Pension Reforms Needed, Panel Told Times-Picayune (New Orleans) (07/16/03) p.10
Radical changes will be in store for employee pension plans unless Congress takes the initiative to change the way pension liabilities are calculated, business leaders said at a recent hearing. Traditionally, companies have been forced to calculate their pension contributions through a formula that depends upon the interest rate of 30-year Treasury bonds. Congress placed a two-year moratorium on this formula, and companies would like to see a more fair system in place when the moratorium ends. If Congress drops the ball on this issue, businesses will be forced to take several steps, including "limiting employee benefit improvements, reducing capital spending for new plant equipment, or curtailing spending for research and development," said Ashton Phelps Jr., publisher of the New Orleans Times-Picayune. These steps would be necessary because low interest rates and the sagging stock market are forcing companies to allocate more money to cover liabilities. Unions are backing businesses on this issue because they are afraid that businesses will otherwise reduce or eliminate pension plans. Reps. Rob Portman (R-Ohio) and Ben Cardin (D-Md.) have introduced legislation that would allow businesses to set the pension-liability formula against higher-yield corporate bonds instead of 30-year Treasury bonds.