. This bill will help ensure that companies can
continue to provide pensions over the long term, it will protect the
benefits of current beneficiaries, and it strengthens plans so that
benefits will be there for workers for years to come.
And while I welcome this bipartisan bill and all that it will do to
benefit the retirement security of workers, I would like to express my
strong concern over the differential treatment of airlines in this
bill. In allocating that relief, not all airlines are treated fairly,
and therefore not on a level playing field. Some, such as Continental
which has a significant economic and employee presence in New Jersey,
are not given the same benefits and flexibility to make up the
underfunding of their pension plans. What especially concerns me is
that Continental went to great lengths to keep it from becoming
financially unstable and to protect benefits for its employees,
including voluntary wage reductions and freezing one of its pension
plans. And despite those actions, because of the unequal treatment in
this bill, the airline is at a competitive disadvantage, and over

[[Page S8758]]

10,000 workers in my state could be adversely affected.
As this legislation has been under negotiation for months and there
is an urgency to pass a final bill, I do not want to hold up the
pension bill from final passage. I do hope, however, that we can secure
the support of our leadership and work with our colleagues to come to
an agreement that would provide more equitable treatment for
Continental Airlines and its employees. Retirement security is a
pressing issue for many workers affected by this bill, including
employees at Continental. Therefore, I urge my colleagues to work with
us in addressing this issue when we return in September.
Mr. HARKIN. Mr. President, I do not believe that the pension bill
should treat different, very competitive companies within the airline
industry in the very disparate manner that it does. This was an
unresolved issue in the pension conference when the House leaders
decided not to complete the negotiations and instead sent us the
measure before us. While I understand that an amendment tonight is not
going to happen, I do believe that the Senate move to and insist that
this wrong be fixed.

airline pension reform

Mrs. HUTCHINSON. Mr. President, I rise to engage the majority leader
in colloquy related to H.R. 4, the Pension Protection Act. Senator
Talent has asked that I state for the information of our colleagues
that he shares my concern in regard to the issue I am raising.
I support the efforts being made to reform and update our Nation's
outdated pension laws and to protect the taxpayers by reducing the
threat of insolvency on the part of the Pension Benefit Guaranty
Corporation. But there is a section in the bill that is not equitable;
it favors two airline companies over two others; and that must be
remedied.
The bill affects the pension plans of four competing airline
companies--American, Continental, Delta and Northwest. Two of these
companies, Delta and Northwest, are currently operating in bankruptcy;
American and Continental are not. When the Senate passed its version of
the pension reform bill these four companies were treated equally. Our
bill did not favor one over the other nor include provisions that would
tilt the competitive playing field to the advantage of one or more of
the companies.
But the legislation that has been sent to us by the House of
Representatives unfortunately contains that type of unfair provision.
The House bill allows Delta and Northwest to use an interest rate of
8.85 percent to calculate returns from pension assets and determine the
amount of money that the companies must contribute each year to their
pension plans to make up for unfunded liabilities. But the interest
rate allowed to be used by American and Continental is not 8.85
percent. It is not 8 percent. It is not even 7 percent. These two
companies must use the corporate bond yield, which is now about 6.2
percent.
Translated into dollars-and competitive advantage--the difference
between 8.85 percent and 6.2 percent means that the annual payment of
American and Continental could be hundreds of millions of dollars more
than the payment due from Delta and Northwest, quickly mounting into
the billions. I say to the majority leader that that is an inequity
that must be removed. I am not arguing that the percentage used for
Delta and Northwest be reduced or changed in any way. But I am arguing
that the disparity between 8.85 percent and 6.2 percent is far too
great and provides an unjust competitive advantage for Delta and
Northwest. Is the leader able to provide any insight on his view of
when and how the Senate would have an opportunity to address this
issue?
Mr. VOINOVICH. I certainly endorse the comments of the Senator from
Texas. The airline industry is very competitive with thin profit
margins. The costs of labor and benefits are two of the few variables
that affect a company's bottom line. The bill that came over to the
Senate from the House, and which we are unable to amend today, puts
several of the airlines at a severe competitive disadvantage because it
does not apply the same rules to each airline's pension fund.
Recognizing the importance of the other reform measures in this
legislation, I understand the need to pass it and send it to the
President for his signature. But before we do that, I would like to
hear from the majority leader if he believes that he will be in a
position before the year ends to revisit this question and help us
reach a more equitable resolution.
Mr. DeWINE. I want to echo the comments of my colleagues. As the
chairman of the HELP Subcommittee on Retirement Security and Aging, I
have been working on pension reform legislation for the last year and a
half. I believe it is essential that the Senate pass legislation this
week that will strengthen defined benefit and multiemployer plans and
that will encourage retirement savings by making the retirement
provisions of EGTTRA permanent. And while I view this bill as an
improvement over the bill the Senate passed last fall, with the
elimination of the provision that used credit rating to determine at-
risk funding status, I believe that this bill's airline relief
provisions are greatly inferior to those of the Senate-passed bill. As
my colleagues who spoke before me made clear, this is unacceptable and
will need to be fixed when we return from the August recess.
Mr. CORNYN. I join my colleagues from Ohio and the senior Senator
from Texas in their comments regarding H.R. 4, the Pension Protection
Act. While providing the airline industry with relief, this bill does
so unevenly and undercuts the ability of Continental Airlines and
American Airlines to compete in a global economy. These Texas airlines
have neither frozen their pension plans nor filed for bankruptcy. As
Senator Voinovich stated, the airline industry operates on thin profit
margins and disadvantaging two profitable airlines has ramifications
not only for the airline industry, but also for consumers and airline
employees. I believe it is crucial that Congress revisits this issue
and provides more equitable relief for all airlines and not just a few.
Mr. INHOFE. I, too, want to echo the comments of my colleagues. I
share their concern in regard to the issue that they have raised.
Mr. FRIST. I appreciate the comments of my colleagues. This pension
bill--while not technically a conference report--essentially represents
the bipartisan and bicameral agreement reached by House and Senate
pension conferees after many months of negotiation. I am aware of the
Senators' concern about the interest rate issue; I have had other
Senators approach me as well.
Although we are not in a position to amend the bill before us, I can
promise the Senators that I will continue to work with them on this
issue after we return from the August recess. Until the Senate has had
an opportunity to more fully examine the issues involved in this
complex matter, we should consider it an issue that requires further
discussion. As such, I think this issue needs to be reviewed further
this year to assure an equitable result, recognizing of course that the
House would have to agree to any changes we might propose.
Mrs. HUTCHISON. I thank the leader for his comments and his offer of
assistance. I am told that the House majority leadership is aware of
this matter and has given a commitment to work with interested
colleagues to reach a resolution that assures no bias on the part of
Congress toward any of the four airlines involved in this issue.
Mr. FEINGOLD. Mr. President, I will vote against the Pension
Protection Act. While there are many constructive provisions in the
bill, the package is deeply flawed in at least two respects. First, it
will add to our already massive government debt. Thanks in large part
to the expensive tax provisions that were added, the legislation will
add another $66 billion over the next 10 years to the already massive
debt with which we are burdening our children and grandchildren. To add
insult to that injury, most of that cost stems from savings incentive
provisions that overwhelmingly benefit those who least need it. The
provisions that raise the contribution limits on tax-preferred savings
accounts benefit only 1 in 16 households, and only 1 in 100 households
with incomes under $50,000. If we want to encourage more savings, and
we should, there are far better ways to do it.
The second matter that raises significant concerns is the so-called
red zone

