A bill that would allow airlines with severely underfunded pension plans to defer much of their cash contributions for two years cleared the U.S. House of Representatives on Thursday.

The bill would let the airlines, which continue to grapple with steep downtowns, to defer 80 percent of the cash contributions they would otherwise be required to make to bring their plans up to full funding, according to the Washington Post.

The legislation next heads to the Senate, where its fate remains uncertain. The Post reports that two Senate committees have approved pension bills, but the measures differ and the panels have been in negotiations to try to agree on a single version.

Several major airlines have been struggling to fund their pensions:

• United Airlines, the nation's second-largest carrier, last month asked the Internal Revenue Service for approval to stretch out its payments to its underfunded plan.
  
  
• US Airways' pilots' pension was taken over this year by the Pension Benefit Guaranty Corp. after the carrier terminated the plan.
  
  
• Northwest Airlines was granted a waiver last November by the IRS for its 2003 plan, which allowed the carrier to extend its payments over five years instead of 18 months.

The Post observes that the House bill could ultimately come back to bite taxpayers if it is widely granted and companies like United don't return to economic health. The PBGC guarantees that it will pay pension benefits up to certain limits on plans that fail. Allowing companies to put off contributions to their plans could make that payoff much more costly for the agency if the plans simply sink deeper into the hole.

The PBGC itself is currently in deficit, and while it has assets to pay benefits for years, a series of large failures could force it to seek a taxpayer bailout of its own, experts said.

Links

• Washington Post article