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Retirement Issues Will Get the Spotlight in the 108th Congress

When I first started working on pension issues they were considered about as interesting as Ben Stiller's droning homeroom roll call in Ferris Bueller's Day Off. Well, much has changed since 1986.

Declining 401(k) balances and the stock market's daily ping-pong-like action provide a backdrop for the Administration and now the Republican majority to make permanent the increased tax deferral limits for pension savings. In fact, before Congress left town for the November elections, the House Committee on Ways and Means passed legislation that would accelerate the increase of the limits and make them permanent.

With the Republican Congress and Administration expect to see legislation making permanent the increased tax deferrals for pension savings enacted in the 108th Congress. It won't be easy or pretty since the Republicans may have to pass legislation with a straight party vote. Maintaining party unity isn't easy with a sluggish economy, budget deficit, unease from the war on terrorism, and potential conflict with Iraq. Not to mention the potential rhetorical pounding from the Democrats who may define themselves by taking Nancy Reagan's approach: "Just say no. . ." to most legislation the Republicans offer. In fact, the Democrats are in a perfect position to influence tax legislation by raising the cautionary flags of a rising federal deficit and tax equity issues. The approach did not help them maintain their slim Senate majority but it will help them get headlines and shape the edges of a Republican tax bill.

Investment advice has been building momentum for the past two years. In fact, Congressman John Boehner's (R-OH) bill passed the House but languished in the Senate. The bill allows financial services firms managing pension assets to provide advice. Expect his advice legislation to be incorporated as part of the Administration's 401(k) reform package that will be a major priority in the opening days of the 108th Congress. Advice legislation has a strong likelihood of enactment particularly with Senators Charles Grassley (R-IA) and Judd Gregg (R-OH) poised to take over the Finance; and Health, Education, Labor and Pensions committees respectively. These Senate committees were divided on their approach to advice legislation: Congressman Boehner versus Senator Jeff Bingham (D-MN) and Susan Collins (R-ME)). Both committees will be replenished with more conservative Republican members, thus making it more likely that advice legislation will be enacted and it will closely resemble Congressman Boehner's approach.

The debate is on when it comes to Social Security. Social Security is a priority for the Administration. While private accounts may be more of a covert move to mandated pension savings than an aid in reducing Social Security's projected shortfall for baby boomers, it will be a major component of the debate along with increasing payroll taxes and reducing benefits. The major components of reform should take shape over the next two years. However, enactment is not likely unless or until?depending upon your political persuasion?President Bush wins a second term in 2004.

Lastly, defined benefit plans will also be on the agenda since the whipsaw of the stock market has eliminated most corporations' pension funding surpluses and pushed their pension liabilities back into the red. Expect the Pension Benefit Guaranty Corporation to be back in the headlines along with a desire to revitalize and even restart the defined benefit system.

To sum up, when roll is called in the 108th Congress, expect to hear pensions in the beginning and that policymakers will not only be in full attendance but fully participating in this important debate. It may have been Ferris Bueller's Day Off but it is now Prime Time for pension issues.

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