[[Page S8759]]

provision which permits pension plans to cut the vested pension
benefits of workers. Allowing a worker's vested benefits to be cut is
unprecedented and grossly unfair. If workers are told that they may
take early retirement at a certain level of earned pension, that
promise should not be broken. But under this bill, the financial future
on which some families were planning can now come crashing down on
them. Retirement benefits which were promised to them and on which they
were relying may now be taken away. And make no mistake; if Congress
permits earned benefits to be taken, they will be taken.
There is a clear need for pension reform, and many of the provisions
in this bill make sense. But I cannot vote for a measure that is so
irresponsible for the fiscal future of our Nation and the personal
economies of thousands of workers who will soon retire.
Mr. HATCH. Mr. President, the Pension Protection Act of 2006 has been
a long time coming. In the Senate, the Health, Education, Labor, and
Pensions Committee and the Finance Committee reported pension
legislation last year. The full Senate passed pension legislation in
November of 2005, The House passed pension legislation in December of
2005.
We had to reconcile those bills, which was no small achievement, and
then we had to consider the real concerns that some of our colleagues
had about the impact of this bill in their States. But we got it done.
We had our differences, but ultimately we agreed more than we
disagreed. We understood the fundamental problem and sought to solve it
through genuine bipartisan negotiations. We saw that our defined
benefit pension system was in dire straits. Too many companies had
severely underfunded pension plans. Companies had made promises to
their employees, promises that those employees were depending on for
their retirement. But the companies were falling short on those
promises.
This was not good for the bottom-line of the Pension Benefit Guaranty
Corporation, PBGC, which is now, as the result of several high profile
bankruptcies, running at a considerable deficit. This was not good for
employees, who in the event of plan termination would receive dimes on
the dollar for their pension plans. And ultimately, it was not good for
the American people, who might have been stuck holding the bag if the
PBGC was unable to meet its obligations.
We had to act to fix this. We had to ensure that companies were
putting their money where their mouths were. If they made pension
promises, they had to keep them, They had to fund their plans.
And this bill requires them to do just that.
It was not easy.
The conference committee assembled to reconcile House and Senate
differences was incredibly unwieldy. We had multiple chairmen involved
in both the House and the Senate. It was an important enough issue for
American workers, American taxpayers, and the American economy that
leadership from both the House and the Senate were involved in the
negotiations. Not only Republicans and Democrats, but even the House
and the Senate, did not see eye to eye on all of the issues. And our
decisions would impact the business plans of some of our country's
greatest corporations, the future of the defined benefit pension
system, and the future retirement of American workers.
But we did it. The final result of all these negotiations is a good
bill.
In short, we are going to require companies to fund 100 percent of
their pension liabilities. This makes sense. Under current law, they
are only required to fund 90 percent of their liabilities. I think that
it makes sense to most Americans that if you make a promise, you should
keep that promise, and companies should be funding the plans that they
have promised to their employees.
At the same time, we recognize that these new obligations could prove
a hardship for many. So we have allowed companies with underfunded
plans 7 years to make up their pension shortfalls. And for the
financially struggling airlines, the opportunity to make up for their
pension underfunding will be extended from ten to seventeen years.

And we are going to severely curtail the practice of promising new
benefits for tomorrow when you cannot even keep the promises you have
already made. Employers with pension plans less than 80 percent funded
will not be able to promise future additional benefits unless the
earlier benefits are paid for.
We shore up the multi-employer plans, which have unique funding
problems.
We provide legal clarity to hybrid ``cash balance'' plans that have
elements of both defined benefit and defined contribution plans.
Firms that administer 401(k) plans for their employers will be able
to provide investment advice to employees, so long as that advice is
based on an independently certified and audited computer model.
And to encourage personal saving for retirement, this bill will allow
companies to automatically enroll workers in 401(k) plans.
This bill makes several tax incentives that encourage retirement
savings permanent. Most importantly, Americans can remain confident
that they will be able to rely on the increased 401(k) and IRA
contribution limits established in 2001 and scheduled to expire in
2010.
This is not a perfect bill. But it is a real achievement.
Not only our pension system, but our entire retirement system, will
be better off as a result of it.
And I want to congratulate my colleague and fellow conferee, Chairman
Enzi, for being able to bring everyone together in the end. I want to
thank my colleague and fellow conferee, Chairman Grassley, for his
persistence.
Our pension system was broken. Critics might complain that nothing
gets done in Washington, but our pension system is busted, and tonight,
through tough bipartisan and bicameral work, we went a long way towards
fixing it.
It is late in an election year, and it says a good deal about our
country that we could put our differences aside and tackle this
important issue.
The lives of American retirees, and the health of American industry,
will be better as a result.
Mr. Akaka. Mr. President, today I will vote not against pension
reform but against the unfair tactics being used by the majority
leadership in Congress. As a representative of my State of Hawaii, I
must ensure that the voices of the people of Hawaii are heard and that
their rights are not infringed upon or forgotten. This is an important
distinction to make at this time because the vote that I cast today is
in support of the rights of every member in Congress and the people
they represent.
It is my understanding that the House and Senate conferees were close
to an agreement on the conference report to H.R. 2830, the Pension
Protection Act of 2005, but without notification, the House leadership
introduced H.R. 4. While this measure does include many of the
decisions made by the conferees, and is in some cases an improvement
from the measures passed by the House and Senate, I must vehemently
object to the process that the House leadership used. In looking to our
future, I must ensure that the process we follow in the Congress does
not negate the voices of the minority.
When the House leadership introduced H.R. 4 and then called for a
vote on the measure, they sent a loud and clear message on how future
measures may be considered by Congress. Supporting such a process would
allow the majority to believe that they do not have to listen to
anyone's concern. Rather than negotiating on legislation with all the
conferees in order to amicably resolve any differences, we find
ourselves looking from the outside in. This is no way in which to
ensure that the ideals and beliefs for all will be given the due
process of consideration that everyone deserves.
For these reasons, I am voting against H.R. 4, again, not because I
am against pension reform and ensuring that working men and women
retain their benefits and pensions, but against the majority
leadership's efforts to nullify our voices. I believe that the
conferees to H.R. 2830 were close to an agreement and should have been
allowed to complete action to develop a true compromise piece of
legislation.
Mr. CHAMBLISS. Mr. President, I rise today in support of the Pension

