Newspaper article St Louis Post-Dispatch (MO)

Critics Say Tax Bill Has Potential for Pension Plunder

Newspaper article St Louis Post-Dispatch (MO)

Critics Say Tax Bill Has Potential for Pension Plunder

Article excerpt

A provision tucked into a massive Republican House tax bill could trigger a $30 billion corporate raid on private pension funds, the administration of President Bill Clinton, unions and senior citizens groups asserted Friday.

The proposal, to be considered next week by the Ways and Means Committee, would permit companies to withdraw "excess" money from their pension funds at any time and use it for any purpose. Current law permits withdrawals only to pay for retirees' health benefits.

Ways and Means aides said the provision would increase government tax revenue by $10 billion over seven years, because the government taxes money withdrawn from pension funds.

Critics say the pension plans that would be tapped are not truly surplus. Withdrawals could jeopardize the pensions of around 24 million workers and retirees and pose a risk to the Pension Benefit Guaranty Corp., the federal agency that backs pensions, they said.

The change would reverse a 1990 law that ended a practice common in the 1980s, when companies drained $20 billion from pension plans to finance corporate buyouts.

"This legislation threatens unprecedented damage to pensions," said Martin Slate, head of the Pension Benefit Guaranty Corp. "Companies will once again be able to take the money and run, leaving retirees and taxpayers holding the bag."

Slate said about $30 billion would have to be drained from funds in order to generate the type of extra tax revenue expected by House Republicans.

GOP aides defended the change, saying companies would be required to maintain 125 percent of the pension funds' current liability.

"The pensioners will get every single penny that is their due," said Ways and Means spokesman Ari Fleischer. "These are phony, trumped-up charges."

But in a letter to Ways and Means Chairman Bill Archer, R-Texas, Alice Rivlin, the White House budget director, argued that the assumptions used to calculate current liability mean a pension plan at the 125 percent level might actually have less than 90 percent of the money it would need to pay off beneficiaries if the plan were terminated. …

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