[Congressional Record (Bound Edition), Volume 150 (2004), Part 1]
[Senate]
[Pages 419-423]
[From the U.S. Government Publishing Office, www.gpo.gov]




                   PENSION FUNDING EQUITY ACT OF 2003

  The ACTING PRESIDENT pro tempore. Under the previous order, the 
Senate will resume consideration of H.R. 3108, which the clerk will 
report.
  The assistant legislative clerk read as follows:

       A bill (H.R. 3108) to amend the Employee Retirement Income 
     Security Act of 1974 and the Internal Revenue Code of 1986 to 
     temporarily replace the 30-year Treasury rate with a rate 
     based on long-term corporate bonds for certain pension plan 
     funding requirements and other provisions, and for other 
     purposes.

  Pending:

       Grassley amendment No. 2233, of a perfecting nature.
       Kyl amendment No. 2234 (to amendment No. 2233), to limit 
     the liability of the Pension Benefit Guaranty Corporation 
     with respect to a plan for which a reduced deficit 
     contribution is elected.
       Kyl amendment No. 2236 (to amendment No. 2233), to restrict 
     an employer that elected an alternative deficit reduction 
     contribution from applying for a funding waiver.

  The ACTING PRESIDENT pro tempore. Under the previous order, the time 
between now and 12:30 p.m. shall be equally divided between the bill 
managers or their designees.
  The Senator from Arizona.
  Mr. McCAIN. Mr. President, a series of high profile events, including 
the Iowa caucuses, the State of the Union Address, the passage of a 
massive Omnibus appropriations bill, and today's primary in New 
Hampshire have overshadowed our consideration of this measure, and that 
is regrettable.
  The pension bill that is almost sure to pass this Chamber is folly. 
The amendment offered by Senators Grassley, Baucus, Gregg, and Kennedy, 
while addressing the short-term interests of a handful of special 
interests, could further exacerbate a severe pension underfunding 
problem. I might say this measure is recognized as such by the 
administration.
  As an editorial in yesterday's Washington Post noted:

       Not for the first time, Congress has muscled up to an 
     important problem, taken a good look at it and resolved to 
     make it worse.

  I ask unanimous consent that the editorial of Monday, January 26, 
entitled ``Pension Perniciousness'' be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

               [From the Washington Post, Jan. 26, 2004]

                         Pension Perniciousness

       Not for the first time, Congress has muscled up to an 
     imported problem, taken a good long look at it and resolved 
     to make it worse. The problem is the vast hole in the 
     nation's corporate pension schemes, and the perverse rules 
     that helped create them. Congress's solution, championed in 
     the Senate by an alliance of Sens. Charles E. Grassley (R-
     Iowa), Judd Gregg (R-N.H.), Max Baucus (D-Mont.) and Edward 
     M. Kennedy (D-Mass.), is to reward the hole-diggers with what 
     amounts to a $16 billion loan from taxpayers.
       About one in five private-sector workers has a ``defined-
     benefit'' pension, the sort in which an employer guarantees a 
     certain pension to its workers when they retire. To pay for 
     these future benefits, employers are supposed to put 
     sufficient money into a pension fund; the problem is they 
     often don't. The gap between money put aside and money needed 
     in the underfunded pension plans comes to an enormous $350 
     billion. When companies go bust, the Pension Benefit

[[Page 420]]

     Guaranty Corp., the government-backed entity that insures 
     pensions, gets saddled with plans that are in deficit. As a 
     result, the PBGC itself has a deficit of 11.2 billion, which 
     taxpayers may have to plug eventually. As more companies go 
     bust, more of the $350 billion problem out there in the 
     private sector will land on taxpayers' shoulders.
       Why do companies run these pension deficits? Because 
     regulations perversely encourage them to do so. If a firm 
     gives workers a pay raise, it will have to pay for that 
     immediately; if it gives them an increase in their pension, 
     accounting rules allow it to defer the cost into the future. 
     This deferral is especially tempting for cash-strapped 
     companies--which often means ones with a strong chance of 
     going bust. Bethlehem Steel, for example, upped its pension 
     promises and declared bankruptcy three years later. Wobbly 
     companies that underfund their pensions would pay extra 
     insurance premiums if the insurer were a private company. But 
     the PBGC's rules do not allow it to price risk properly, 
     adding a further incentive for shaky companies to hitch a 
     free ride with the others.
       There is, as Congress is demonstrating, no political 
     constituency for fixing this problem. Weak companies with 
     underfunded pensions lobby lawmakers for permission to 
     continue their imprudence; labor leaders from those same 
     firms lobby lawmakers in the same direction; nobody is on the 
     other side. In the deal currently being cooked up, a group of 
     hard-pressed companies led by the steel industry and the 
     airlines will be given a special break for two years; if any 
     of these firms goes bust in the meantime, the public will end 
     up shouldering the deficits, which is why the congressional 
     measure amounts to a taxpayer loan.
       Yet taxpayer support for people in defined-benefit pension 
     plans is a perverse notion. Fully one in two private-sector 
     workers has no company plan whatever. Why should the less 
     fortunate bail out the lucky ones?