[[Page S8760]]

Protection Act. This has been a long process, but I am glad we were
able to produce a bill that provides retirement security to millions of
Americans while at the same time protects the taxpayers. These reforms
provide tough rules to ensure that employers will keep their pension
promises.
I would like to thank my colleague from Georgia, Senator Isakson, for
all his hard work throughout this process. I appreciate it, and I know
the folks back in Georgia appreciate it.
Many companies and their employees in my home State of Georgia
support this legislation and will benefit from its provisions. For
example, Kroger has grocery stores all over Georgia and employs 18,000
folks across the State, who are depending on their pensions when they
retire. General Motors also has a large presence in Georgia with almost
14,000 retirees and 3,500 employees, many of whom are covered by a
defined benefit pension plan. The United Parcel Service, UPS, is
headquartered in Atlanta, GA, and over 127,000 of its employees
participate in multiemployer pension plans.
The airline industry in particular has taken some economic hits over
the years, and I am pleased that Congress was able to provide critical
provisions for the airlines, ensuring that they will get the time they
need to fulfill their pension obligations.
Delta Airlines is headquartered in Georgia, and has a longstanding
history of service to passengers throughout the world and has been an
exemplary corporate citizen. Like many other hard-working Americans,
Delta's some 91,000 employees and retirees have devoted years of work
and time to their employer.
While our airlines are in a unique situation, many of them like Delta
maintain a strong commitment to keep the pension promises they made to
their employees and retirees.
I would like to close by reiterating why we are here today: American
workers deserve to know their pensions will be there when they retire.
With the passage of this conference report, we can ease the fears of
millions of employees and retirees by taking the steps necessary to
help ensure that pension promises will be kept and employers, not the
taxpayers, will be held accountable.
Mr. KOHL. Mr. President, I rise in support of H.R. 4, the Pension
Protection Act. This bill is not a conference report, and I am troubled
by the way that the House circumvented the process and endangered swift
enactment of this important legislation. However, the bill that will
soon be before the Senate does reflect the carefully negotiated
agreement of the conferees and enjoys broad bipartisan support.
Our goal is to strengthen traditional pensions, which have been an
important source of retirement income for hard-working Americans.
Unfortunately, these pensions have been on the decline, as companies
replace them with 401(k)s that shift risk to individual workers and
generally do not guarantee retirement income for life. We must ensure
that traditional pensions remain a viable option for companies and at
the same time ensure that companies keep their promises and do not dump
their plans on the Government at taxpayer expense.
This compromise strikes the right balance of requiring companies to
contribute enough to their pension plans, without discouraging them
from maintaining their plans. The bill enacts the commonsense
requirement that companies must fully fund their plans, so that they
can keep their promises to the 34 million workers and retirees who rely
on their hard-earned benefits. It allows companies to put in more money
when times are good. It also provides relief to Delta and Northwest,
who have said that they will be forced to dump their plans if Congress
does not enact this bill soon.
Aside from reforming traditional pensions, the bill also includes
important provisions to boost retirement savings. Most importantly, it
improves and makes permanent the saver's credit, which helps low- and
moderate-income workers save. It encourages companies to automatically
enroll workers in 401(k) plans and makes pensions more portable. And it
provides protections to workers in the wake of the Enron accounting
scandal.
While this bill is not perfect, I believe that it will go a long way
toward improving the retirement security of all Americans, and I
therefore support its enactment.
Mr. LEVIN. Mr. President, last November I cast one of only two votes
against the Senate's version of pension reform. One of my primary
concerns with that bill was that companies trying to do right by their
workers would be unfairly penalized. I was concerned that on balance,
that bill did more to drive companies away from offering guaranteed
benefit pension plans than it did to strengthen the system. But the
bill before us today is much improved, and I will support it.
Let me state upfront that it is through a highly unusual maneuver
that we are taking up this issue in the form of a new bill sent over
from the House last week rather than as a final House-Senate conference
report. As part of their ongoing efforts to ram through a reckless
near-repeal of the estate tax, House Republicans hi-jacked the pension
conference process to remove a package of widely supported tax breaks
so they could be paired up with their estate tax proposal in another
bill. The abuse of process involved in that maneuver is serious.
But regardless of political games, defined-benefit pensions are
facing a crisis today and reforms are needed to make sure that retirees
receive the benefits they were promised. We need to make sure that
companies are required to adequately back up the promises they have
made to their workers. At the same time, we should make sure that
reforms are designed to encourage the recovery and strengthening,
rather than the termination, of underfunded and vulnerable pension
plans.
Striking this delicate balance is not easy. I am pleased that two
misguided provisions from the Senate bill were dropped in the
conference negotiations that are reflected in this bill. The first of
those two provisions would have required companies with solid pension
plans but who also had poor credit ratings to use actuarial assumptions
that require them to put away unnecessarily high amounts of money into
their pension trusts. I am glad that this bill uses a more direct
measure of a pension plan's financial health to determine whether
additional money needs to be put into the plan.
The second provision of concern dealt with an actuarial method known
as ``smoothing.'' Under current law, the amount of money companies are
required to put into their pension plans is determined by using a four-
year weighted average of the values of pension assets and/or
liabilities. The Senate bill would have shortened smoothing to 12
months, which would have added significant volatility for companies
when they are determining how much money they need to set aside for the
pension plans. The bill before us today changes smoothing to a 2-year
time period. I would have preferred the 3-year average proposed in the
original House bill, but the 2 years in today's bill is an obvious
improvement over the Senate's original 1 year.
Based on my concerns with these credit rating and smoothing
provisions, Senator Voinovich and I wrote a letter to the House-Senate
pension bill conference committee members, urging them to consider the
potentially adverse impact these provisions could have on companies
that offer defined benefit pension plans and the employees and retirees
who are counting on the stable pensions they have been promised. I was
pleased that one-third of the Senate joined us in signing this letter,
and I appreciate the conferees addressing our concerns.
I am also pleased that this bill, like the Senate bill, will give
airlines extra time to fund their pension obligations. I am told that
this action means that Northwest and Delta will keep their plans when
they emerge from bankruptcy, rather than turning their obligations over
to the Government's pension insurer, the Pension Benefit Guaranty
Corporation, PBGC. Passing the airline provision is a win-win. The
companies should now not dump their plans on the Government, and the
airlines' employees and retirees will get to keep their full earned
pensions.
I am pleased this bill includes four tariff-related bills I authored
that will help Michigan companies become more competitive.
I am also pleased that the bill encourages companies to use automatic

