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Washington, DC-- As a member of the Education and Workforce Committee, Congressman David Wu participated in a lengthy, vigorous debate over the past two days focused on reforming employer-sponsored defined benefit pension plans. Congressman Wu introduced two amendments to bring equity and stability to H.R. 2830, a pension funding reform proposal introduced last week by Rep. John Boehner (OH), Chairman of the House Education and Workforce Committee. Reform proposals discussed in today's debate are in response to the thousands of jobs and billions of dollars of retirement savings lost in the wake of stock market crashes and major corporate bankruptcies in recent years.
Congressman Wu recognizes the vast majority of companies have diligently paid into their pension plans and have consistently worked to ensure their workers are provided for in their retirement years. However, Americans have witnessed first hand, through family members or neighbors, one of the realities of a downturn in the economy: the instability of employer-sponsored pension plans. Hard working Americans ultimately pay the price and many have no alternative resources.
Congressman Wu is working in the committee to ensure this issue is appropriately addressed and pension plans continue to be a reliable source of retirement income. He believes H.R. 2830 is a good start, but is concerned that the legislation creates an unfair system for American workers, the very people pension reform is supposed to protect. Also, it unnecessarily adds complexity to pension calculations which could discourage employers from offering such benefit plans.
Rather, Congressman Wu is working diligently for reforms that strengthen the reliability of the defined pension benefit system without further complicating pension benefit calculations. During debate, Congressman Wu introduced two amendments. The first would have eliminated the unfair benefit restrictions in H.R. 2830 that reduce workers' retirement security and the second would have replaced the modified yield curve with the more stable composite corporate bond rate for the purposes of calculating benefits.
As introduced, H.R. 2830 eliminates plant shutdown protections, unfairly limits benefit increases, overly restricts lump sum payments and requires companies to subtract the value of credit balances from pension plan assets for the purposes of determining whether the plan is subject to benefit restrictions. In brief, Congressman Wu's amendment reverses these inequities by:
- allowing shutdown benefits;
- restoring equity by requiring that if the rank and file workers' plan is negatively affected, then the managers' plan is similarly affected;
- exempting wage and salary increases from the benefit restrictions imposed on underfunded plans;
- exempting restrictions on lump sum distributions for individuals who are within five years of retirement age;
- changing the lump sum distribution interest rate to a more fair rate for workers and;
- removing the provision that credit balances must be deducted from assets in determining funding target attainment.
Congressman Wu's second amendment specifically addresses the modified yield curve, the tool H.R. 2830 requires companies to use in determining future pension obligations. Congressman Wu believes the modified yield curve will unnecessarily add complexity and volatility to pension calculations.
Congressman Wu's amendment would have replaced the modified yield curve with a composite corporate bond rate, the present tool companies use in determining their future pension obligations. The rate is working well, is transparent, free from manipulation and easy to enforce. Also, it is easily understood by plan sponsors.
Unfortunately, for Oregonians, their businesses and Americans alike, Congressman Wu's amendments did not pass. Congressman Wu's workers' benefits amendment failed along a party line vote of 20 to 25 and his second amendment, while it had the support of Democratic committee members, failed by voice vote.
H.R. 2830 will now move to the House Committee on Ways and Means which shares jurisdiction over pension plans with the House Committee on Education and Workforce.
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