Stung by outsize investment losses, some of the nation’s biggest companies are pushing Congress to roll back rules requiring them to put more money into their pension funds, just two years after President Bush signed a law meant to strengthen the pension system.
The Pension Protection Act of 2006 was enacted in response to a string of big corporate bankruptcies and pension failures at the beginning of this decade. Federal law requires companies to put money into their pension plans on a regular schedule, but the bankruptcies revealed gaping loopholes that were allowing companies to go for years without adding money. The 2006 amendments were intended to close some of the loopholes and make the pension system less risky. Until this year’s market disaster, most company pension funds had been making great gains.
The Pension Rights Center, an advocacy group in Washington, said the financial crisis had clearly shown that defined-benefit pensions were superior to 401(k) plans, which make participants bear all the market risk. The center said it would make sense to encourage companies to keep offering pensions by giving them a break on their contributions — but only if they agreed not to freeze their plans. In a pension freeze, employees keep the benefits they have earned, but stop building up new benefits with additional years of work. Even a frozen pension fund still needs contributions, albeit smaller ones, and the companies seeking relief include those with both frozen and active plans.
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