  Mr. McCAIN. Mr. President, the editorial goes on to say:

       There is, as Congress is demonstrating, no political 
     constituency for fixing this problem. Weak companies with 
     underfunded pensions lobby lawmakers for permission to 
     continue their imprudence; labor leaders from those same 
     firms lobby lawmakers in the same direction; nobody is on the 
     other side. In the deal currently being cooked up, a group of 
     hard-pressed companies led by the steel industry and the 
     airlines will be given a special break for two years; if any 
     of these firms goes bust in the meantime, the public will end 
     up shouldering the deficits, which is why the congressional 
     measure amounts to a taxpayer loan.
       Yet taxpayer support for people in defined-benefit pension 
     plans is a perverse notion. Fully one in two private-sector 
     workers has no company pension plan whatever. Why should the 
     less fortunate bail out the lucky ones?

  Once again, Congress is poised to give another handout to certain 
airline, steel, and labor interests, regardless of the costs this could 
impose on the employees and retirees of these businesses and ultimately 
on American taxpayers. By allowing these entities to dig their already 
underfunded plans further into debt, we are creating a very real risk 
of defaults. When this occurs, the Federal agency that ensures private 
sector fixed benefit plans, the Pension Benefit Guaranty Corporation, 
or PBGC, will be the first to try to cover this liability. The PBGC 
itself is hugely in deficit and ultimately the American taxpayer is on 
the hook.
  I join the PBGC in opposing this proposal that relieves severely 
underfunded pension funds of the obligation to make deficit reduction 
contributions, or DRCs, to catch up on their deficits. As the PBGC's 
director has said:

       Giving a special break to weak companies with the worst-
     funded plans is a dangerous gamble.

  In a letter to the majority leader last week, the directors of the 
PBGC, Cabinet Secretaries Chao, Snow, and Evans, wrote:

       It would be irresponsible to amend the interest rate bill 
     with any additional provisions that would significantly 
     further exacerbate systemic plan underfunding. If H.R. 3108 
     were amended to do so, we as the PBGC board would recommend 
     that the President veto the legislation.

  The Grassley, Baucus, Gregg, and Kennedy amendment does just that. In 
addition to being fiscally irresponsible, the amendment is grossly 
unfair, once again lavishing Federal largesse on selected industries 
and companies.
  Explaining why the pension system is already in jeopardy, the PBGC 
directors wrote:

       The PBGC reported a record single-employer program deficit 
     of $11.2 billion through the end of 2003, three times larger 
     than any previously recorded deficit. Last year, the General 
     Accounting Office added the PBGC's single-employer pension 
     program to its ``high risk'' Federal program list. In 
     addition, the PBGC remains exposed to $85 billion in pension 
     underfunding in single-employer plans sponsored by 
     financially weak employers. The PBGC also reported the first-
     multiemployer deficit in two decades.

  As the Secretaries explained in another letter sent last November:

       The DRC rules were put into place to guard against the 
     continuing deterioration of funding levels in underfunded 
     plans. These rules were designed to protect participants' 
     accrued benefits and the financial integrity of the pension 
     insurance system. Suspension of the DRC rules would mean a 
     significant further reduction in the resources available to 
     meet the promises made to existing and future retirees. 
     Moreover, suspending DRC rules would jeopardize pension 
     funding in the future, as companies begin to fund their plans 
     less prudently in anticipation of extraordinary relief from 
     their contributions when the plans become underfunded.