[[Page S8761]]

enrollment and automatic increase in 401(k) pension plans to ensure
that workers save more.
In addition, this bill includes long-overdue reforms to multiemployer
pension plan law. These reforms will allow multiemployer pension plans
to address any short-term funding crises as well as add new flexibility
to advance fund and guard against a future crisis. Unfortunately, the
bill also takes the unwise step of allowing underfunded multi-employer
pension plans to cut benefits that workers have already earned. While I
understand that shared sacrifice may be necessary in some instances,
taking away earned benefits is unfair, and I hope this does not set a
precedent for future pension laws.
I am also disappointed that this bill does nothing to pay for making
permanent provisions enacted in the 2001 tax law to expand tax-
preferred retirement and education savings accounts. The conference
agreement makes these tax cuts permanent without offsetting their cost.
According to Joint Committee on Taxation estimates, making these tax
cuts permanent would cost $52.6 billion between 2007 and 2016. We are
deep in a deficit ditch and already each American citizen's share of
the debt is almost $29,000. Instead of just adding to our deep fiscal
troubles, we should be closing down abusive tax shelters and offshore
tax havens and coming up with other ways to pay for any further tax
cuts.
While this bill is less than perfect, on balance I will support it
because of the critical need to address retirement security for
millions of Americans.
Mr. REED. Mr. President, the Pension Protection Act of 2006 would
strengthen private pension plan funding and improve the financial
position of the Pension Benefit Guarantee Corporation, PBGC. While the
bill reflects difficult compromises, it is important that we act now to
preserve the financial health of defined benefit pensions.
This legislation is an important step toward protecting the pensions
of working Americans. Today's workers will live longer and work longer
but also spend more time in retirement than ever before, so it is vital
that the pension benefits promised to workers will actually be there
when they retire.
The crisis in private pensions is just part of the growing problem of
economic insecurity for many Americans. Although the economy has been
growing, job growth has been modest, wages are not keeping pace with
inflation, income inequality is growing, employer-provided health
insurance coverage is falling, and private pensions are increasingly in
jeopardy. Soaring prices for gasoline, home heating, health care, and
college tuition is squeezing the take home pay of most workers. Many
workers have little left over for retirement savings after making ends
meet for basic living expenses.
Meanwhile, many employers shift the risk and responsibility of
adequate retirement funds onto workers, as retirement prospects are
more uncertain than ever. Twenty years ago, most workers with a pension
plan could expect to receive a defined benefit based on years of
service and salary. Today, defined contribution plans--which shift most
of the investment risk and responsibility onto workers--have become the
dominant form of pension coverage.
Despite the shift away from traditional pensions, defined benefit
plans remain a critical source of retirement support, with 44 million
workers and retirees relying on such plans as a source of stable
retirement income. However, as we have seen with recent pension
terminations in the airline industry, the real risk of defined benefit
plan defaults further exacerbates workers' uncertainty and concern
about their retirement prospects.
This bill tackles the growing problem of employers not setting aside
enough money to cover their pension obligations. The Pension Benefit
Guarantee Corporation, PBGC, estimates that total underfunding in PBGC-
insured pension plans is about $450 billion, more than $100 billion of
which is in plans sponsored by financially weak companies that are at
reasonable risk of default.
However, the PBGC, which is the backstop to the defined benefit
pension system, has funding issues of its own due to increased defaults
by employers. At the end of 2005, the PBGC reported a cumulative
deficit of $22.8 billion in its single-employer program. While the PBGC
has sufficient assets to pay benefit obligations for a number of years,
without changes in funding, the agency will eventually run out of
money. The Congressional Budget Office estimates that PBGC's cumulative
deficit will increase to $87 billion over the next 10 years, and
suggests that there is a significant likelihood that all of PBGC's
assets will be exhausted within the next 20 years.
The Pension Protection Act would tighten the funding rule for defined
benefit plans by requiring that plans fund 100 percent of their
liabilities, up from 90 percent under current law. Companies with
underfunded plans would have seven years to make up any funding
shortfall. Financially troubled airlines with underfunded plans would
have 17 years to become fully funded.
The legislation would limit the use of credit balances to prevent
companies with unfunded plans from avoiding plan contributions,
prohibit companies with underfunded plans from increasing future
benefits, and require an accurate accounting of each plan's true
financial condition. Plans would also be required to provide more
information about their current funding status to plan participants and
beneficiaries.
In addition, the bill contains important, long overdue disclosure
rules to protect the pension of workers, to avoid a situation like that
of the Enron workers who lost their entire life savings. Under this
bill, companies would be required to give workers quarterly benefit
statements that show the value of their assets, and explain their right
to and the importance to diversify their investments. The companies
would also be required to give their employees a range of options for
investing their 401(k) plans rather than just the in company stock and
allow workers to sell the stock after three years.
A few of the other notable features of this bill are provisions that
encourage low- and moderate-income workers to save for retirement by
extending the ``saver's credit,'' and requiring automatic enrollment in
defined contribution pensions such as 401(k) plans.
The saver's credit provides a permanent non-refundable tax credit to
taxpayers with incomes below certain limits if they make contributions
to an IRA or an employer-sponsored plan. Early evidence indicates that
the saver's credit has increased participation rates in retirement
plans. The effects of the credit are limited, however, by its
nonrefundability, the sharp phase-down of the credit rate for moderate-
income taxpayers, and the lack of indexing of the income limits. This
bill would address one of the current problems with the credit by
indexing the income thresholds starting in 2007.
The Pension Protection Act would encourage companies to use automatic
enrollment. Under automatic enrollment, companies can enroll employees
in contributory pension plans and defer a specified percentage of their
earnings into an account. Employees are free to opt out of the plan if
they do not wish to participate. Under current rules, employees must
make an active decision to participate in contributory plans.
Studies show that automatic enrollment dramatically increases
participation rates. The increase is particularly likely to benefit
younger workers and low-income workers, who tend to have the lowest
participation rates.
One concern I have is that this legislation extends the higher
contribution limits on 401(k) and IRA contributions enacted in 2001,
which would do little to encourage retirement saving while adding over
$36 billion to the budget deficit over the next 10 years. While tax-
advantaged retirement saving by low- and moderate-income individuals is
likely to represent new saving, high-income individuals are more likely
to use expanded savings opportunities to shift existing savings from
taxable accounts to tax-advantaged accounts. In its analysis of a
similar proposal in the President's FY 2004 budget, CBO concluded that
expanding tax-free savings accounts would have little effect on
personal saving.
Nonetheless, the Pension Protection Act makes progress toward
ensuring that workers will receive the retirement benefits they have
earned. We must continue work to improve our pensions system to ensure
that Americans who work hard their entire lives

