The House of Representatives approved a bill late Friday to overhaul the creaking US private pension system and prevent more spectacular airline pension defaults, and sent the measure to the Senate for possible action next week.
Republican leaders want to finish the pension overhaul that has been months in the making, while pushing through a contentious estate tax cut ahead of November congressional elections in a bid to blunt Democratic electoral gains.
To do so, they peeled $35 billion in popular tax breaks off the pension bill and combined them with a permanent rollback in estate taxes that was to be voted on in the House early Saturday. The estate tax bill also includes an increase in the minimum wage.
The leaders' plan was for the House to pass both bills before an August recess, and for the Senate to take them up next week. But it was unclear whether the strategy would work in the Senate, where the estate tax has repeatedly been rejected.
Senators who have spent months drafting the pension bill, and did not want the popular tax breaks taken out, were angry - and worried that the tax breaks might now be voted down in their chamber along with the estate tax.
The 900-page pension bill, which the House passed 279-131, aims to close loopholes that led to underfunding of traditional employer-sponsored pensions that cover 44 million Americans. This system is underfunded by some $450 billion.
The measure also seeks to prevent a taxpayer bailout of the federal agency insuring pensions, which has absorbed multibillion-dollar defaults from plans in the airline and steel industries. Most companies would have seven years to make up funding gaps in their pension plans. But airlines that have frozen their pension plans would be allowed 17 years to fund them. This was targeted at bankrupt Delta Air Lines Inc and Northwest Airlines Corp. They had threatened to default on their pensions if they got no help, as United Airlines, a unit of UAL Corp and US Airways Group Inc have done.