By By a vote of 279-131, the House of Representatives last week passed H.R. 4, the Pension Protection Act of 2006, to help fix outdated pension rules that affect more than 44 million Americans who rely on pension plans, as well as the many more who are saving for their retirement through IRAs, 401(k)s, and other defined contribution plans.
The pension reform bill contains a variety of provisions to strengthen the funding rules for pension plans and provide economic security that is so desperately needed. It seeks to ensure employers properly and adequately fund their pension plans to avoid a potential multi-billion dollar taxpayer buyout of the Pension Benefit Guaranty Corporation (PBGC).
Under the bill, employers will have to provide meaningful disclosure to workers regarding the status of their pension plan. Most pension plans would be required to be 100% funded-90% is the current requirement-and if not, they will be required to fully fund their plans within seven years.
High-profile corporate bankruptcies and pension plan terminations have become an all too common occurrence over the past decade.
United Airlines, US Airways, and Bethlehem Steel are just three recent examples of large companies cancelling their pension plans due to pending bankruptcies.
Who can forget the torrent of reports starting in 2001 of executives running their companies into bankruptcy while lining their own pockets? The fraud at companies such as Enron, WorldCom, Inc., Tyco, and HealthSouth cost thousands of jobs and billions of dollars in pensions and retirement savings.
In 2000, Enron reported earnings of more than $100 billion, but just a year later, the company collapsed costing not only jobs but the pensions of more than 4,000 workers.
Some investors lost their entire life savings in what became the largest bankruptcy in American history. Top Enron executives were later found guilty of fraudulent accounting practices and trying to conceal millions of dollars of the company's debt.
WorldCom, Inc. is another prime example. One of the most powerful telecommunications companies in the world was found to have inflated its assets by 11 billion dollars.
Currently, when a company can no longer provide pensions the burden can be laid on PBGC; however, this is not a quick fix considering the company's $23 billion deficit.
Also, the gap between PBGC's pension plan promises and ability to pay has grown to $450 billion. This legislation will help to remedy these problems by requiring companies to close these gaps within seven years.
Sadly, fewer and fewer Americans are saving for their retirement either through IRAs, 401(k)s, or other saving plans. The Pension Protection Act will encourage workers to save by allowing companies to automatically enroll employees into a company 401(k) plan as well as broaden the rules under which mutual fund companies can offer workers advice on their 401(k) and IRA investment options.
U.S. Rep. Jo Bonner represents Alabama in the U.S. House of Representatives.