The House passed a measure yesterday aimed at strengthening the United States' system of company pensions, but many members said they considered the bill flawed and hoped to amend it before final passage.
The continued controversy over the bill suggests that it still faces considerable turbulence when lawmakers try to work out the differences between the House and Senate versions.
Moreover, the White House warned yesterday that President Bush would veto the bill unless it went further in shoring up the creaky pension system. The administration is seeking legislation that would require companies to put more money behind their pension promises than current law requires, and to pay adequate premiums to the Pension Benefit Guaranty Corporation, the government agency that insures traditional pension plans.
"The president's senior advisers will recommend a veto" if the House and Senate end up with a bill no stronger than the law they have been trying to amend, the White House said in a statement. The Bush administration has said it considers pension reform a major legislative priority; it issued a similar warning when the Senate passed its version in November.
Negotiations between the House and Senate are not expected to take place until early next year.
The Republican-backed pension bill, approved yesterday by a 294-132 vote, would require companies to close shortfalls in their pension funds within seven years, and even more quickly in cases of very large financing gaps.
The House bill, like the Senate legislation, contains other provisions that would appear to satisfy, at least in part, the Bush administration's calls for tougher pension rules.
But the White House has called for applying new rules more quickly and in a purer form than either the House or Senate bills, which contain many compromises.
One of the biggest differences between the House bill and its Senate counterpart lies in its lack of any special relief for airlines. The major airlines have been struggling with their big pension plans, and Northwest and Delta, both in bankruptcy proceedings, have fallen out of compliance with the existing law.
Those two airlines have little hope of keeping their plans going unless Congress gives them a break on their pension contributions. But the administration has said it is opposed to pension relief for airlines, or for any other single industry or company.
Several members of Congress, from both parties, focused on the question of airline pensions yesterday, saying they wanted to incorporate relief for the airlines when the differences between the House and Senate bills were worked out.
"Let's give the airlines a fighting chance," said Representative David Scott, a Georgia Democrat, who said many of his constituents were counting on Delta Air Lines for their pensions and retiree medical benefits. He said he saw many imperfections in the pension bill but urged passage anyway so that it could go to a conference committee with the Senate, which gives airlines 20 years to shore up their pensions.
Republicans said the bill was necessary to prevent further erosion in the use of traditional corporate pensions. "Without reform," said Representative Tom Price, a Georgia Republican, "the system may very well collapse under mounting deficits."
But many Democrats complained that the bill, rather than supporting traditional pensions that provide a guaranteed income in retirement, would discourage companies from offering pensions in the future.
"Without question, this bill will dismantle pensions in the same way they've tried to dismantle Social Security," said Representative Earl Pomeroy, a North Dakota Democrat.
The House measure would push companies to try to keep a full dollar set aside in trust for every dollar of benefits they have promised to their employees. Under the current law, companies can essentially call their pension plans fully funded when they have just 90 cents set aside for every dollar they owe.
Moreover, any time a new deficit appeared in a company's pension fund - something that routinely happens when benefits are increased or investment returns weaken - the House bill would require the company to put in enough money to close it again within seven years.
Under the current law, companies have as many as 30 years to close such gaps.
The bill would also bar companies from increasing benefits at all if their plans are very weak. It would require companies to give their workers more detailed and up-to-date information about the health of their pension plans.
In addition, the House bill would require companies to pay higher premiums to the federal pension guarantor, and would index the premiums to wage inflation in the future. The current premium rate, $19 per participant, has been in place since 1994 and does not come close to covering the value of the insurance provided.
The bill would also reward companies that have healthier pension plans by giving them five years to phase in the rate increase. Companies with weak pension plans would have to start paying the higher premiums within three years.
But critics cited what they saw as its failure to halt abuses like "revolving-door bankruptcies," age discrimination in pensions and generous golden parachutes for executives of companies that demand concessions from rank-and-file workers.
The House bill also contains a provision that would make it easier for hedge funds to handle pension money without being subject to the legal safeguards that cover most financial institutions.
Representative John A. Boehner, Republican from Ohio, who has been a leader in drafting the House pension bill, said he was confused by some of the criticism yesterday. He argued that the bill struck a good balance between being too lax or too tough. He said he was committed to trying to solve some outstanding issues, like the airline problems, in a House-Senate conference.