By a vote of 279 to 131, the House late on July 28, 2006, passed the Pension Protection Bill of 2006 (HR 4). The bill would tighten controls on companies that fall behind in meeting funding requirements for defined benefit plans, providing generally for a seven-year catch-up requirement. Special breaks are provided to the airline industry and defense contractors. The legislation also promotes alternative retirement vehicles by permitting automatic investment in 401(k) plans and sanctioning certain hybrid defined benefit plans such as cash balance plans. Any company with a defined benefit plan that is less than 80 percent funded or in danger of bankruptcy would have restrictions imposed on increases in benefits and executive compensation. The legislation appears to do little to stem the continuing decline in the number of companies offering defined benefit plans.
The legislation also would permit more latitude in providing investment advice to 401(k) account holders. Other provisions seek to strengthen the Pension Benefit Guaranty Corporation and expand disclosure requirements.
The huge 900 page bill would cost $73 billion over ten years. Although both the House and Senate had previously passed pension legislation that had been in conference committee for many months, this legislation was passed after those conference negotiations broke down and without a package of expired tax cut extenders that the conference committee negotiators has been planning to insert in the pension package. The legislation is likely to be taken up by the Senate next week, but its fate is not clear. Without conference committee protection or budget protection, the legislation may be subject to amendment which would push it back into a conference committee with the House.
