News

Thursday April 8, 2004 3:37 pm ET
By Susan Cornwell

WASHINGTON, April 8 (Reuters) - Legislation expected to save U.S. companies over $80 billion in pension contributions over two years was passed on Thursday by the U.S. Congress and now goes to President George W. Bush for his expected signature into law.

Final action on the bill came from the Senate on a vote of 78 to 19. The measure had already passed the House of Representatives, and supporters in the Senate were in a hurry to approve it in time to give a break to companies that have to make quarterly pension payments on April 15.

Businesses lobbied hard for the bill, which would provide about $80 billion in pension accounting relief through the end of 2005 for some 31,000 companies with traditional "defined benefit" pension plans. These cover about 35 million workers.

None of the aid would come from the government; instead, it would come through replacing a formula for calculating pension contributions. Many traditional pension plans are underfunded and companies are struggling to keep up with the payments.

There would also be $1.6 billion in extra aid for a handful of steel companies and major U.S. commercial airlines, such as bankrupt United Airlines, a unit of UAL Corp.

And the bill would help a small percentage of the 1,600 pensions sponsored by more than one employer by letting them stretch out payments to plans. These plans cover over 9 million mostly unionized workers in the trucking and construction industries.

The legislation is intended as a temporary measure to help companies keep their pension plans afloat while Congress works on longer-term reforms.

"This is the ultimate jobs bill," said Sen. Judd Gregg, a New Hampshire Republican. Without the measure, companies will be forced to take money they would have otherwise put into job creation and put it in their pension plans instead, he said.

"If we don't do it (pass the bill), we will end up losing jobs, we will end up making ourselves less competitive, with less investment, and fewer people in our country working," Gregg said.

But critics complained that most of the aid to plans sponsored by more than one employer had been deleted, under the threat of a veto from the White House.

As a result, said Massachusetts Democrat Sen. Edward Kennedy, less than 4 percent of the multi-employer plans would qualify for assistance under the bill.

"The White House decided it was going to be punitive," Kennedy charged. "(They) said, 'we are not going to do it because so many of these are union members, and we don't like unions.'"

The Big Three automakers had written to senators urging a "yes" vote, saying it would help them continue to offer pension benefits to employees. They noted that the United Auto Workers supported the bill.

The letter was signed by executives from DaimlerChrysler, Ford Motor Co., and General Motors Corp.

The steel aid in the bill would go to Ispat Inland Inc., a unit of London-based Ispat International N.V.; AK Steel Holding Corp. of Middletown, Ohio and iron ore company Cleveland-Cliffs, congressional aides said.