By Janet Krueger, chair
MnSF pension committee

Corporations that offer pensions to employees need to fully fund those promises. The MnSF pension committee applauds Congress for stepping up to the challenge of improving pension funding regulations with the recently passed Pension Protection Act of 2006.  However, despite Congress' good intentions, the Pension Act may have unintended consequences. It was introduced at the 11th hour after a conference committee that had been working to merge two prior bills failed to reach agreement, even after many months of negotiation. One of the reasons negotiations broke down was a last-minute attempt by the House to tie repeal of the estate tax to the pension reform bill. 

Several months ago the MnSF pension committee offered to meet with Rep. John Kline, a co-sponsor of the bill, to discuss our concerns with current ERISA legislation, but he never found time for us on his calendar. Without major amendments to this important legislation, the current trend of frozen pension funds and broken corporate promises is likely to continue.  The "Red Zone" provision in the Act has opened a door that should have been left securely locked; corporations should never be allowed to reduce pension checks of their current retirees! Red Zone amendments allow certain benefits, such as early retirement subsidies, to be eliminated from multi-employer plans with no credit given for the benefit already accrued. Elimination of accrued benefits has, up to now, been forbidden.  

The next pension protection act needs to strike a balance between offering incentives for employers to offer new plans and protecting workers who rely on corporate promises for retirement funding. It needs to ensure that executive pension plans are not enriched while employee plans are cut. The MnSF pension committee has been working on a set of basic pension principles that can help guide legislators on these critical issues. More detailed recommendations will be explained in future articles.