ERIC    Jul 21, 2003

ERIC Proposal in Portman-Cardin Bill Advances but Political Dispute Clouds Future

SUMMARY: Following an extraordinary lobbying effort by ERIC Members, the House Ways and Means Committee this morning reported a modified Portman-Cardin bill (H.R.1776) that substantially advanced the ERIC pension funding position first unveiled in August of 2002 over a contrary position put forward by the Administration. The new bill replaces the 30-year Treasury rate with a corporate bond rate for 2004, 2005, and 2006 for pension funding and variable rate premium purposes. In 2006 it takes a first step toward coordinating the lump sum rate with the funding rate. The Administration had proposed a corporate rate for 2004 and 2005 followed by a phase-in to a yield curve. The new bill makes no mention of use of a yield curve in the future. The bill also contains several other provisions of interest to ERIC members (outlined below).

Committee action, however, erupted in a bitter political dispute over the rights of the majority and minority and Democratic objections to moving quickly on a bill they had had only a short time to review. In the course of the dispute, Democratic committee members left the committee room to a private room nearby, acrimonious exchanges occurred between certain committee members, and police were summoned to the Ways and Means Committee. This was followed by an extraordinary debate on the House floor on a motion by the Democratic Minority Leader to disapprove of the actions of Ways and Means Committee Chairman Bill Thomas's (R-CA) in conducting the committee meeting and to rescind the Committee's action to report H.R.1776. The motion was tabled 170-143 by a straight party line vote.

During the debate, Democratic members did not voice objections to the content of the bill but focused on process, including reporting the bill from the Committee while no Democrats were in the room. Thus, the bill's future is very uncertain, and plans to pass the bill in the full House next week have been put on hold.

KEY PROVISIONS OF BILL: The long-awaited new bill reduces the $230 billion H.R.1776 to a bill of $50 billion over ten years. A preliminary review of the bill follows.

Provisions of interest to major employers in what has been dubbed "Portman-Cardin lite" include:


Change in Form of Plan: Under certain conditions an employer can change the form of a plan.

Provisions which appear to have been substantially modified from the original bill include:

Provisions in H.R.1776 excluded from the new bill include:

A FULL DESCRIPTION OF THE NEW BILL HAS BEEN PUBLISHED BY THE JOINT COMMITTEE ON TAXATION AT
http://www.house.gov/jct/x-69-03.pdf

For questions or comments, contact:
Janice Gregory, Vice President
jgregory@eric.org






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