  Despite these warnings and a $400 billion gap between what companies 
have contributed to their pension funds and what they owe under their 
plans, why is the Senate ready to give companies whose pensions are 
severely underfunded a pass on their obligations to ensure their 
employees' retirement pay? Because, we are told, economic forces beyond 
anyone's control have come together to create a ``perfect storm.''
  The extraordinary coincidence of low interest rates and a poorly 
performing stock market, proponents claim, has led to big losses and 
created a unique hardship for these companies' pension funds.
  A look at historical contributions suggests, however, that the 
anomalous ``perfect economic weather'' of the last decade is as likely 
an explanation for the current sorry shape of pension plans as the 
``perfect economic storm.'' In the 1990s, record stock market returns 
allowed companies radically to reduce or simply not budget for pension 
contributions. Whereas single-employer pension contributions totaled 
$63 billion between 1980 and 1984, between 1990 and 1995 single-
employer pension contributions amounted to only $26 billion.
  Clearly, today's economic climate is not what it was in the late 
1990s, and I do not question that many companies now face significant 
liabilities to their pension funds. I am not proposing that nothing be 
done, and the base bill, H.R. 3108, provides enormous relief to all 
pension funds by adjusting the way in which contributions and assets 
are calculated so as to reduce companies' obligations to their pension 
funds by $80 billion.
  The Grassley, Baucus, Gregg, and Kennedy amendment, however, would 
give another huge break to a very select group of entities. Why, when 
companies' pension liabilities are so high, should we let a favored few 
walk away from their responsibilities to their employees and retirees? 
Why should the Senate permit these select entities to use money that 
should go to reduce their pension deficits for other purposes, and 
invite them to dig themselves deeper in the hole, especially when it is 
likely that the American taxpayers, many of whom have no pension plans, 
are going to have to bail them out?
  We can talk about economic ``perfect storms,'' interest rates, and 
bull and bear markets, but I hope that people understand that we are 
really talking about the ability of retirees to pay their heating 
bills, buy needed medicine and groceries, and visit their 
grandchildren. Even if, as I suspect the managers and union officials 
who support the amendment cynically calculate, the PBGC will assume 
pension liabilities if plan sponsors default, the benefits that 
participants will get from PBGC will likely be far less than what they 
were counting on receiving.
  There is no doubt that current pensions laws are in desperate need of 
reform, but I don't support DRC relief in a vacuum.
  The amendment contains yet another bailout of certain airlines, steel 
producers, and one apparently very special labor union. DRC relief is 
granted to these entities with no restrictions. Any other entity that 
wants to receive DRC relief has to show that it is able to meet its 
future contributions in a

[[Page 421]]

