Employment–based pensions are an essential component of a strong national retirement system for America’s working families. But the Bush Administration’s pension proposal, explored today in a House joint subcommittee hearing, could derail secure pension plans for workers. Defined benefit plans remain the soundest vehicle for building and safeguarding retirement income security, as they are federally insured and provide a guaranteed monthly lifetime benefit. However, these plans are now facing excessive funding pressure under the Administration proposal that could unnecessarily jeopardize their stability.

The proposal being considered today by the House Ways and Means Subcommittee on Select Revenue Measures and the Education and the Workforce Subcommittee on Employer Employee Relations is very troubling on several counts, including the fact that it will change the way that private pension liabilities are calculated and therefore the timing and amount of employer contributions to pension funds.

While the Administration is claiming that its plan is aimed at stabilizing and shoring up these plans, the administrative complexities and volatility in contribution requirements that would result from use of interest rates based on a yield curve are more likely to encourage employers to get out of the pension system altogether.

With workers retirement security at stake, Congress should be considering proposals that encourage and preserve traditional pension plans while maintaining the security of workers’ benefits. There is a real risk, however, that the Administration’s proposal could signal the end of secure pension benefits for millions of American workers.

Contact:  Suzanne Ffolkes 202-637-5018