<nobr>May 5, 2008</nobr>

Senate Drops Airline Pension Provision from Aviation Reauthorization Legislation

Senate Majority Leader Harry Reid (D-NV) last week maneuvered to remove an airline pension funding provision from legislation to reauthorize funding of the Federal Aviation Administration. The bill (H.R. 2881) would reauthorize appropriations for fiscal years 2008-2011 for airport planning and development, air navigation facilities and equipment, and FAA operations.

The airline pension provision has been controversial for over a year, and bogged down the FAA legislation. In September 2007, the Finance Committee added the provision to the FAA bill to modify the relief provided for nonfrozen airline pension plans in the Pension Protection Act of 2006. The PPA permitted commercial airlines that do not freeze their defined benefit plans to pay off their pension liabilities over 10 years, and permits those airlines to use an interest rate of six percent to calculate future plan asset earnings.

A supplemental appropriations bill enacted in May 2007 changed the percentage for employers that did not freeze their plans from six percent to 8.25 percent, but the change was made without consideration by the Finance Committee, which has jurisdiction over the issue. Senate Finance Committee Chairman Max Baucus (D-MT) and ranking member Charles Grassley (R-IA) questioned the last-minute addition and vowed to look into the matter.

The Finance Committee provisions that were dropped from the FAA bill would preserve the 8.25 percent interest rate that the 2007 supplemental appropriations bill enacted, but would add a condition that to use the 8.25 percent interest rate, the company would have to make contributions to cover pension benefits that accrue during the current year. Senators Baucus and Grassley are likely to seek another legislative vehicle to add the dropped provisions.

Questions or comments on this issue should be addressed to Rosemary Becchi, rbecchi@eric.org.

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Websites:

Senator Baucus Release on Airline Pension Provision

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