timely manner. Let me repeat that. Any other entity that wants DRC 
relief must show that it can make its future contributions. Certain 
passenger airlines, steel producers, and one union, however, get a DRC 
break, regardless.
  Let us talk about the airline industry. I was one of the first people 
to support giving financial assistance to this industry in the 
aftermath of September 11. At the onset of the Iraq War, I supported, 
with some reservations, additional temporary relief to the industry. 
But here we are again facing another cry for help and an outstretched 
hand. Let us review the assistance to the airlines over the past few 
years.
  After September 11, Congress provided to the airlines $5 billion in 
direct payments to compensate for losses stemming from the September 11 
attacks; $10 billion in loan guarantees; Federal terrorism insurance; 
$68 million in reimbursements for increased insurance costs; and, 
liability protection against claims arising in connection with the 
September 11 attack.
  Later in 2001, Congress provided that the Federal Government assume 
responsibility for security from the airlines.
  In the legislation that established the Department of Homeland 
Security, Congress extended the terrorism insurance.
  In the Iraq Wartime Supplemental Appropriations Act, Congress 
provided $2.3 billion directly to the airlines in the proportional 
share each carrier has paid the TSA or collected in passenger security 
and air carrier security fees, and suspended security fees from June 1 
through September 30, 2003. This has been estimated to provide a 
savings of $700 million to airlines.
  Congress has appropriated almost $200 million to reimburse airlines 
for hardened cockpit door installation.
  In the FAA reauthorization bill that was just signed into law 
Congress once again extended terrorism insurance--through March 30, 
2008.
  I don't begrudge the airlines the assistance Congress has provided to 
date, and I understand that the industries' health is inextricably 
bound to the well-being of our economy. That said, I won't continue to 
support special aid to airlines without some accountability. We can't 
seem to go more than 6 months without the airline industry asking 
Congress for another handout. I have not doubt that they will be up 
here again soon asking for tax relief, relief from security fee 
obligations, or some other form of aid.
  I urge my colleagues to stand up for workers and taxpayers, and 
against a bailout. Disregarding the interests of their employees and 
members, management and labor have joined in urging Congress to support 
the amendment by Senators Grassley, Baucus, Gregg, and Kennedy, that is 
premised on the hope that companies' currently inadequate pension 
assets will recover, not through contributions, but through rising 
interest rates and a robust stock market. I know the Super Bowl is 
coming up, but this ``Hail Mary'' pass is not the right move. Let us 
spend a little time crafting a true pension reform bill rather than 
simply rushing through a bill that will benefit a handful of coddled 
industries at the risk of workers and taxpayers throughout this 
country.
  If, as I am afraid will happen, however, the amendment providing 
select DRC relief is adopted, and this folly is enacted into law, I 
would expect that companies and unions that avail themselves of this 
relief will freeze the compensation of their highest paid officials at 
the same time. If companies and unions determine that they cannot or 
will not make contributions to their severely underfunded pension plans 
and honor their obligations to their rank and file, they should not 
then turn around and increase the princely sums being paid to their top 
executives. We will be watching.
  To reiterate, the airlines were major recipients of this pending 
amendment, the Grassley-Baucus-Gregg-Kennedy amendment. After September 
11, Congress already provided the airlines $5 billion in direct 
payments to compensate for losses stemming from September 11, $10 
billion in loan guarantees, Federal terrorism insurance, $68 million in 
reimbursement for increased insurance costs, and liability protection 
against claims arising in connection with September 11. Later, Congress 
provided that the Federal Government assume responsibility for security 
for the airlines. The list goes on and on about what we have already 
done for the airlines and now another bailout for the airlines. I 
really strongly object to the selectivity of this amendment and I don't 
know how you rationalize it.
  I thank my colleagues.
  The ACTING PRESIDENT pro tempore. Who yields time?
  The Chair recognizes the Senator from Montana.
  Mr. BAUCUS. Mr. President, is there a time limit?
  The ACTING PRESIDENT pro tempore. There is a time limit. The Senator 
has 9 minutes 42 seconds remaining.
  Mr. BAUCUS. Mr. President, I ask unanimous consent that I have an 
additional 5 minutes. Perhaps it has to be yielded to me by someone.
  Mr. REID. Mr. President, I ask unanimous consent that the request be 
modified so that if someone from the majority wishes to speak for an 
extra 5 minutes after Senator Baucus, they be allowed to do so.
  The ACTING PRESIDENT pro tempore. Without objection, it is so 
ordered.


                      Working For A Better America

  Mr. BAUCUS. Mr. President, I simply wish to say thank you. I rise to 
say thanks to all my colleagues, particularly here in the Senate, my 
friends and family in Montana and across the country, my wife Wanda and 
my son Zeno, my mother, and so many others. Thank you for the best 
wishes, the get-well cards, flowers, phone calls, and e-mails for the 
past few weeks. It is astounding how much we do live in kind of a 
global village and how connected we are. I deeply appreciate the 
concern of so many of my very good friends.
  A few weeks ago, I underwent surgery for a condition known as 
subdural hematoma which was the result of a fall I took in November 
while running in what is called the JFK 50 Miler in Maryland. You might 
ask, Why in the world would someone want to run 50 miles? I sometimes 
ask myself. Nonetheless, it was then that I took a fall, and as a 
consequence of that fall, I had this condition called subdural 
hematoma.
  I must say I am very grateful to the doctors, nurses, and everyone 
who was very helpful. They have encouraged me to take my time. They 
didn't want me to do something stupid or dumb, or to get back to work 
too quickly. Unfortunately, as you well know, we have 24-hour news 
service these days. When I was at home, I had an extremely bad case of 
cabin fever. I could hardly wait to get back to work. The doctor said 
stay home. Wanda said stay home. My friends said stay home. So I stayed 
home for a little while.
  In all seriousness, I am very delighted to be back in this Chamber 
and back in the Senate with all of you, doing what I love; that is, 
representing Montanans and working to make their lives better.
  Following the surgery, I have been asked several times if any of this 
has changed my perspective. Does it give me pause? The answer, 
obviously, is that it does; clearly, it does. It gives you a deeper 
sense of perspective. It is humbling. I am sure the response would be 
different for different people, but for me, it caused me to just think 
a little more clearly and deeply about what we are all about and what 
we are doing.
  I must say I think it has been very helpful. It makes one deeply 
appreciate what we have in life--our family, our friends, including our 
health. It also reinforces one's resolve. It makes you want to keep 
driving, pushing, working to create change and help people. You 
realize, even more, that we have only a finite amount of time here to 
get our work done. It subtly reminds you about the ever-daunting 
deadline that time imposes on all of us, the sense we have to get as 
much done as we can in the short time we have been given so as not to 
waste one day, an hour, or a minute.

