OUR traditional defined benefit pension system is in crisis, and as a result the retirement security of millions of American workers, retirees and their families is at risk. Too many companies have recently defaulted on their pension promises, making it painfully clear that our pension laws simply don’t work. The Bush administration believes that real reform must not be put off any longer.
While most companies try to do the right thing by their employees and retirees, our pension system has many failings. Under current law, companies can make pension promises they don’t fully pay for. It is virtually impossible for workers to figure out if their plans are in trouble. Current law doesn’t ensure that the Pension Benefit Guaranty Corporation, the pension insurance system guaranteeing workers’ basic benefits, can pay its bills. There hasn’t been an increase in premiums in 14 years, even though pension underfunding and the value of the benefits those premiums insure have increased significantly.
Recognizing the risk facing America’s workers, in January President Bush proposed comprehensive pension reform to remedy these defects. First, the president’s plan requires companies to set aside enough money over a reasonable time to pay for the promises made to workers. Second, it makes sure that workers know the true status of their pension plans so they can take action before it is too late. Third, it updates the premium structure so that the federal pension insurance program doesn’t run out of money to pay benefits to retirees whose pension plans have been terminated.