U.S. Congress hesitates who should plug pension deficit

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Monday May 16, 06:35

U.S. Congress hesitates who should plug pension deficit

(by Natali Novak)

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U.S. Congress hesitates who should plug pension deficit

By the end of 2004, this government aid went upon pension plans whose liabilities exceeded assets by $23 billion. The Bush administration proposed to make companies with defined-benefit pension plans pay larger premiums for their government insurance inm order to eliminate the deficit. The plan is expected to bring about $18 billion over five years.

According to the proposal, firms with constantly underfunded pensions should be prohibited from making new pension promises. Firms closing a risk of going bankrupt should be forced to pay higher premiums.

The recent budget resolution adopted by Congress raised doubts about one part of this good plan resulted in undermining the best part of the plan. Negotiators reached agrrement on only $6.6 billion increase of premiums, instead of increasing by $18 billion over five years. Meanwhile, the proposals to limit additional liabilities faced the strong opposition of business lobbyists. They consider the requirement that companies should fund such huge promises within seven years to be impossibly draconian.

If the lobbyists manage to gain the support of the Congress, the deficit at the Pension Benefit Guaranty Corp. is predicted to grow putting forward a risk to be payed by taxpayers.

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