[[Page S8762]]

have the financial security they deserve. Part of this work will be to
revisit some of the elements of this bill as well as to encourage
employers to continue to offer retirement plans to hardworking
Americans. The dilemma is that it took the majority 8 months to bring
this bill forward and without it, more plans and workers are
jeopardized. Congress must continue concerted efforts to address the
real needs of American workers.
(At the request of Mr. Reid, the following statement was ordered to
be printed in the Record.)
Mr. BAUCUS. Mr. President, first, I want to thank Chairman
Grassley, Senator Kennedy, and Chairman Enzi for their hard work and
cooperation on this bill.
I like the final product. It strikes a balance between getting plans
funded and not forcing employers out of the defined benefit pension
system. It provides certainty for cash balance plans. It makes certain
that workers can diversify their investments out of employer stock. It
makes changes that will help workers save for their retirements. And it
assures that workers and retirees will receive clear information about
the health of their plans and their individual situations.
I don't like for one minute, however, the process that got us here.
Chairman Grassley and I worked very closely to include tax extenders on
this bill. We had an agreement with the House to do so. We were ready
to sign the conference agreement. Instead, we had the rug pulled out
from under us. The pension bill now comes to us without the extenders.
There is a reason for the conference process. It was a process that
was working. I think that we should have continued down that path.
But as I said, this is a good pension bill of which we can be proud.
We need to pass it.
I will not go through all the provisions in the bill. They are too
numerous to do that. But there are some points that I want to
highlight.
First let me address single-employer pension plan funding. When I
spoke last November about the pension bill that was then pending in the
Senate, I asked my colleagues to remember that we are here to protect
workers' pension benefits. That has been our goal from day one. And
that is what this bill does.
The current system is broken. The Pension Benefit Guaranty
Corporation--the Federal corporation that guarantees defined benefit
pension benefits--has a $23 billion deficit. The existing rules and
temporary congressional fixes have created unpredictable funding
requirements. As a result, employers are freezing their plans as a
preliminary to leaving the defined benefit system altogether. And many
view defined benefit plans as an antiquated vehicle for delivering
retirement benefits.
How do we fix the system? We would all like to get the plans fully
funded. We would all like not to increase funding requirements too much
for employers who cannot afford it. We would all like to see defined
benefit plans continue. That is especially true for the 44 million
Americans now receiving retirement benefits from defined benefit plans
or earning benefits under them.
Addressing these goals required a delicate balance. The balance that
we struck is one of which I am proud. It reflects difficult compromises
by all parties. There is no perfect answer here. But I think that we
came as close as we could.
Employers will not be able to make promises that they don't fund.
Employers and unions will not be able to negotiate for benefit
increases without paying for them. Workers will have to push for better
funding if they want to continue to earn benefits.
The medicine may not taste very good. But it is necessary to keep the
patient alive.
At the same time, there are some patients that are so sick that they
need more than harsh-tasting medicine. They need some understanding and
a chance to recover. We are giving that chance to the airlines. Maybe
that way we can avoid the harm that will come to the workers and
retirees--and the PBGC--if the plans terminate.
Second, let me address cash balance plans. We have been struggling
with the difficult problems of a new form of defined benefit plan
called a ``cash balance plan'' for many years. Most pension experts
recognize the cash balance design and other hybrid plan designs as the
future of the defined benefit system. And that future is in limbo until
we provide certainty as to the governing rules. Yet there is a real
concern about age discrimination and what happens to workers who get
caught up in the switch from a traditional plan to a cash balance plan.
This bill once again strikes a balance. It is a balance that is not
likely to make anyone completely happy. We have dealt with the law
going forward. We intend no inference to what the rules were prior to
enactment. We will leave the past to the courts.
But in the future, employers and workers will know the guiding
principles. I expect that as a result, we will see new life in the cash
balance world. And we also make sure that workers are protected.
Third, let me address diversification. While defined benefit plans
are important, many Americans today receive retirement benefits from
their defined contribution plans. What a tragedy it was in Enron and
other situations when workers had their entire retirement wrapped up in
Enron stock. They could not get out even if they wanted to.
The new law will require plans to allow workers to diversify. Workers
won't have to. It will be their choice. But they will have that choice.
Fourth, automatic enrollment: I am proud that this bill included a
provision that I have been pushing for some time to allow 401(k) plans
and 403(b) arrangements to automatically enroll workers unless they opt
out. This means that the workers' salaries will be reduced to put
savings into the retirement plan unless the worker instructs the
employer not to do this withholding. And we let employers automatically
increase the amount saved each year unless the worker says no. Many
studies have found that this ``opt-out'' approach significantly
increases workers'' retirement savings.
Fifth, let me address the saver's credit and permanence of provisions
from the Economic Growth and Tax Relief Reconciliation Act of 2001,
which people call EGTRRA. The bill makes permanent the EGTRRA savings
provisions affecting plans and IRAs. I worked very closely with
Chairman Grassley to get the savings provisions included in EGTRRA in
the first place. And I am very happy that this bill makes them
permanent.
Perhaps more importantly, we made the saver's credit permanent. The
saver's credit would have expired at the end of 2006. And for the first
time, we indexed the saver's credit so that worker eligibility will not
shrink over time because of inflation.
Sixth, we include the tax court modernization package. This package
has passed Finance Committee three times. It is designed to help bring
parity between the tax court and Article III courts. And it will
modernize the tax court's pension system. This package is long overdue.
Seventh, we include important incentives for charitable giving. These
include measures to promote land conservation. And these include a
provision to encourage IRA rollovers to charitable organizations.'
I have been working since 2001 to allow ranchers and farmers to claim
a special tax incentive to ensure their valuable production land
preserved for generations of Montanans in the future. In fact, my first
hearing as chairman of the Finance Committee in 2001 was on tax
incentives for land conservation.
There are numerous other provisions in this 900-plus page bill of
which we can all be proud. We have taken on a very difficult and
complex subject and struck the right balance. I just regret that we
could not do it in the proper way and finished the conference. There
were important provisions included in the conference bill that are not
included in the pension bill before us. We all know what they are and
the reasons they are not included. I am sorry that the Senate process
has come to such a sad state.
But after nearly 3 years, several hearings, and countless missed
deadlines, the Senate is about to pass a monumental pension bill. It
will enhance retirement security for millions of Americans.
There are many who deserve thanks for this legislation. I want to
thank

