President Bush signed into law on Saturday a change in the formula that 31,000
U.S. companies must follow to fund traditional, defined-benefit pension plans—a
change that will save them more than $80 billion in contributions over the next
two years.
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The Reuters news agency reports that businesses had lobbied hard for the legislation.
The weak stock market of the last few years, low interest rates, and shrinking
profits—at least for some—combined to make it increasingly difficult
to keep with the required payments under the old formula.
According to The New York Times, the legislation ends a requirement that contributions
be tied to interest rates on 30-year Treasury bonds. Now, contributions will
be tied to a rate based on a composite of long-term corporate bonds for 2004
and 2005.
The formula change is intended as a temporary measure to help keep plans afloat
while Congress works on longer-term pension reform, according to Reuters. It
takes effect just in time for the companies' next round of scheduled payments,
on Thursday.
The legislation also contains an extra $1.6 billion in relief for some struggling
steel companies and airlines, including bankrupt United Airlines. They will
receive waivers on pension-fund payments.
Overall, the legislation affects about 35 million workers.
Reuters reports that some Democrats in Congress were angered that the legislation
did not apply to plans sponsored by more than one employer. Such plans cover
mostly union workers in the construction and trucking industries.
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