WASHINGTON - Young workers, Wall Street, a couple of airlines and U.S. taxpayers could come out as winners in the pension changes made by Congress. Some older employees, as well as truck drivers and construction workers hoping to retire early, might not fare as well.
The legislation passed by the Senate late Thursday and sent to the president will, if successful, prod companies to fund their pension plans properly and ensure that workers get the retirement benefits they deserve.
But the bill also reflects the reality that the traditional defined-benefit pension plan system is in decline, and the transition to new defined-contribution-style savings plans won’t be easy.
Here’s how some of the major players in the legislation may be affected:
• Employers: The 30,000 defined-benefit plans run by employers are now underfunded by $450 billion, and the bill requires plans to reach 100 percent funding levels in seven years.
Seriously underfunded ‘‘at-risk’’ companies must contribute at an accelerated rate.
The American Benefits Council, which represents companies with traditional pension plans, said the bill was a ‘‘mixed bag’’ that promotes saving but could make funding requirements more unpredictable, giving plan sponsors thinking of freezing their plans another reason for doing so.
The council’s vice president, Lynn Dudley, said the responsibilities onto the the individual by promoting 401(k) and other defined-contribution plans.
‘‘Defined-benefit plans were sacrificed in the process and for that we are disappointed.’’
Frank McArdle, manager of the Washington office of Hewitt Associates, a human resources consulting firm, didn’t think the funding rules would of themselves contribute to more ditched plans.
The Congressional Budget Office concluded that companies will actually contribute less to their plans over the next few years as the new funding rules are phased in, but will start making higher contributions in about five years.
Two companies pleased about the legislation are Delta Air Lines and Northwest Airlines, which have filed for bankruptcy and have frozen their defined benefit pension plans. Delta intends to terminate its pilots’ pension plan.
Concerned that the two airlines would dump their plans, underfunded by a total of more than $10 billion, on the government, lawmakers gave them an extra 10 years beyond the seven years that other companies get to catch up.
• Workers: The bill, while stabilizing a shaky system, does not ensure there will be a defined-benefit plan in a worker’s retirement future. Half the workers in private industry have no pensions, and the legislation ‘‘doesn’t do anything for that,’’ said Karen Friedman, policy director of the Pension Rights Center.
A Hewitt Associates survey of 227 employers last year found 29 percent were very or somewhat likely to close participation in defined-benefit plans during the year.
The AARP said workers get shortchanged in a provision that adds legal certainty to cash balance plans, ‘‘hybrids’’ currently in legal limbo because of a lawsuit against IBM filed by employees claiming age discrimination.
The bill, said the AARP’s David Sloane, ‘‘may lead to discriminatory plan designs that stop or reduce benefits for older workers.’’
Experts agree that young workers in particular will be big winners from provisions promoting automatic enrollment into 401(k) programs. Research by the Investment Company Institute and the Employee Benefit Research Institute found that 401(k) participation rates among lowincome workers would more than double, from 42 percent to 91 percent, under automatic enrollment plans.