[[Page S8763]]

Chairman Enzi and Senator Kennedy from the Health, Education, Labor and
Pensions Committee. They provided excellent leadership and cooperation.
I want to thank their staffs, many of whom spent sleepless nights
getting this work done. In particular, I thank Diann Howland, David
Thompson, Greg Dean, Portia Wu, Holly Fechner, and Terri Holloway. They
played an important role developing the retirement security provisions
in this bill.
I also to thank my good friend Senator Grassley, the chairman of the
Finance Committee, for his commitment to the retirement security of
Americans. I want to thank some staff members in particular. I
appreciate the cooperation we received from the Republican staff,
especially Kolan Davis, Mark Prater, John O'Neill, Dean Zerbe,
Elizabeth Paris, Chris Javens, Cathy Barre, Anne Freeman, Elizabeth
Goff and Nick Wyatt.
I thank the staff of the Joint Committee on Taxation and Senate
Legislative Counsel for their service, including Jim Fransen, Mark
Mathiesen, Stacey Kern, Mark McGunagle, Carolyn Smith, Patricia
McDermott, Nicole Flax, Roger Colinvaux, Ron Schultz and Gordon Clay.
I also thank my staff for their tireless effort and dedication,
including Russ Sullivan, Pat Heck, Bill Dauster, Jon Selib, Melissa
Mueller, Rebecca Baxter, and Ryan Abraham. I also thank our dedicated
fellows, Stuart Sirkin, Tiffany Smith, Mary Baker, and Tom Louthan.
I especially want to express my sincere gratitude to Judy Miller. Her
extraordinary efforts and contributions on this legislation went over
and above the call of duty. I hold her in the highest esteem. And I
can't thank her enough for her counsel and professionalism.
Finally, I thank our hardworking law clerks and interns: Christal
Edwards, Justin Kraske, Joseph Adams, Tom Duppong, Jonathan Lebe,
Robert Little, Chris Polhemus, Diana Ramos, Tara Rose, John Schiltz,
Thad Seegmiller, Gwen Stoltz, and Matthew Wergin.
This legislation really was a team effort. And the product will do a
lot of good. I am glad that we have finally reached the day where we
can look forward to it soon becoming law.
A fair and good explanation of the bill can be found in The Technical
Explanation of HR 4 prepared by the Joint Committee on
Taxation.
Mr. GRASSLEY. Mr. President, I rise today in support of the Pension 7
Protection Act of 2006.
Every Member of the U.S. Senate should be proud to support this bill.
This is a bill that is about one thing--improving the retirement
security of all Americans.
It been a long road to get here.
There were times, I will tell you, when I wondered if we would ever
get here.
But the fact that we are here today shows that when people stick to a
goal and work together, you can get great things done for the American
people.
I want to commend Chairman Enzi for his outstanding leadership and
his perseverance in leading us here today.
I can tell you that it wasn't an easy job.
I am also very pleased to commend the great work of my colleague and
good friend, Senator Baucus, who was my partner in the Finance
Committee and all the way through conference on this legislation.
We worked together and our staffs worked together.
I wish he could be here with me today to see final passage of this
legislation, but as we all know, he is attending to family matters that
are far more important than anything we could be doing here in the U.S.
Senate.
I also want to thank Senator Kennedy, who worked tirelessly on this
bill and was critical to the bipartisan bill before us.
Why is this a good bill?
I could spend all night talking about all of the positive reforms in
this bill, but don't worry--I am not going to do that at 10 o'clock
here tonight.
But I do want to highlight a few parts of this legislation that will
make Americans more secure in their retirement.
First and foremost, this bill will ensure that American workers can
depend on their pensions. They will know that their pension will
actually be there for them when they retire.
This bill will also protect the PBGC from absorbing billions of
dollars in pension liabilities from bankrupt airlines and give those
airlines' employees an opportunity to receive the full pension they've
been promised.
This bill will protect workers from the next Enron by prohibiting
employers from stuffing company stock in their 401(k) plans.
This bill will make permanent the bipartisan retirement savings
provisions from the 2001 tax relief bill--increased 401(k) and IRA
limits, a permanent low-income Savers' Credit, greater portability of
retirement assets, and a wide array of other pro-savings initiatives.
These provisions are vital to building a ``savers' society,'' and I
am proud that these provisions originated in the Senate Finance
Committee and were included in the 2001 tax bill at the insistence of
myself and Senator Baucus.
This bill will also encourage greater participation in retirement
plans by promoting automatic enrollment arrangements.
These are just a few of the key reforms in this bill. This is
legislation that every Member of the Senate can truly be proud to
support.
I look forward to seeing the President sign it into law.
I would like to incorporate by reference a technical explanation
being prepared by the staff of the Joint Committee on Taxation that
describes the legislative intent with respect to H.R. 4, the Pension
Protection Act of 2006. This document expresses our understanding of
the provisions in the bill, and it will be a useful reference in
understanding the legislation. Chairman Thomas also made a statement on
the floor of the House of Representatives last Friday that he had
requested this technical explanation. The technical explanation will be
published by the staff of the Joint Committee on Taxation as document
number JCX-38-06, Technical Explanation of H.R. 4, The Pension
Protection Act of 2006, as passed by the House on July 28, 2006, and as
considered by the Senate on August 3, 2006.
The PRESIDING OFFICER. All time has expired. Under the previous
order, the question is on the third reading of the bill.
The bill was read the third time.
Mr. KENNEDY. Mr. President, I ask for the yeas and nays.
The PRESIDING OFFICER. Is there a sufficient second? There is a
sufficient second. The bill having been read the third time, the
question is, Shall the bill pass?
The clerk will call the roll.
The assistant legislative clerk called the roll.
Mr. DURBIN. I announce that the Senator from Montana (Mr. Baucus) and
the Senator from Connecticut (Mr. Lieberman) are necessarily absent.
The PRESIDING OFFICER. Are there any other Senators in the Chamber
desiring to vote?
The result was announced--yeas 93, nays 5, as follows:

