April 09, 2004
April 9, 2004
LANSING – Governor Jennifer M. Granholm said today that federal legislation on its way to President Bush addresses a key issue identified by the Manufacturing Matters Summit she convened last December that has affected the ability of many businesses to remain competitive. Granholm said she is encouraged that the President is expected to sign the bill by April 15, the deadline for companies to contribute to their pension funds.
"As our manufacturing summit reported last December, pension costs can negatively impact competitiveness when companies are forced to divert money from research and development and hiring to cover their pension liabilities," Granholm said. "The action taken by Congress will allow companies to meet their obligations without being overburdened."
On Thursday, the U.S. Senate voted 78-19 to approve the conference report on the pension bill that the House of Representatives approved earlier this month. Under the agreement, there will be a temporary change to the rate at which companies are required to contribute to their pension plans. It changes the contribution rate from the 30-year Treasury bond, which is considered artificially low, to a blend of corporate bond index rates. This change is estimated to save companies $80 billion over the next two years, the length of time the change will be in effect.
Granholm noted that the conference report will bring relief for most businesses that provide employees with pension benefits. She was also pleased with the consideration given to airlines, steel companies, and iron ore companies in light of their struggling pension plans. The change is estimated to save the major airline companies $1.3 billion and steel companies $300 million over the next two years.
Granholm is encouraged to learn that Congress is already in discussions about a long-term, permanent solution to the pension issue that she hopes will include relief for all multi-employer plans as well as single-employer plans. The final conference report on its way to the White House covers only an estimated 4 percent of the multi-employer plans in financial crisis.
Granholm noted that supporters of the bill, including U.S. Senators Levin and Stabenow, have noted that for the companies whose plans this bill helps, it will free up resources for equipment upgrades, new hires, research and development, and other investments in the future. Granholm was also pleased that J.T. Battenberg III, CEO of Delphi and a member of her Manufacturing Matters Summit, said funds will be available to companies to use for other investments such as "upgrading old plants, retraining our workforce, [and] launching new research and reviving our manufacturing base."
It is estimated that nearly 35 million workers and retirees are covered by single-employer plans and 9.7 million are covered by multi-employer plans.
The pension bill is an amendment to the Employee Retirement Income Security Act of 1974 (ERISA).
Governor Granholm plans to join other governors in Washington on April 27 when they will share other issues raised by the Manufacturing Matters Summit with federal officials, including international trade, workforce training and development, rising health care costs, energy policy, and the U.S.-Canada border infrastructure.
