March 2, 2005
White House Urges Changes to Clarify Pension Valuations
By MARY WILLIAMS WALSH NYTimes
WASHINGTON, March 1 - Senior officials of the Bush administration told a
Senate panel on Tuesday that the nation's companies should use "mark to
market" values, or numbers that more closely reflect current market values,
for their pension funds. Their remarks drew criticism from both business and
labor representatives who testified.
Mark Warshawsky, the assistant Treasury secretary for economic policy, told
the Senate Finance Committee that pension funding rules were
inaccurate, permitting companies to shortchange their pension plans and mask
their weaknesses. These practices, he said, jeopardize the benefits of
millions of workers and undermine the finances of the federal agency that
insures them.
"The current problems in the system are not transitory, nor can they be
dismissed as simply the restructuring in a few industries," he said. "Minor
tinkering with the existing rules will not solve these problems."
The officials had been asked to testify about the Bush administration's
proposal for strengthening America's pension system, which was announced in
January. An unusual number of pension funds have failed in the last few
years, straining the Pension Benefit Guaranty Corporation, the federal
insurer of pensions, and raising concerns about a possible taxpayer bailout.
The testimony on Tuesday focused on the federal rules for funding pensions.
One change the administration is seeking is to make the guaranty agency's
data on pension plans available to the public, except in cases of trade
secrets, pending mergers and other special circumstances.
Now, said Ann L. Combs, the assistant secretary of labor, companies file
annual pension reports to the Labor Department about two years after the
fact. By then, the information is out of date. More current information is
reported to the guaranty agency, she said, and is calculated with
market-based methods. But the public is not permitted to see it.
"This makes no sense," she said. "Basic data regarding the funded status of
a pension plan is vitally important to participants and investors." Ms.
Combs also described the administration's proposals to increase the premiums
companies pay to the agency and to bar companies from increasing their
pension promises if they are in financial trouble.
Some senators expressed uncertainty about how serious the pension system's
problems were. Senator Charles E. Grassley, the Iowa Republican who heads
the finance committee, said some constituents told him the guaranty agency
"might be crying wolf."
Senator Trent Lott, Republican of Mississippi, said the airlines constituted
a special case and should not be subjected to the same tightening of
standards as other companies.
"It almost looks like you want to put them into bankruptcy and make them
terminate those plans," he said.
Bradley Belt, the executive director of the guaranty agency, said that was
"the last thing we want."
Alan Reuther, the legislative director of the United Automobile Workers
union, said he thought the pension system's problems came mainly from steel
and airlines. Given that, he said, it would be "dangerous and
counterproductive" to impose stricter standards on all companies.
Mr. Reuther said it would be preferable for the federal government to assume
the pensions of the airline and steel companies immediately, and pay them
with general revenue.
An official of the Business Roundtable also criticized the administration's
proposals. Larry Zimpleman said his members thought that if the
administration's measuring techniques were adopted, pension funding levels
would immediately drop about 10 percent.