[[Page 422]]

  It also reinforces what my Indian friends taught me so long ago in 
Montana--that we have a moral obligation to leave this place in as good 
or better shape than we found it, to pass on to our kids and our 
grandkids an America as great as our parents bestowed upon us.
  It is written in Scripture that much is expected from those to whom 
much has been given. As Americans--particularly as Members of the 
Senate--we have been given an awful lot. We have a lot of work ahead of 
us.
  That is why it is imperative we look to the example of leadership set 
by so many here in this Chamber--courageous yet humble leaders such as 
my friend and mentor, former majority leader of the U.S. Senate, 
Ambassador Mike Mansfield. I don't know of a more gentle, a more 
strong, or, in a sense, a more profound man than Mike Mansfield. He is 
a man to whom we should all look up for leadership and try to 
exemplify, although we may never get there, as much as possible.
  We have a big year ahead of us. For my part, I will continue to work 
together with all of you--my distinguished colleagues on both sides of 
the aisle--to make America an even better place to live, to work, and 
to raise a family.
  I look forward to passing a new transportation bill that will create 
jobs and ensure safety on our Nation's roads.
  I look forward to reforming our pension system to ensure that workers 
and their families' life savings are protected.
  I look forward to working with my good friend, chairman of the 
Finance Committee, Senator Chuck Grassley, to pass our JOBS bill, 
otherwise known as FSC/ETI reform, and to give a boost to domestic 
manufacturing and create jobs.
  I look forward to working together to boost agriculture in our 
country and get international markets open to U.S. beef as soon as 
possible.
  I look forward to cracking down on tax cheats. There are too many 
people who cheat Americans by breaking the law in our income tax code. 
I look forward to making a greater investment in education, something 
we do not do enough of in this Chamber.
  I look forward to working together to curb the rising number of 
uninsured Americans. I was lucky. I had surgery performed by excellent 
people. I am fortunate enough to have good health insurance coverage. A 
lot of Americans do not. An event like this reminds us that the 43.6 
million Americans who go without health insurance must have it. We in 
Congress, who do have the security of good health insurance, must do 
much more to assure that more Americans and soon all Americans have 
health insurance. We are not doing enough.
  We tend to get all involved in lots of peripheral issues and not 
spend enough time on the core issues. I daresay that health insurance 
inadequacy, the cost of health insurance, is probably the first, 
second, and third most important issue facing Americans. We do not 
spend enough time on it.
  We have an aggressive agenda before the Senate. It is up to us to 
fulfill the promises we made, set aside partisan differences, and work 
together--not talk about it but do it. Do what is right for America. 
Move our country forward. It is up to us to lead. People want Congress 
to do what is right. Most Americans are not partisan. They are not very 
rightwing or very leftwing. Most Americans are in the big middle. They 
want the Congress to do what is right. It is up to us to provide that 
leadership.
  I say thank you. I deeply appreciate my colleagues in the Senate. It 
is my distinct honor and privilege to serve here.
  I also will address the pension bill and the pending managers' 
amendment that will be before the Senate later today. First, I thank 
the chairman of the committee, Senator Grassley, and also Senator 
Kennedy, who gave some very kind remarks a few days ago, and Chairman 
Gregg for their collective persistence, determination, and their 
willingness to work together. Here is a good example of the two 
committees, the leadership from both committees on both sides of the 
aisle, working together to craft a very important piece of legislation. 
The amendment before the Senate is truly bipartisan. I also thank again 
Senator Kennedy for managing the bill in my absence and I deeply 
appreciate his kind words on the floor a few days ago.
  Now let me turn back to the pension bill and the managers' amendment. 
This legislation helps address the retirement security of literally 
millions of workers and retirees. It seeks to support the pension 
benefits they have earned and upon which they rely for their economic 
well-being. It is an important step to help preserve the embattled 