[Rollcall Vote No. 230 Leg.]

YEAS--93

Akaka
Alexander
Allard
Allen
Bayh
Bennett
Biden
Bingaman
Bond
Brownback
Bunning
Burns
Byrd
Cantwell
Carper
Chafee
Chambliss
Clinton
Cochran
Coleman
Collins
Conrad
Craig
Crapo
Dayton
DeMint
DeWine
Dodd
Dole
Domenici
Dorgan
Durbin
Ensign
Enzi
Feinstein
Frist
Graham
Grassley
Gregg
Hagel
Harkin
Hatch
Hutchison
Inhofe
Inouye
Isakson
Jeffords
Johnson
Kennedy
Kerry
Kohl
Kyl
Landrieu
Lautenberg
Leahy
Levin
Lincoln
Lott
Lugar
Martinez
McCain
McConnell
Menendez
Mikulski
Murkowski
Murray
Nelson (FL)
Nelson (NE)
Obama
Pryor
Reed
Reid
Roberts
Rockefeller
Salazar
Santorum
Sarbanes
Schumer
Sessions
Shelby
Smith
Snowe
Specter
Stabenow
Stevens
Sununu
Talent
Thomas
Thune
Vitter
Voinovich
Warner
Wyden

NAYS--5

Boxer
Burr
Coburn
Cornyn
Feingold

NOT VOTING--2

Baucus
Lieberman

The bill (H.R. 4) was passed.
The PRESIDING OFFICER. The Senator from Wyoming.
Mr. ENZI. Mr. President, I wish to take a moment and do special
thanks

[[Page S8764]]

on the bill that was just passed. I congratulate everybody who has
worked on the bill. It is going to make a difference for at least 145
million people in the United States. It is a very important bill, and
it has been a long road with a lot of twists and a lot of difficulties.
They all got ironed out with a very convincing vote.
I appreciate all the people who participated in this effort and were
able to lend their expertise, their knowledge, their background, and
put together something that will solve the pension difficulties for
this country.
I particularly thank Senator Kennedy, who is the ranking member on my
committee. He worked with me through the drafting in committee, getting
it through committee, then merging it with the Finance Committee, then
getting it through the Senate as a whole, and then serving on the
conference committee to get it all ironed out. He has been delightful
to work with on this issue and other issues that deal with health,
education, labor, as well as the pension bill.
I thank Senators Grassley and Baucus for their extremely hard work.
They brought the finance piece, the tax part together. They are experts
in that area. They work together extremely well and extremely hard.
Without their participation, this bill would not have been possible.
I appreciate everybody's commitment to the private pension system and
their willingness to strive for solutions, not just to look at issues,
and to make the tough decisions we had to make.
I also thank Senators DeWine and Mikulski, again. They started the
hearings on this bill before we ever got to the bill part, the
drafting. They have worked together well on the aging issues of this
country for a long time. They know them backward and forward.
As the bill went through the process, they made sure that specific
instances they were aware of were known, the details were known, and we
could consider ways to solve those as part of an entire package as
opposed to piecemeal. They were extremely cooperative in working on it.
Through the final days of the conference committee, they were engaged
in asking questions and making a difference for this bill. I can't say
enough about Senators DeWine and Mikulski and their extraordinary work.
But there are many people who worked behind the scenes to get this
bill completed. I thank all of my staff for their diligence,
commitment, expertise, and hard work. Since March, many of them have
not had a weekend off. They have spent 12, 16, 18 hours a day working
this bill. That is a huge commitment. I am sure a weight has been
lifted from their backs. Without their expertise, we would not have
been able to do it.
First off I would like to thank my staff director, Katherine McGuire.
Without her, this bill never would be enacted. She had extraordinary
efforts with the committee and then the conference committee and was
able to pull people together to get an agreement. A lot of times, it
meant not a compromise but finding a whole different way of doing it
and engaging people and doing some research to find those other ways
and even relying on some other committees to lend their expertise to do
it. We made it through.
Greg Dean, our general counsel, played a central role in the
investment advice and prohibited transactions bill language. That is a
very specialized part. He helped me on the Banking Committee when I was
subcommittee chairman there and then moved to this committee. He
expertly managed discussions throughout the process, and he brought
various players together time and again to move the bill forward. It is
a very technical area, and it takes someone with that kind of technical
expertise to do it.
I thank Ilyse Schuman, my chief counsel for the committee. She was
able to pull together all the legal issues and was able to talk on that
level with all of the other Senators and Members of the House to pull
this off.
I thank Diann Howland, who is my pension policy director, who bravely
agreed to come back to the Hill and take on her third major pension
reform. In light of this, she brought a fresh perspective to the
complex issues every day and has to be commended for leadership in
getting this bill done. She probably knows more about pensions than
anybody I have ever met and has been a valuable resource, knowing the
history as well as being able to move forward on a new bill and get
some things done that are different from what has been done before but
things that have preserved pensions for people.
David Thompson brought a superb understanding of the intricate and
complex legislation issues to the table and has a unique ability to
explain these difficult issues in relatively few words and also explain
some of the charts that went along with them. Again, I want to thank
Amy Angelier who works as my budget staffer and approps staffer and
policy adviser. She knows the intricacies of how the budget and the
appropriations and the policy all have to fit together, whether it is
pensions or whether it is banking or whether it is the rest of the
issues we cover under Health, Education, Labor and Pensions. She was on
top of each and every aspect of the budget aspects of this bill and
helped guide it to success.

