Boehner & McKeon:  CBO Report Confirms that Comprehensive Pension Reforms Far Stronger than Current Law, Protects Taxpayers from PBGC Bailout

WASHINGTON, D.C. – U.S. House Majority Leader John Boehner (R-OH) and Education & the Workforce Committee Chairman Howard P. “Buck” McKeon (R-CA) today highlighted a report from the Congressional Budget Office (CBO) which confirms that under the bipartisan Pension Protection Act (H.R. 4), employer contributions to their worker pension plans would be significantly higher than under current law.  The Pension Protection Act was passed by the House last Saturday and is pending in the U.S. Senate. 

Because pension contributions are tax deductible, more contributions by employers to worker pension plans actually results in less revenue to the federal government.  The CBO report confirms that – after a brief period when the new, stricter funding requirements are phased-in – the Pension Protection Act would in fact require employers to make significantly higher contributions to pension plans over the 10-year period immediately after the bill takes effect.  Boehner & McKeon issued the following joint statement:

“This CBO report confirms that the pension reforms passed by the House are far stronger than current law because they significantly increase the amount of contributions employers must make to meet their pension promises.  The reasonable increases in premiums paid by employers will also further insulate taxpayers from a possible future bailout of the Pension Benefit Guaranty Corporation.  Ensuring that workers and retirees can continue to count on their hard-earned pension benefits is critically important, and we’re confident our bill will help ensure that those benefits will be there when they retire.”

The CBO report estimates that the bill will lower federal government revenues by about $2.4 billion over 10 years because of increased pension contributions by employers.  As the new, stricter funding rules are phased-in, the bill provides a brief transition period for employers to meet the tougher requirements.  During this time federal revenues will increase in the short-term.  However, from 2011 through 2016 (the last year in which CBO provides an estimate), increased employer pension contributions are expected to lower federal revenues by some $7.2 billion.  This fact confirms that the Pension Protection Act will strengthen pension plan funding and help ensure that the pension benefits promised to workers will be there when they retire.

Providing further proof that the Pension Protection Act would strengthen current law and protect taxpayers from a possible future bailout of the Pension Benefit Guaranty Corporation (PBGC), CBO estimates that the bill would increase premiums paid to the PBGC by $5 billion over 10 years.  The bill, passed by an overwhelming vote of 279-131, reflects the agreement reached between the House and Senate pension reform conferees.  It is currently awaiting action by the Senate.

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Brief Summary of the Bipartisan Pension Protection Act (H.R. 4)

The bipartisan Pension Protection Act (H.R. 4) significantly strengthens antiquated pension laws and ensures the hard-earned benefits of workers and retirees will be protected by:

• Tightening funding requirements so employers make more cash contributions to their worker pension funds;

• Closing loopholes that allow underfunded plans to skip making cash pension payments;

• Prohibiting employers and union leaders from digging the hole even deeper by promising extra benefits if their pension plan is significantly underfunded;

• Strengthening disclosure to give workers and retirees more information about the status of their pension plan;

• Protecting multiemployer pension plans for workers and their employers;

• Restricting “golden parachute” executive compensation arrangements while the retirement security of rank-and-file workers remains at risk;

• Giving workers new access to face-to-face, personally-tailored professional investment advice;

• Providing legal certainty for hybrid pension plans so employer can offer these benefits to their workers; and

• Shielding taxpayers from a possible multi-billion dollar taxpayer bailout of the federal Pension Benefit Guaranty Corporation.