Washington, D.C. – U.S. Senator Mike Enzi, R-Wyo., and Senate colleagues passed legislation today that would help ensure the retirement security of millions of Americans.

The Senate passed the Pension Funding Equity Act, H.R. 3108, by a vote of 86-9. The bill is designed to restore stability to the defined benefit pension system while giving Congress time to consider comprehensive pension funding reform.

Enzi voted in favor of the bill.

"We have reached a major crossroads in the private pension system that affects the retirement security of millions of American workers," said Enzi, a member of the Senate Health, Education, Labor and Pensions Committee. "With this legislation, we give ourselves time to ensure we make the right decisions to strengthen our pension system so that pension plans will have sufficient assets to pay future benefits when workers retire."

The bill would work to save businesses money by replacing the 30-year Treasury bond rate that is currently used to determine annual contributions to pension plans with a rate based on a mix of corporate bonds for the next two-years. Because Treasury bonds are no longer issued, interest rates on the bonds are artificially low. This has caused pension contribution levels to inflate, which is costing businesses nationwide billions of dollars.

"The current formula for determining contributions to defined benefit plans is actually harming businesses and workers," said Enzi. "A business that is out of business or on its way there cannot continue to provide for its employees' retirements as it should."

The House passed its version of the bill by a vote of 397-2. The legislation will next go to a Senate-House conference committee to work out the differences between the two bills.

Enzi's full statement from the Senate floor follows.

We can all remember our first jobs. When we came home with our first paycheck anxious to spend it, our parents had some good advice for us. First, prepare a budget and second, always put something away, something that will provide for you when the day comes for you to retire. The pension funding laws we are considering today have the same objective.

We have reached a major crossroads in the private pension system that affects the retirement security of millions of American workers. The funding requirements for defined benefit plans contained in the Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code are complex. Yet, their goal is clear - to make sure a plan has sufficient assets to pay future benefits when workers retire. In other words, a company must show that it has the resources on hand to make these future benefit payments when they come due. Pension law must be finely-tuned to accurately reflect a plan's liability so that appropriate funding levels can be determined. Unfortunately, the current system is off-key.

The outdated 30-year treasury rate, which is used to calculate a plan's current liability, has distorted funding levels. Simply put, a lower interest rate means employers have to put more cash into their plans to satisfy pension funding requirements. Continued use of this artificially low interest rate places the worker's retirement, the pension plan, and the employer's business at risk. The 30-year treasury rate generates inflated calculations of liability that also places the entire pension system and our economic recovery at risk. Businesses will have to divert billions of dollars from development and job creation to satisfy misguided funding rules.

The number of defined benefit pension plans in this country is steadily declining - due in large part to complex and restrictive pension laws. In 1983 there were 175,000. Today, there are fewer than 35,000. Many more companies may choose to freeze or discontinue their plans when faced with artificially inflated funding payments. We must act now to prevent further deterioration of the pension system and to protect our economic recovery. But, we must not act in haste to pass long-term, sweeping changes that might undermine the retirement security of America's workers.

Use of the obsolete 30-year treasury rate has combined with recent stock market losses and economic conditions to create the "perfect storm" for the pension funding environment. Last year, the Pension Benefit Guaranty Corporation had a record $11.2 billion deficit. The amendment offered today will provide temporary relief to recover from the "perfect storm" while Congress considers comprehensive pension funding reform.

The amendment provides the following temporary relief:

- It replaces the 30-year treasury bond rate with a conservative, long-term, corporate composite rate for 2 years;

- It defers a portion of accelerated deficit reduction contributions by airlines and steel companies for 2 years; and

- It defers the amortization of recent investment losses by multi-employer plans for 2 years, which allows these collectively-bargained plans time to return to the bargaining table.

I stress that this relief is temporary. It does not forgive a pension plan's debt. It contains important safeguards to prevent further decline in the financial health of a plan. It gives plans time to recover their footing, and it gives Congress time to carefully consider the best way to improve the troubled pension funding system.

It's often the case here that if something is worth reacting to, it's worth overreacting to. We must be careful not to overreact to the pension system's current funding troubles. Replacing the 30-year treasury rate, along with improving economic and market conditions, should improve the temporary funding deficiencies created by the "perfect storm." But we must look beneath the clouds of recent, unique circumstances to see the true health of the pension funding system and identify where reform is needed. We must learn from the lessons of the "perfect storm" to reduce volatility, bring pension accounting closer to reality, and increase the transparency and disclosure of pension information to participants.

With this legislation, we give ourselves time to ensure we make the right decisions to strengthen the pension system and improve retirement security. These decisions will be very difficult, but we must make them. Anything less would be unacceptable. We cannot pass the burden of a broken pension system onto future generations.