WASHINGTON -- Rankled by the rich retirement payouts many troubled companies make to executives, Congress is moving to block such companies from funding the lavish packages.
The provision, tucked into legislation that would shore up the federal agency that provides a safety net for private-sector pensions, would keep financially troubled companies from setting aside any special pension benefits for top executives if their pension plans for rank-and-file employees weren't adequately funded.
Disclosures about bankruptcy-proof supplemental executive retirement benefits at some airlines, including a $45 million fund set up a few years ago for 35 top officials by Delta Air Lines Inc., have galvanized bipartisan support for reining in such perks at other beleaguered companies.
"We've heard too many stories of top executives of bankrupt companies sticking workers with unfunded pensions while running off with millions of dollars of so-called nonqualified pension benefits," says Senate Finance Committee Chairman Charles Grassley, an Iowa Republican.
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The shift toward a dual system started in 1994, when Congress passed a law intended to limit the cost to taxpayers of runaway executive pay. The law barred companies from taking a tax deduction on compensation in excess of $1 million a year for any current employee. The result: Companies began setting up supplemental pension plans that encouraged senior managers to defer compensation.
Over time, the plans added generous benefits and covered a greater number of salaried employees. Now, more than 90% of the largest companies offer nonqualified deferred executive compensation plans, according to a new survey of the 1,000 largest companies by Clark Consulting, a Chicago benefits consulting firm. Most companies have expanded the programs to include all managers with annual salary and bonus exceeding $150,000, benefits experts say.
Many members of Congress think the proliferation of supplemental executive retirement plans has contributed to the trend of companies freezing or terminating defined-benefit pension plans. They reason that if executives have their own rules for setting aside money, they have less incentive to maintain nest eggs for their employees.
Sen. Ron Wyden, an Oregon Democrat on the Finance Committee, took Glenn Tilton, chief executive of UAL Corp.'s United Airlines, to task at a hearing in June for striking a $4 million benefit deal when he joined the airline while other workers were taking pay cuts. The benefit deal, Mr. Tilton said, was designed to compensate him for benefits he would have received from his former employer.
"The question of a double standard is very important and resonates with people in the middle class," Mr. Wyden said.
The double standard also represents yet another missed opportunity by Democrats to take control of the conversation.