defined pension benefit plan. And it is embattled.
  The security of our pension system is at stake. Daily we hear 
employers are dropping out of the defined benefit plan system. The 
reasons are simple. The defined benefit plans require a commitment on 
the part of the employer. This is a commitment many employers are no 
longer willing to make or can afford to make.
  A recent survey found that 15 percent of the defined benefit plan 
sponsors have frozen plans since January 1, 2001. That means these 
plans will no longer allow workers to earn more benefits. Another 6 
percent are actively considering freezing the defined benefit plans. 
This could mean that more than one in five employees earning a 
guaranteed retirement benefit will not earn future benefits.
  We need to ask what caused this and what can we do. According to the 
survey, the most common reason for freezing the defined benefit plans 
is the cost--not just the total cost but also the volatility and 
unpredictability of the cost. It is one thing to have an obligation you 
can put in the budget projections. Businessmen love to know what is 
going on. We understand that. Then business can build a plan to meet 
certain obligations. It is another thing to have costs that vary wildly 
from year to year. You do your best to project these costs, but it is 
difficult. Having cash available for investment in growth and expansion 
is critical to a successful business. Fluctuating minimum contribution 
requirements make good business plans very difficult.
  In the worst of times, a large unexpected contribution requirement 
can spell disaster. It can bankrupt an enterprise. That enterprise has 
to turn the unfunded pension liability over to the Pension Benefit 
Guaranty Corporation, known as the PBGC.
  Last September, the Finance Committee marked up the National Employee 
Savings and Trust Equity Guarantee Act, a bill that includes a set of 
long-term funding changes to address the situation. That bill provides 
temporary relief for companies that are suffering. It provides a 
temporary substitute for the 30-year Treasury rate, similar to the 
provision in the amendment before the Senate today. It also provides 
temporary relief for the deficit reduction contribution for companies 
that were well funded in the year 2000. These provisions were designed 
to give companies relief from large contribution cash demands.
  The Finance Committee bill includes provisions to allow companies to 
put more money into their plans when times are good, and the bill 
provides for long-term replacement of the 30-year Treasury rate with a 
yield curve, which is a conservative basis for liability measurement.
  We need to look at long-term reforms such as those included in the 
Finance Committee bill. I hope we will do that later this year.
  We have an immediate, more pressing need to deal with the problems we 
face today: low interest rates, the effects of recent market downturns, 
and the resulting high contribution requirements that companies will 
face if we do not take action today. Normally, low interest rates are 
good, but in this case they tend to exacerbate the problem with respect 
to defined benefit guarantee plans. Increased payments would have to be 
made as early as April 15. We must act quickly to provide the needed 
relief.
  The pending managers' amendment has three important components to 
deal with the immediate problems we

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face. First, it substitutes the long-term corporate bond rate with a 
30-year Treasury rate. Second, it provides partial relief from deficit 
reduction contributions from companies that did not make a deficit 
reduction contribution in 2000. And it provides temporary relief from 
experience loss amortization payments for multiemployer plans.
  These are not long-term solutions. They will provide short-term 
relief from contribution volatility for employers who have been 
generous enough to provide defined benefit programs for their 
employees.
  The more important factor in the health of the defined benefit system 
and of the PBGC, which guarantees the benefits of the system, is the 
health of the employers in response to the plans. The short-term relief 
provisions will help. The more employers who stay in the system, the 
healthier those employers and the stronger the system.
  I look forward to working with my colleagues to come up with a long-
term solution. But the provisions in this bill cannot wait. The 
retirement security of millions of workers hangs in the balance. I urge 
my colleagues to support this amendment.

                          ____________________