Compensation Management News
State:
Category
Topic *Please pick a topic
Free Special Resources
Get Your
FREE Special Report. Download Any One Of These
FREE Special Resources, Instantly!
Featured Special Report
Claim Your Free
Cost Per Hire Calculator
This handy calculator lets you plug in your expenses for recruiting, benefits, salaries, and more.
Graphs automatically generate to show you your annual cost per hire and a breakdown of where you are spending the most money.
Download Now!
April 11, 2002
Critics: Pension Bill Favors the Highly Paid
RatFor a Limited Time receive a
FREE Compensation Market Analysis Report! Find out how much you should be paying to attract and retain the best applicants and employees, with
customized information for your industry, location, and job.
Get Your Report Now!
Some of the bill's provisions would allow companies to reduce the number of employees covered by pensions and give proportionately larger pension benefits to the most highly paid executives, these experts say.
The measure, expected to be combined into another bill on the House floor today, is the first inspired by Enron's collapse to make it to a full vote of either chamber of Congress.
The Times says the legislation's fine print highlights how congressional efforts at "reform" - as the battle over campaign finance also demonstrated - can sow new concerns.
Current rules, dating to a 1986 pension law, require that to qualify for favorable tax status, pension plans must meet very specific tests for the balance between benefits for lower-paid and higher-paid workers.
But a provision tucked into the House bill during a Ways and Means Committee hearing last month would scale back those requirements, allowing companies to test their plans against more subjective standards and giving the Treasury Department authority to approve plans that do not meet today's tests.
The provision, which some pension law experts said would significantly weaken employee protections, was championed by business interests and supported by Rep. Bill Thomas, the California Republican who is chairman of the committee.
The provision was also supported by the bill's chief sponsors, Reps. Rob Portman, R-Ohio, and Benjamin L. Cardin, D-Maryland.
"This provision is an outrage," said Daniel Halperin, a pension law expert at Harvard Law School and a Treasury official during the Carter administration. The language in the bill, he said, is an attempt to "basically gut" current rules intended to ensure that companies offer roughly proportional retirement plans to highly paid and more moderately compensated workers.
Portman said that such criticism "way overstates" the effect that the provisions would have, and he predicted that the language would actually encourage small-business owners to offer retirement plans. The provisions, he added, "will be used only in rare instances, but it's considered important by companies which have a fair plan, but when you go through the very specific and very technical mechanical tests, they still don't meet the so-called nondiscrimination rules," Portman said.
Business groups say the provision would go a long way toward eliminating inflexible tests for pension plans that make it difficult for some good plans to qualify for tax-favored treatment. They also note that the bill gives discretion to the Treasury Department to approve plans that otherwise do not pass muster.
"I'd certainly be surprised to see the Treasury Department start to bless plans that anyone believes are unfair," said James Delaplane, vice president for retirement policy at the American Benefits Council, which represents large employers. Many retirement plans that clearly treat all employees fairly have faced regulatory concerns over such matters as provisions governing early retirement, Delaplane said.
To view the New York Times story, click here. Registration required.
Participate in this week's HR.BLR.com poll and discussion!