Bush Administration Unveils Pension Reform Proposal

On Monday, January 10, U.S. Secretary of Labor Elaine Chao announced the Bush administration’s proposal for reforming the pension plan system. The proposal applies only to private, single-employer defined benefit plans; such plans currently cover approximately 34 million workers and retirees. The Secretary expressed concern with the increasing number of plans that are significantly underfunded, and with the $23.3 billion deficit reported in November 2004 by the Pension Benefit Guaranty Corporation (“PBGC” – the system’s guarantor of benefits up to a specified annual amount). In an attempt to bring clarity to the system, and to improve the funding shortfall, the administration presented a proposal focused on three main areas: (1) reforming the funding rules; (2) adjusting PBGC premiums; and (3) improving disclosure to workers, investors, and regulators about a plan’s funding status.

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