News 

Representative Miller Releases PBGC Analysis That Shows That GOP Proposals Would Worsen Private Pension Crisis
 

Monday, July 24, 2006

 

WASHINGTON, DC -- All three of the proposals now being considered by Republican lawmakers to change the federal laws that govern the nation’s private pension system would actually worsen the pension crisis, according to a government analysis released today by U.S. Rep. George Miller (D-CA), the senior Democrat on the House Education and the Workforce Committee.

Republican negotiators said last week that they expect to have final legislation to change the nation’s pension laws ready this week. The U.S. is in the midst of a private pension crisis: increasing numbers of employers are dumping their traditional pension plans in favor of 401(k) or similar plans, which generally provide weaker benefits for retirees than do traditional plans. Meanwhile, pension plan underfunding – that is, the difference between what employers across the U.S. must pay out in retirement benefits and the amount of funds they actually have available to meet those obligations – has reached a record high of $450 billion. And the federal pension insurer, the Pension Benefit Guaranty Corporation, is running a deficit of $23 billion.

Yet the analysis released by Miller today – prepared by the PBGC – shows that all of the Republican proposals now being discussed by negotiators would actually reduce the contributions that companies must pay into their pension plans and increase the PBGC’s deficit. Miller also said that the GOP proposals would encourage more companies to dump their pension plans faster.

“This pension reform is the worst of every possible world,” said Miller. “By driving up the PBGC’s deficit, it will increase the risk of an eventual taxpayer bailout of that agency. By increasing pension underfunding, it will put more Americans’ pension benefits at risk. And to top it all off, it will encourage more companies to drop their traditional pension plans altogether, stripping millions of Americans of a secure retirement. It is amazing to me that Republican leaders have spent seven months negotiating with each other over this bill and still can’t get it right. These changes could be devastating for American workers and retirees.”

The PBGC analysis shows that the private pension system would be better of if Congress did nothing than it would be if Congress adopted one of the pension proposals now under discussion. If Congress simply made no changes to the law, then U.S. companies would be required to pay $1.24 trillion into their pension plans over the next ten years, and the PBGC’s deficit would increase by an estimated $12.8 billion over the same time period. Here’s how that compares with each of the three options now under discussion:

  • The first GOP proposal would require companies to contribute $1.23 trillion to their plans over the next ten years and would increase the PBGC’s deficit by $14.9 billion.
  • The second GOP proposal would require companies to contribute $1.22 trillion to their plans over the next ten years and would increase the PBGC’s deficit by $15 billion.
  • The third GOP proposal would require companies to contribute $1.21 trillion to their plans over the next ten years and would increase the PBGC’s deficit by $15.2 billion.  

Current law would require companies to calculate their long-term liabilities using a discount rate based upon Treasury bills. Two independent agencies – the Congressional Budget Office and the Government Accountability Office – say that the Treasury bill rate is the best measure for calculating long-term pension liabilities.

“Congress has a responsibility to act to preserve the private pension system and save the retirement nest eggs of Americans who have worked a lifetime to build a secure retirement for themselves,” said Miller. “But the proposals under discussion now will worsen the very problem that Congress is supposed to be fixing. These proposals are clearly the wrong way to go.”

The PBGC had prepared a similar analysis of separate House and Senate pension bills in December 2005. Miller said today that by now Republicans should have come up with legislation that truly addressed the pension crisis in light of the fact that they had known for months that their proposals would worsen the crisis. Miller said that any pension reform legislation should prevent companies from dumping their employees’ pension plans without first exhausting other alternatives.

Click here to view the analysis released by Miller today.

###


Get Acrobat Reader We post many documents in .pdf format. Please visit Adobe to download the free viewer if you do not already have this capability.


Return to Committee Home Page  |  Return to Miller Home Page

2101 Rayburn House Office Building, Washington, D.C. 20515
Phone: (202) 225-3725 FOR IMMEDIATE RELEASE
CONTACT: Tom Kiley or Rachel Racusen