The prospects for pension relief for airlines worsened on Tuesday after a committee chairman called a Senate proposal “irresponsible” and “not good public policy”.
John Boehner, chairman of the House committee on education and the workforce, which plays a key role in pension reform, said: “When we get into conference with the Senate bill we will look at it, but the Senate language is irresponsible.
“It could give companies 14 years to not make a payment to their plans and could mean they wouldn't have to pay for 20 years. That is not good public policy.”
A sense of urgency about pension reform has been fuelled by the bankruptcies of Delta and Northwest, which both have heavily underfunded pension plans.
Two Senate committees on Tuesday agreed on a compromise that would improve the funding of the federal pension insurer by raising flat rate premiums to $30 per participant. It would change interest rate assumptions and alter the premiums paid by companies that offer the plans. It would also grant a special funding rule that would allow airlines, in effect, to make up the gap in their unfunded liabilities over 21 years in exchange for freezing their defined-benefit pension plans.
The proposal has the backing of the two bankrupt airlines and of American Airlines. But Continental and some low-cost carriers have voiced concerns. Mr Boehner said: “The House bill's focus has been on comprehensive pension reform. I have avoided industry specific issues throughout . . . I don't want to get in the middle of airline restructuring by giving some air carriers preferential treatment over others.”
Commenting on the prospects for Social Security reform, Mr Boehner acknowledged the political appetite for dealing with it in Congress. “It is like asking Congress to eat a bowl of cold green peas. They don't want to do it. But I hope Bill Thomas [ways and means committee chairman] will continue his efforts.”
But an aide said Mr Boehner was committed to the president's plan and the need to move forward with reform. The Senate could vote on the pension bill this week. Mr Boehner hoped the House would act on reform of the defined-benefit pension system by October.
Duane Woerth, president of the Airline Pilots' Association, said reform was “a race against time”.
