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OPA News Release: [01/10/2005]
Contact Name: Eryn Witcher
Phone Number: 202-693-4676
Release Number: 05-0041-NAT

Bush Administration Proposal to Strengthen the Retirement Security Of 34 Million Workers Announced by Secretary of Labor

Reforms Protect Workers and Retirees Enrolled in Private, Defined Benefit Pension Plans

WASHINGTON—Elaine L. Chao, U.S. Secretary of Labor and Chairman of the Board of the Pension Benefit Guaranty Corp.(PBGC), today announced the Bush Administration's plan to strengthen the retirement security of the 34 million workers and retirees covered by private, single employer defined benefit pension plans.

“As Chairman of the Board of Directors of the Pension Benefit Guaranty Corporation, I have become increasingly concerned as the number of terminated plans grows and the PBGC is forced to assume ever larger liabilities,” said U.S. Secretary of Labor Elaine L. Chao. “If nothing is done, the financial integrity of the federal insurance system will be compromised and the pension security of 34 million workers and retirees will be more at risk.”

The Administration's plan will ensure the long term solvency of the PBGC and protect the workers and retirees covered by private, single employer defined benefit plans. It is based on three main principles:

• Reforming the funding rules for private defined benefit pension plans to ensure that employers fully fund their retirement promises.
• Reforming the premiums that private defined benefit plans pay to the federal insurance program to better reflect the real risks and costs.
• Increasing the disclosure of information about private defined benefit pension plans to workers, investors and regulators to ensure greater transparency and accountability.

The key elements of the Administration's plan include:

• A single, accurate way to measure pension fund liabilities, replacing an existing system that is overly complex, confusing and ineffective.
• Funding targets that reflect a plan's real risk of termination.
• Reasonable time periods for plans to reach funding targets.
• Flexibility for solvent companies to make more generous contributions to pension plans during good economic times.
• Restrictions on the ability of financially strapped companies to promise more benefits than they can pay for.
• Measures to ensure the long-term solvency of the PBGC.

Read the fact sheet.

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