Now, my staff didn't do this alone. My staff worked closely with the
staffs of my other Senate conferees, and those individuals deserve
thanks. They are Michael Myers, Portia Wu, and Holly Fechner of Senator
Kennedy's HELP Committee staff; Kolan Davis, Mark Prater, John O'Neill,
Judy Miller, Stu Sirkin, Russ Sullivan, Pat Heck, on the staff of the
Finance Committee for Senators Grassley and Baucus.
I especially commend Mark Prater for his leadership over the last
week helping us to maneuver through troubled waters. He really knows
the tax issues and knows the interplay between the moving parts in that
whole area and was a tremendous help.
I would also like to thank the nonpartisan legislative counsels and
the staff from the Joint Committee on Taxation for their very long
hours and professionalism. They had to be in with all of the different
times as all of these meetings were going on. Every person with a
pension should join me in thanking Jim Fransen, Stacy Kern, Carolyn
Smith, Patricia McDermott, and Nikole Flax.
Finally, I thank my chief of staff, Flip McConnaughey. He did an
excellent job holding the office together and keeping a focus on
Wyoming's specific issues when the pension conference kicked into full
gear.
So I appreciate everybody's support of this legislation. I hope I
haven't left anybody out. There have been so many people who have been
involved in this, as I said, for just countless hours. It has been an
incredible commitment of time and effort and knowledge, and I really
appreciate that because without the kind of teamwork that we had on
this, we would not have had the kind of approval we have.
I thank the Chair, and I yield the floor.
Mr. SANTORUM. Mr. President.
Mr. FRIST. Mr. President, if I could have one minute.
The PRESIDING OFFICER. The majority leader is recognized.
Mr. FRIST. I just wanted to thank Chairman Enzi for his tremendous
leadership. So many people have been thanked over the course of the
night, and it has been a very productive 4 weeks. But if you look at
the committee chairman, he has probably been the busiest just
overseeing the greatest number of bills, and then on top of that,
having a very challenging conference, as we have all seen. It started
with pensions, and for a period developed into about three or four
other issues. I just wanted to thank him for his work, his tremendous
work, his dedication, his passion, his independent but dedicated
thinking where he listened to everybody and to his staff who have been
tremendous on this particular bill, a very difficult bill, the pensions
bill.
So on behalf of all of us, we thank Chairman Enzi.
Mr. ENZI. I thank the Senator.
Mr. GRASSLEY. Mr. President, after great effort by many people, the
Senate has voted to agree to H.R. 4, the Pension Protection Act of
2006.
Credit must go to the dedicated members of my staff, who spent many
hours over many months working on the issues that ultimately led to
this bill. Kolan Davis, Mark Prater, John

[[Page S8765]]

O'Neill, Dean Zerbe, Elizabeth Paris, Chris Javens, Cathy Barre, Anne
Freeman, Elizabeth Goff, and Nick Wyatt showed great dedication to the
tasks before them.
As is usually the case, the cooperation of Senator Baucus and his
staff was extremely valuable. I particularly want to thank Russ
Sullivan, Patrick Heck, Bill Dauster, Judy Miller, Stuart Sirkin, Jon
Selib, Melissa Mueller, Rebecca Baxter and Ryan Abraham.
I want to show my appreciation towards HELP Committee Chairman Enzi's
staff, including Katherine McGuire, Greg Dean, Diann Howland and David
Thompson. I want to thank Portia Wu and Holly Fechner along with the
rest of HELP Committee Ranking Member Kennedy's staff. I also want to
thank the staff of Finance Committee member conferees on the pension
bill. They include Evan Liddiard, Brendan Dunn, Manny Rossman, Wes
Coulam, Jennifer Perkins, Jen Vesey, Amy Barber, Steve Bailey, and
James Dennis.
I also want to mention Thomas Barthold, the acting chief of staff of
the Joint Committee on Taxation and his staff. The efforts of Carolyn
Smith, Patricia McDermott, and Nicole Flax were invaluable. Roger
Colinvaux, Gordon Clay, and Ron Schultz provided great assistance with
the charitable provisions that are in the bill. I also want to thank
Theresa Pattara, who worked on my staff as a legislative fellow, for
her work on the charitable provisions.
Finally, I want to show my appreciation to the staff of Senate
Legislative Counsel, including Jim Fransen, Mark Mathiesen, Stacey
Kern, and Mark McGunagle.
Mr. President, after great effort by many people, the Senate has
voted to agree to H.R. 4, the Pension Protection Act of 2006.
Credit must go to the dedicated members of my staff, who spent many
hours over many months working on the issues that ultimately led to
this bill. Kolan Davis, Mark Prater, John O'Neill, Dean Zerbe,
Elizabeth Paris, Chris Javens, Cathy Barre, Anne Freeman, Elizabeth
Goff, and Nick Wyatt showed great dedication to the tasks before them.
As is usually the case, the cooperation of Senator Baucus and his
staff was extremely valuable. I particularly want to thank Russ
Sullivan, Patrick Heck, Bill Dauster, Judy Miller, Stuart Sirkin, Jon
Selib, Melissa Mueller, Rebecca Baxter and Ryan Abraham.
I want to show my appreciation towards HELP Committee Chairman Enzi's
staff, including Katherine McGuire, Greg Dean, Diann Howland and David
Thompson. I want to thank Portia Wu and Holly Fechner along with the
rest of HELP Committee Ranking Member Kennedy's staff. I also want to
thank the staff of Finance Committee Member conferees on the pension
bill. They include Evan Liddiard, Brendan Dunn, Manny Rossman, Wes
Coulam, Jennifer Perkins, Jen Vesey, Amy Barber, Steve Bailey, and
James Dennis.
I also want to mention Thomas Barthold, the acting Chief of Staff of
the Joint Committee on Taxation and his staff. The efforts of Carolyn
Smith, Patricia McDermott, and Nicole Flax were invaluable. Roger
Colinvaux [CallIn-Vo], Gordon Clay, and Ron Schultz provided great
assistance with the charitable provisions that are in the bill. I also
want to thank Theresa Pattara, who worked on my staff as a legislative
fellow, for her work on the charitable provisions.
Finally, I want to show my appreciation to the staff of Senate
Legislative Counsel, including Jim Fransen, Mark Mathiesen, Stacey
Kern, and Mark McGunagle.
I yield the floor.

____________________