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May 06, 2003
Pension Burden May Be Eased for Some Companies

On the premise that blue-collar workers have shorter life expectancies than white-collar ones, certain industries would be allowed reduce the amounts they place into their pension funds under a measure making its way through the U.S. House of Representatives.

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The change would let companies use recent actuarial calculations, which show that blue-collar workers on average die sooner than white-collar ones. That in turn would cut the amounts that companies must put aside under the law to fund future blue-collar pensions.

One of the bill's co-sponsors, Rep. Ben Cardin, D-Md., said the idea has the support of both workers and companies in "older" manufacturing industries.

"We've raised the issue for a good reason," Cardin told the Reuters news agency. "There are plans that are funding at a mortality rate that is not realistic for their workforce."

The United Auto Workers has no quarrel with the proposal, according to its legislative director, Alan Reuther. "We think you ought to have assumptions that reflect the reality about plan retirees," he told Reuters.

"If you over-fund a plan," he added, "you may be taking money away from retiree health benefits, or money that is needed for investment and plant, and without that money you may have a plant closing."

The proposal comes even amid increasing concerns about the underfunding of defined-benefit pension plans. The U.S. Employee Benefits Security Administration, formerly the Pension and Welfare Benefits Administration, says total pension underfunding currently exceeds $300 billion at U.S. companies, and $60 billion of this is attributable to the auto industry.

But Reuters notes that using different assumptions about the mortality of workers could presumably have the effect of making some of these plans appear to be better funded, by lessening their liabilities.

Cardin said he did not know by how much his proposal would reduce the pension obligations of companies. It is part of a broader pension bill introduced in the House last month by Cardin and Rep. Rob Portman, an Ohio Republican; it is unclear when it will move to the House floor.

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